Is it time trade bodies looked at Facebook’s mobile advertising model?

By 31st October 2012Corporate Blog

Facebook has announced advertising revenues of $1.1 billion for the third quarter. It’s the first time the social network’s quarterly ad revenues have topped $1 billion, but more importantly, the company can now start to say that it is generating meaningful revenues from mobile.


Advertising model could raise industry eyebrows


On the back of this news, Facebook’s share price leapt 23%, and investors, initially concerned at the lack of appeal of its sponsored stories mobile advertising model, are starting to see some return from the mobile channel.


In terms of numbers, the third quarter saw Facebook generate mobile ad revenues of $152 million, approximately 14% of total ad revenues. While this is merely a toe-in-the-water for the social behemoth, the majority of mobile ad networks around the world would leap through tiny flaming hoops to achieve even a quarter of these quarterly sales figures.


Let’s not simply dismiss this figure. If mobile represented 14% of total global advertising spend right now, it would be worth somewhere in the region of $65 billion per year. So perhaps Facebook should be given significantly more credit than it has received to date.


Let’s put these numbers into context. Globally, Facebook generated average revenue per user (ARPU) of $1.29 ‑ though in North America, ARPU stands at an impressive $3.40. On mobile only, which Facebook says it now has 604 million users, ARPU is $0.25. So while Facebook might be patting itself on the back for generating $152 million in mobile ad spend, a harsh reality check reveals that mobile users are, at least for the time being, worth one-fifth of online users.


And there is good reason for this disparity between total ARPU and mobile-only ARPU. Sponsored stories as a concept are fundamentally flawed. It relies on a user having at one stage liked a company, and this has morphed into an opt-in permitting Facebook to deliver ads onto a fuser’s (Facebook user) news feed from said same liked company. Historically, liking a company was a fairly worthless and meaningless act. Now, fusers will think twice before committing that extra click on their mouse when confronted with a company on Facebook.


But before brands view Facebook as an amazing channel for them to connect with customers, consider this: research carried out by mobileSQUARED highlighted that only 10% of fusers wanted brands to communicate with them on their mobile Facebook page. If mobile advertising is going to become truly effective on Facebook, brands must identify those 10% first.


The only conceivable way in which mobile advertising can work on mobile is if Facebook encourages its 604 million mobile users to opt-in again. This is certainly an area that a trade body like the MMA should investigate. After all, fusers originally signed up to Facebook to connect to friends and family on a social basis, but the emerging commercial side of Facebook will mean fusers are increasingly being coerced in to connecting with companies.


Nick Lane

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