July 29, 2013
Has Facebook Figured Out Mobile Ads?
Last week, Facebook revealed that its ads on mobile devices accounted for 41 percent of its overall $1.62 billion in ad sales in the second quarter, up from 30 percent in the first quarter.
Shares of Facebook rose nearly a third last Thursday as mobile ad strength led earnings and revenues to far exceed projections. It also erased some concerns for Twitter, Pinterest, Snapchat and others websites that mobile advertising would be inherently less lucrative than traditional desktop PC advertising due to the smartphone’s teeny screen size and social media fans’ aversion to any ads.
With mobile ads now accounting for five percent of Facebook’s newsfeed, the limited range of ads has apparently not pestered fans enough to stop them from engaging with other content on the social network. Facebook’s monthly active users on mobile skyrocketed 51 percent to 819 million during Q2.
"The reason Facebook can do it is, the rest of the content that’s there is so engaging that you don’t mind one out of every 20 ads," Hussein Fazal, CEO of AdParlor, which manages advertising campaigns on Facebook, told Reuters. "If you have a newsfeed that’s not so engaging, and you keep seeing ads, then it doesn’t work."
Facebook said it has more than one million active advertisers, including all of the biggest global brands — double that of a year ago. Pricing on mobile ads for Facebook is similar to desktop, surprising many given Google’s challenges there.
Personalizing ads to timeline interests are said to help make mobile ads more relevant. On a conference call with analysts, CEO Mark Zuckerberg noted that Facebook will be investing more in improving ad quality. A particular focus will be on expanding the number of marketers and overall demand in its system rather than just increasing the number of ads shown.
He added, "We believe that this will help us improve the quality of the ads that we show by creating a more competitive auction, and this will create the best experience for people who use our products, the best returns for more marketers and the best results for us."
COO Sheryl Sandberg noted that mobile represents just two percent of ad spend globally and three percent in the U.S. but people are spending "dramatically" more time checking their feeds on their mobile devices.
"As Facebook delivers personalized experiences to over 1.1 billion people, we also have a unique opportunity to deliver a more personalized advertising experience," said Ms. Sandberg. "As I meet with the marketers all around the world, I find more and more that they are understanding the benefits of this opportunity."
- Facebook Second Quarter Earnings Release – Facebook
- Facebook Quarterly Earnings Slides Q2 2013 – Facebook
- Facebook Second Quarter Transcript – Facebook
- Facebook offers the dummy’s guide to mobile advertising – Reuters/Baltimore Sun
- How Facebook Mastered Mobile Ads (and Publishers Can Too) – Advertising Age (tiered sub.)
- Facebook Is Erasing Doubts on Mobile – The New York Times (tiered sub.)
- Facebook Mobile Swells to 41% of Its Ad Sales Digital giant’s Q2 revenue – Adweek
BrainTrust
Recent Discussions
Discussion Questions
Are you surprised by the rapid growth of Facebook’s mobile ad business? Do you think social networks have now found a solution to the mobile ad problem via in-stream ads? What other questions do Facebook and other social networks have to answer to show their viability as an advertising platform?
Poll
I’m not surprised at the growth because marketers are eager to place their bets on mobile. It’s the latest, the greatest, and expected to last. Facebook and its street cred gives them that opportunity. At the end of the day, media placement is governed by expected ROI. The flexibility and innovation Facebook and others have shown suggest that if at all possible they will prove their viability as an advertising platform. This is still the beginning and I’m not a visionary.
Facebook is ahead of others on mobile in two important ways. First, the ads are well integrated into the media experience, much better than the flashing ad junk on games…kinda mobile’s version of the “punching monkey” stuff in the ’90s. The more important aspect is that Facebook is one of the few companies that can integrate knowledge across screens for behavioral and lifestyle targeting.
Viability as an “advertising platform” is a very different thing than being an effective advertising. Chicago department store magnate Wanamaker was famously reported as saying that he knew half of his advertising didn’t work. Unfortunately, he didn’t know which half.
The reality is that this principle is still in effect globally, with literally hundreds of billions of dollars sloshing around the global advertising industry, seeking to SOMEHOW influence more sales. Everywhere you read accounts by people trying to reach shoppers with online advertising, reporting poor success. Unless those people reporting are also invested in selling that advertising.
Under these circumstances, a grain of salt is appropriate in hearing of a massive profit quarter by Facebook. With those billions of poorly accountable ad dollars sloshing about, a bit of ad buyer belief can be worth a fortune—Wanamaker’s conundrum.
Against all odds, FB stock price has inched back into the IPO territory, perhaps enabled by them beginning to figure out the monetization challenges of their services. They will need to stay proactive in this area in order to ensure that their users don’t tire the ads, even if the ads aren’t bothersome…yet.
The future of advertising, and presumably the debate over its success, seems almost silly on the face.
We are/were concerned that users said they don’t want ads encroaching on their social media vehicles—but when have users ever “invited” ads? And how often has that stopped the owner of the media from monetizing the media through advertising sales? And when have users ever successfully driven advertising from a medium once it is there?
I can’t think of one instance. More often, the medium simply goes away. The ads may be the straw that breaks the back of a poor medium that is no longer meeting users’ needs or that has allowed itself to become obsolete. But in general, if the medium survives the ads are tolerated.
The prognosis for social media/digital in general, and FB in particular, does not seem to me to be bleak in the least.
Facebook needed to get it right because more people are using mobile apps on social media than desktop. Companies like Facebook, Twitter, YouTube, etc., need to harness the power of analytics and pattern recognition to create a great experience for users while monetizing the eyeballs with appropriate advertising.
Surprised? The world/their world lives on mobile. FB users use the mobile app, the ads blend in (great design,) they leverage FB data (more relevant than other vehicles, aka banners). The supply/demand makes them cheap for now and their usage vs. RHS (Right Hand Side) ads are magnitudes better.
Yes, they’ve found a solution.
Viability? Don’t turn people off, so as they sell more ads, they need to watch the mix of ads vs. posts. That will limit things, but for now it’s been said that if you liked FB at the IPO (when they didn’t have a mobile business) you will really love them now.
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I’m not surprised at the growth because marketers are eager to place their bets on mobile. It’s the latest, the greatest, and expected to last. Facebook and its street cred gives them that opportunity. At the end of the day, media placement is governed by expected ROI. The flexibility and innovation Facebook and others have shown suggest that if at all possible they will prove their viability as an advertising platform. This is still the beginning and I’m not a visionary.
Facebook is ahead of others on mobile in two important ways. First, the ads are well integrated into the media experience, much better than the flashing ad junk on games…kinda mobile’s version of the “punching monkey” stuff in the ’90s. The more important aspect is that Facebook is one of the few companies that can integrate knowledge across screens for behavioral and lifestyle targeting.
Viability as an “advertising platform” is a very different thing than being an effective advertising. Chicago department store magnate Wanamaker was famously reported as saying that he knew half of his advertising didn’t work. Unfortunately, he didn’t know which half.
The reality is that this principle is still in effect globally, with literally hundreds of billions of dollars sloshing around the global advertising industry, seeking to SOMEHOW influence more sales. Everywhere you read accounts by people trying to reach shoppers with online advertising, reporting poor success. Unless those people reporting are also invested in selling that advertising.
Under these circumstances, a grain of salt is appropriate in hearing of a massive profit quarter by Facebook. With those billions of poorly accountable ad dollars sloshing about, a bit of ad buyer belief can be worth a fortune—Wanamaker’s conundrum.
Against all odds, FB stock price has inched back into the IPO territory, perhaps enabled by them beginning to figure out the monetization challenges of their services. They will need to stay proactive in this area in order to ensure that their users don’t tire the ads, even if the ads aren’t bothersome…yet.
The future of advertising, and presumably the debate over its success, seems almost silly on the face.
We are/were concerned that users said they don’t want ads encroaching on their social media vehicles—but when have users ever “invited” ads? And how often has that stopped the owner of the media from monetizing the media through advertising sales? And when have users ever successfully driven advertising from a medium once it is there?
I can’t think of one instance. More often, the medium simply goes away. The ads may be the straw that breaks the back of a poor medium that is no longer meeting users’ needs or that has allowed itself to become obsolete. But in general, if the medium survives the ads are tolerated.
The prognosis for social media/digital in general, and FB in particular, does not seem to me to be bleak in the least.
Facebook needed to get it right because more people are using mobile apps on social media than desktop. Companies like Facebook, Twitter, YouTube, etc., need to harness the power of analytics and pattern recognition to create a great experience for users while monetizing the eyeballs with appropriate advertising.
Surprised? The world/their world lives on mobile. FB users use the mobile app, the ads blend in (great design,) they leverage FB data (more relevant than other vehicles, aka banners). The supply/demand makes them cheap for now and their usage vs. RHS (Right Hand Side) ads are magnitudes better.
Yes, they’ve found a solution.
Viability? Don’t turn people off, so as they sell more ads, they need to watch the mix of ads vs. posts. That will limit things, but for now it’s been said that if you liked FB at the IPO (when they didn’t have a mobile business) you will really love them now.