Facebook’s potential in the mobile ad space is tremendous. That’s not up for debate. What is up in the air is just how big the social networking giant can be in small screen world of smart phones. According to some estimates, if Facebook were to repeat its desktop ad success on mobiles, it would capture a nice section of the global ad spending budget. However, getting from here to there will take some heavy lifting. In particular, Facebook needs to come up with a brand-new ad sector for the mobile market. It faces the daunting task of inventing a new ad space. Sounds daunting, right? Fortunately, Facebook has already reinvented a few things before reaching this stage. Creating a whole new mobile ad market and platform would only be just the latest of challenges it has stared down and successfully dealt with.
Market reinvention or market creation, depending on how you look at it, is really the only option Facebook has in the fast growing mobile advertising space. The alternative is for the social networking giant to grab a piece of the large mobile ad market. However, this might not be enough because Facebook’s current numbers don’t stack up. According to analytics firm, Berg Insight, global mobile advertising’s market size is $3.4 billion in 2010. It has a growth rate of 37 percent annually. However, Facebook’s total ad revenue, while pegged at an impressive $3.1 billion, is completely devoid of mobile ad revenue. More than fifty percent of the company’s active monthly users access the platform through mobile devices. There’s a problem here because Facebook’s mobile presence has no ads.
So far, Facebook isn’t losing money due to this mobile hole. However, it is leaving a lot of money on the table. Indeed, if Facebook were to just duplicate a small portion of its web-based ad success on mobile phones, it stands to vacuum a large chunk of the total mobile ad marketing money being spent currently.
Another way to analyze Facebook’s mobile ad “blind spot” is that it actually helps the social networking giant make more money. How? By being able to access Facebook from a wide variety of devices, users’ loyalty is maintained, and they eventually visit Facebook’s through the website which has ads that bring revenue. In this sense, having a mobile presence increases ad views instead of decreasing it.
Still, the analysis above applies to 90 percent of google’s users. However, there is a hardcore 10 percent that views Facebook solely off mobile phones and other small devices. This is an 83 million user segment and represents the fastest growing Facebook user segment. This group also comes from developing markets that represent the largest share of Facebook’s growth. This is the group Facebook worries about because this group has absolutely no ad interaction.
Facebook’s response is to offer sponsored stories. Unlike regular ads that won’t fit into the tiny space of mobile phones, sponsored stories weave sponsors’ marketing messages with content that users can consume. Given Facebook’s ability to mine its user base’s preferences and location information, sponsored stories provide a potentially laser targeted advertising approach that is wrapped around content.
Facebook’s experiment with sponsored stories, if successful, might reinvent mobile advertising and blow up the market. The market will expand not because Facebook will eat up Google and Apple’s share of the mobile ad space but that it will create its own space and pump mobile ad revenue from its existing channels.
Still, challenges remain daunting. Even Facebook’s existing hefty website advertising base is experiencing some turbulence as corporate sponsors like General Motors cut down on Facebook ad spends. Others are left questioning the effectiveness of Facebook’s ads. Facebook will need to shore up its traditional ad base and deliver decent ROI before it can convincingly nail down the mobile ad space.