Facebook Seeks to Boost Revenue From Mobile Ads

/// Facebook Seeks to Boost Revenue From Mobile Ads

June 6, 2012  |  Blog

In the wake of its disappointing initial public offering last month and amid concerns over its advertising business, Facebook Inc. FB -3.99% is expanding ways for marketers to buy mobile ads.

In one of its first major business moves since its IPO, the Menlo Park, Calif., social network said Tuesday that marketers can now pay individually for “sponsored stories,” the company’s only mobile-ad product. With “sponsored stories,” marketers pay Facebook to republish positive messages that users post about their brand.

Previously, mobile ads on the social network could only be purchased through a premium ad package that included mobile and other forms of advertising on Facebook. But small and medium-sized marketers, or even large brands, who wanted to focus squarely on the mobile market, couldn’t do so with Facebook.

The move is an attempt to address what has long been a sore spot for the company, especially as Facebook struggles to prove its value to Wall Street. Since going public last month, Facebook has lost nearly a third of its value. Facebook’s stock fell $1.03, or 3.8%, to $25.87 in 4 p.m. composite trading Tuesday on the Nasdaq Stock Market. Facebook ended the day with a market capitalization of about $71 billion, down from more than $100 billion when it went public.

The mobile-ad market is an area where Facebook has been especially weak. The social network’s 900 million users are increasingly accessing the site through its mobile app. Yet Facebook currently makes almost no money from mobile advertising, the company has said in its regulatory filings.

Facebook produced $3.7 billion in revenue last year, with 85% of that coming from advertising. In the first quarter, ad sales declined from the prior quarter, though they increased from a year earlier. The company doesn’t break out mobile-advertising revenue figures because the amount isn’t currently considered material.

“Facebook is always looking for ways to improve products and has responded to requests from marketers to control the placement of their sponsored stories,” the company said in a statement. “As companies are promoting services more frequently on mobile, this option gives them the opportunity to focus on specific placements that will impact them most directly.”

The change in how brands can buy ads on Facebook is also part of a bigger push to make it easier to buy advertising on the site.

Facebook is currently rolling out “promoted posts,” which let the owners of free brand pages pay to have fans see a post. Without promoted posts, Facebook says only 16% of fans can see a post based on the company’s standard algorithm for all Facebook posts by users or brands. By paying, Facebook ensures that 75% of fans see a post.

Previously, brands could pay for promoted posts as part of an ad package. Now, the company is letting brands pay for just one post at a time. The move has the potential to get new kinds of advertisers who may just want to pay once in a while for a specific post but don’t want to pay for a larger ad package.

The expansion will let all types of advertisers—not just premium brands—have access to the Facebook News Feed, the prime piece of real estate on the Facebook home page. Advertisers covet the News Feed because unlike ads that run on the side of the page, it feels like a part of the organic Facebook experience and doesn’t look different from posts from friends.

That presents a challenge for Facebook, as well as an opportunity, said eMarketer analyst Debra Williamson. “Facebook is going to have to make sure the quality of the advertising remains high,” she said. “You will see a greater depth and breadth of advertisers than you might have seen than just being sold to premium advertisers.”

The fee will be based on a bidding process that charges advertisers per thousand ads viewed in the News Feed or per ad clicked on by a user.

Link: Facebook Seeks to Boost Revenue From Mobile Ads


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