Facebook’s Mobility Challenge

Facebook’s Mobility Challenge

Facebook has announced its inability to monetize the more than 400 facebook members who access the site via a mobile device.  As part of their public offering facebook had to reveal risks that the company faces in the upcoming years and one that they highlighted is their inability to generate meaningful revenue through mobile devices.  Overall spending on mobile advertising in the US is expected to jump 80% next year to over $2.6 billion and facebook needs to find a way to capture a large chunk of that spend if they want to continue to be a powerhouse in the tech industry.  Although a large number, the mobile advertising industry is still very immature when compared to TV, print and online advertising.  The inability to generate significant revenue on mobile advertising is not unique to facebook as other large companies are struggling as well.  Although facebook has listed their inability to generate significant revenue from mobile devices as a risk many believe that facebook is deliberately delaying ads on mobile devices, similar to their strategy with the traditional facebook website. 

This article brings up several interesting points about the mobile advertising market.  This market is poised to grow over 80% in the upcoming year; however marketers still do not know how to fully capitalize on this market.  According to the article and several other experts consumers are not yet ready for advertising to appear on their mobile screen.  In most cases mobile screens are much smaller than those on traditional PC’s and consumers do not want to see clutter on their phones and they do not want anything to jeopardize the speed at which they pull up content on their mobile devices.  Google is currently the leader in mobile advertising however they are still not fully capitalizing on the vast potential that this market offers.  Another interesting point that this article brings up is the other ways that companies like facebook can make money on mobile devices.  Currently Google allows developers to great apps and games and offer them on their android platform free of charge while companies like Apple and facebook charge a percentage of app sales from each developer.  This is one reason why facebook was reluctant to create and Ipad app for facebook because now facebook needs to share revenue from faecbook apps with Apple.

With the current model and fight for dollars in the mobile market there are several battles going on within the war.  For instance many believe that facebook deliberately created their Ipad app with bugs so their members will just access facebook via the web directly versus the apple app.  This would be a very interesting strategy especially because facebook openly admits that over half of their users access their website via a mobile device.  It is obvious that there is still great potential to be reached in the mobile market and facebook is testing models with streaming advertisements that are attached to a member’s friend.  The question that still remains is facebook’s current mobile strategy one that will make this segment profitable?  Facebook must make a lot of strategy decisions in the upcoming months and two of the most critical strategies will be how much resources to devote to mobile and how to attack this segment.  If you were facebook how would you attack this segment?

You can access this article at the link below.

10 thoughts on “Facebook’s Mobility Challenge

  1. You cannot advertise on mobile, at least not in the traditional sense. Banner ads and click-through are no good when they take up a third of the screen or when they are in your pocket. The only effective way to advertise on a phone is audibly, like a radio ad. And lets be honest, Facebook isn’t there yet; they probably will never be.

    So what’s the solution then? One way to monetize mobile is to simply charge for the app. In exchange for your $1/year, you get your Facebook contacts on your phone so you can call, text, and video chat directly from your mobile. In addition, for that same one dollar, you would be able to GPS tag your photos, find your closest friends, and keep up on all the latest baby photos. Sounds like a pretty sweet deal to me! To put this into perspective, if only 5% of Facebook users tolerated this, it would still be $50 Million a year of revenue for the social media giant.

    Another way to monetize was implied in the post above; Facebook could become a distributor of apps. Like the “Facebook App Store”, where you can play all your social Facebook games right on your mobile device. Again, $1 goes a long way here…

    I understand there are drawbacks to monetizing this way, a lot of people would be pretty unhappy at Facebook for charging for an already free app. However, at $26/share I don’t think Zuck and the gang have much of a choice.

  2. Mobile advertising on Facebook still has a long way to go. As an iPhone user myself, it seems like most mobile advertisements come from free games. For example, if you beat a level, an advertisement will pop up that you might be forced to watch or read before continuing onto the next level. The way these games make money is to put these adds on the free games, and then urge the consumer to upgrade to the premium version (which isn’t free). The premium version will then allow you to play your game without the interruption of ads or popups.

    If Facebook tries putting ads on their mobile site, the consumer will not be too happy about it. They must find a way to incorporate their advertisements while keeping the user happy. Like w13lewis said, they could potentially charge users to a premium app that blocks the ads and popups while their free app keeps the ads and popups. Some people are so sickly addicted to Facebook that they would drop the dollar in order to block the annoying ads. On the other hand this would obviously irk a lot of the consumers that have used Facebook for free in the past.

    It all comes down to figuring out the best strategy to keep the revenue coming while keeping the consumer happy.

  3. I am sure I speak for a lot of people when I say that Advertisements on our apps are simply annoying and if Facebook’s team decides to incorporate ads, then there will definitely be a number of complaints and users who will start accessing it via the internet. I really like your idea of Facebook having their own “Facebook App Store” because it is a different approach for their team to take in the market and can potentially create large amounts of revenue for the organization. However, a reason why this might not work is because they would be competing with Apple’s App Store and Google’s Play App Store. These two markets are the powerhouse and I believe Facebook is too small to start up their own and compete with their competitors.

  4. I know a lot of people who only access Facebook on their mobile devices. As technology has gotten better on mobile devices, people don’t have to spend as much time on their laptops or desktops. Its difficult for Facebook to advertise on mobile phones since most users access facebook through an application rather than a browser page. From what I have seen up to date, it is hard for advertisers to put ads through applications. In my experience I think that these ads through applications are very annoying and end up freezing the application itself. Until Facebook can find an affective way to advertise through mobile devices I think they will continue to lose revenue. They need to find an affective way to advertise because I believe that the traffic through mobile devices is going to keep increasing exponentially. They also have to take into affect what will be the best way to advertise without disrupting the consumers experience on the Facebook application.

  5. In the world of business and marketing it’s all about differentiation. Yes, it is simple for Facebook to charge $1 for service, populate the site with adds, and generate revenues from games such as FarmVille, but what will set Facebook apart is what made it popular in the first place, being different, providing services to users free of charge, and keeping it simple.

    I agree that a great source of revenue is to take a cut from game apps. I also think if Facebook could develop it’s own app store that would be very profitable, but as the previous comments have noted, Facebook stands in the shadows of some big competition in that market (Apple and Google). So what can Facebook do to monetize in the mobile market? Why not take a twist on something Facebook does well; notifications.

    How would you feel about this: you go on to Facebook and “like” a page that notifies you when your favorite store is having a sale, or one of your favorite restaurants are introducing new menu items. Take it a step further and have a notification come up when one of your favorite actors (recognized by either being listed as your favorite actor on your home page or that you “liked” their page) is staring in a movie at your local theater. These notifications are personalized to inform you of events/items you are actually interested in hearing about. Furthermore, take for instance the restaurant or movie example, why not set up a reservation or purchase your ticket right off your phone. The difference here as opposed to other adds or going out and searching the web is that the information (information you care about) has come to you. Facebook can take larger cuts from this type of strategy because it not only advertises, but prompts the user to actually make a purchase which is another revenue stream Facebook can partake in.

    It comes to keeping it simple, keeping users happy, and just taking what Facebook does well a few steps farther in order to start tapping in to the mobile market.

  6. I always thought that Facebook’s decision to go public was a bad one. They run a website that is difficult to monetize because of everything that has been available to its users for free. Now that the company has investors and shareholders, the company has more people to make happy, except these people have a stake and will steer the company to make money for them. Facebook has always been for the user, now that they need to make money, they are going to have difficulties pushing advertisements where users do not want them. This might eventually lead the way to a new social network. Mobile advertisement will prove even more difficult, who wants to be bothered by ads when you only have a few minutes to check your phone.

  7. I can relate to this because I’m one of those people who doesn’t get off of their iPhone, Facebook included. However, I have never before stopped to think about this issue and how they are trying to earn revenue through mobile advertising. Yes, I agree with this article and many of the previous comments, phones have too small of a screen to have banner ads popping out as you’re on Facebook. On the other hand, when I’m playing an game app, every time an ad comes up in the middle of the game, I get super mad, and it always slows down the entire thing, if not completely exit out of it. I think Facebook is just not there yet and advertising on mobile has a long way to go. A thing to consider is that, like the article mentioned, for Facebook to make money, they could just become a distributor of apps. The Facebook App store is great, and instead of making everything free, charge a dollar here or there, or also game apps that constantly have ads coming up, well consumers would definitely pay the money to upgrade to a newer game of same sort that would stop having the ads come up. The Facebook App store does have a lot of competition against the Google and Apple app stores, so overall, Facebook just needs to find an affective way to advertise that will work best for them, and at the same time, keep the consumers happy and satisfied.

  8. Facebook understands the potential negative impact that having advertising through their mobile app will produce and therefore the task of advertising is difficult. Most of us, as many have clearly already stated, dislike advertisements as they clutter the screen and overwhelm the viewer. Having that into consideration Facebook needs to come up with an effective strategy to produce more revenue without the cost of user satisfaction. I really like the idea proposed by spr1314drutkowski. I think it would be very effective to use notifications as an advertising strategy since one would be receiving notifications from things they have an interest in and be able to take action quickly. This would create a positive response from the Facebook users and provide much advertisement as well a greater opportunity for the products or services to purchased.

  9. Facebook needs to capitalize on the use of mobile advertising and they will. Although, it says they are having trouble doing so, there are tactics that have been drawn up for a couple years now and I know that personally from a colleague that works at Facebook. A strategy of differentiating there advertisements will prove to drive heavy profits because the normal side scroll or bottom banner ads do not provide any value to us as consumers. They are working on some top secret strategies in Palo Alto and its going to be cool seeing what they come up with. Yet, another reason why the purchased instagram a solely mobile platform. They will leverage the use of photo IQ to show people what people actually want to see rather then displaying pointless ads. I am excited to see what they do with it.

  10. It would be in Facebook’s best interest to continue their research and application to capitalize on the vastly growing internet use through mobile devices. I for one use my smart phone essentially in place of my home computer due to my busy lifestyle and the advanced technology in web based cell phones. Also, in today’s rapidly growing market, Facebook needs to stay ahead of the game by out pacing their competition in a field that will eventually take over the majority of the advertising industry. Thus rendering many marketing strategies obsolete such as newspapers and possibly surpassing television ads in the future. Other companies will look to gain an edge against Facebook in this sector if they choose not to realize the importance of constant improving and adapting to new market trends such as mobile internet access.

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