Mobile is the epicentre of Facebook’s future

Despite forking out mega bucks on acquiring app-related companies and rolling out new ad formats, mobile continues to dog Facebook’s long-term financial viability.

Lara O'Reilly

It seems absurd to snark at a company that’s making £1.1bn in revenue in a mere quarter, especially as that revenue has grown 32% year on year. However, that growth continues to slow quarter on quarter.

A number that does happen to be on the incline for Facebook is its number of monthly active mobile users, which grew 67% year on year to 543 million.

Facebook’s issue is still trying to work out how it can effectively monetise those users in the long-term. The social network didn’t give much away as to how exactly it plans to achieve this in its maiden public financial report this week, which worried investors and dampened its share price in after hours trading.

Mark Zuckerberg referenced the uphill struggle in a subsequent media and analyst conference call.

“I think we’re really much closer to the beginning than the end [in terms of our mobile offer]. If you use the apps today, I think they’re relatively basic to what anybody would want from a Facebook experience on the phone,” he said.

I agree with Zuck. Why should users need separate iPhone apps to access their news feeds, another for photos, another to manage Pages and yet another for Messenger? Considering the amount of times Facebook employees refer to the platform as an “ecosystem”, that seems more like disjointed silos.

Facebook is working to build out the depth of experience of its mobile offer. This development is bulked somewhat by its acquisitions of Instagram and iOS developer Acrylic Software in recent months.

It still needs to bear in mind that however deep and beautiful the experiences it creates, they must have revenue at the core.

Facebook is not alone in struggling with its long-term mobile future.

The majority of mobile display ads are still intrusive on such small screens on what are very personal devices, having just tried to replicate the desktop model. Facebook knew it couldn’t add such a disruptive format on its apps, hence the introduction of Sponsored Stories, which appear in the news feed.

Early indications suggest this format is working, which chief operating officer Sheryl Sandberg saying they make the company around half a million dollars day in revenue.

Research from TBG Digital suggests that mobile Sponsored Stories are generating click through rates that are 94% greater than those in desktop news feeds – although this figure may be slightly skewed owing to the fact that new formats tend to yield bigger CTRs.

Facebook can’t rely on this one format alone – especially as users become more savvy to the marketing technique and choose to forbid brands from using their name or image in advertising in their personal settings.

It needs to innovate beyond a display ad modified to fit on a tiny screen. Facebook needs to remember that mobile phones are consumers’ most-used utility and must create advertising that reflects that.

Location-based advertising is a simple way for Facebook to attempt to make mobile ads act as a service, by pointing users towards relevant retailers or cafes that their friends may have once visited or liked, for example.

Facebook must also remember that advertising isn’t always about intricate targeting and sometimes it’s not even about context; it has the muscle to lead the charge in the space and make mobile advertising that is beautiful. Instagram could surely teach it a thing or two about aesthetics.

Moreover, Facebook has the partners and the developers to be able to make mobile advertising fun. Mobile is the fastest growing platform for gaming, with people paying up to £5 to download individual games, according to the National Gamers Survey – a lucrative opportunity to take advantage of an already existing trend in one of the areas Facebook already knows so well on desktop.

The entire mobile advertising market is in a rudimentary stage in terms of output, but Facebook has the ability to innovate and become a leader in the area – but it must keep investors informed of its progress on the way.

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