Why Facebook Can’t Resist Mobile Ads

Social media patrons always treat ads as the ultimate evil, forcing major social networking sites to be prudent in running ads. Facebook has managed to run ads without annoying users, but the temptation of increasing mobile ad revenues is now haunting popular sites like Facebook. In the February IPO filing of Facebook, the company hinted on possible monetization of its mobile offshoot like in the form of sponsored stories displayed as mobile News Feeds.  The social media giant also revealed that more than half of its 845 million users sign in on their phones, yet the site is not yet maximizing revenues from such visitors.

When Facebook introduced Sponsored Stories last year, desktop visitors barely complained. Such activity updates of your friends would appear anyway even without Sponsored Stories. You see Sponsored Stories when your friends like or interact with the Facebook page of advertisers. Commenting, casting a vote, using a third-party app, playing Facebook game, and sharing a page are delivered as Sponsored Stories. Just as the usual updates you get from your FB friends, Sponsored Stories can be hidden, removed or restricted.

Facebook is expected to trade publicly in May, thus mobile advertising, whether in the form of Sponsored Stories or regular banners, is hard to ignore knowing that it can  attract shareholders. In 2011, there were 487.7 million smartphones shipped worldwide, 58.8 million of which were in the fourth quarter; whereas annual PC shipments only reached 414.6 million annually and 20.2 million for the last quarter of 2011. The figures include laptops and netbooks. The annual figure for smartphones increased 63% year-on-year, compared with just 15% growth rate for PC shipments.

Facebooks’ mobile traffic is expected to grow more rapidly than overall monthly visitors in the foreseeable future.  It is now apparent that Facebook is under pressure more than ever to tap on mobile revenues as smartphones become the dominant platform to access the site. Emerging countries like Brazil and several Latin American markets are more likely to use smartphones than PCs when accessing the Web. In the US, 69% of smartphone users view the world wide web every day.

eMarketer estimates that mobile ad spending in the US will jump by 80% to $2.6 billion in 2012, compared with $1.45 billion last year. Google and iPhone currently dominate the mobile advertising market, pocketing  $750 million and $90 million in mobile ad revenues in 2011, respectively.

Anti-Ad Sentiments

Facebook knows subdued advertising better than Twitter. Last year, the microblogging site ran a short-lived advertising platform, Quick Bar, on its mobile site. Quick Bar regularly flashed sponsored Twitter topics when the page is refreshed, which many users found intrusive.

Twitter’s mistake might have served a good lesson for Facebook. Sponsored Stories can easily be mistaken for regular FB updates or news, unlike text ads and banners that are prominently displayed.

Financial Times reported that Facebook’s mobile Sponsored Stories would be rolled out this March. Due to relatively low click-through-rates of mobile ads, some speculate that Facebook would experiment with various ad sizes and positions as it expands its mobile portfolio.

Bradley Zarich is one of the most published guest bloggers in the fields of consumer electronics, online marketing, satellite communications and wireless technologies. Some of his posts appear in searchenginepeople.com, tripwiremagazine.com, netchunks.com and other leading web sites.