Facebook’s quarterly gains in mobile ad revenue boosted spirits on Wall Street last week, especially for those who have been long on the social networking titan since its bumpy IPO last year. What does Facebook’s performance indicate about the overall health of the mobile economy?
I see mostly positive developments and some useful lessons for any company seeking inroads in mobile.
On the one hand, Facebook saw over $650 million in mobile revenues, up 76 percent since the last quarter. Overall revenue increased 53 percent, which means that Facebook’s primary growth engine lies in its mobile operations. Facebook has succeeded in large part because it is figuring out user tolerances for paid content. Facebook isn’t serving banners, which have become the white noise of digital advertising, but rather content they believe users will tolerate if not appreciate because of its intelligent targeting. Facebook’s model for providing paid content to mobile users is worth emulating.
On the other hand, Facebook, which for years focused more on acquiring its massive, 1 billion+ installed base than monetizing its users, doesn’t have Google’s or Yahoo’s digital revenue legacy problem. By that I mean digital advertising incumbents such as Google and Yahoo have established revenue and profit expectations based on their success on fixed devices, such as computers and laptops. As more users transition to mobile devices, where advertising is much cheaper, these companies are going to struggle to grow revenues at their historical rates. Because Facebook only recently made monetization a priority, it doesn’t carry the same digital revenue legacy and expectations.
More strikingly, Facebook represents one of the most popular apps for mobile users. Check out the graph in this story by Flurry, and you’ll see that users spend, on average, 18 percent of their mobile time on Facebook. Though the article published in April of this year, I expect today’s numbers would look mostly unchanged. No other single mobile app or game comes close in time spent, which means Facebook is uniquely poised to capture sizable mobile ad revenues. Given a choice between spreading its mobile marketing investments across dozens of mobile games, apps and websites, or putting it all in a single environment in order to reach a massive audience, I suspect most advertisers would and do prefer the latter.
So the combination of mobile dominance and unburdened investor expectations has enabled Facebook to blow us away with its growth. What lesson does this hold for others seeking a toehold in mobile?
I don’t think the answer lies in trying to replicate Facebook’s scale. That’s unrealistic because only a handful of companies can attract over a billion users. Instead, focus on Facebook’s integration of paid content and the efforts it is undertaking to make using Facebook easier. It is leveraging what it knows about consumers to say, essentially, to advertisers “Trust us, and we’ll tell you how you can advertise to potential customers in a way that won’t turn them off.” That is exactly the approach all digital, mobile and social marketers should embrace. Though Facebook Home represents a rare mobile blemish for the company, its attempt to make it even easier for people to use Facebook is something other app makers should emulate. I wrote about this not long ago, and though Home has not succeeded yet, I don’t expect Facebook to give up. I wouldn’t recommend that other app developers give up on their own pursuit of a Home-like strategy, either.
Kudos to Facebook for a fantastic quarter. Now let’s see if other companies can replicate Facebook’s approach and results.
For more useful information on Facebook’s recent results, I recommend this Bloomberg story.