Facebook to make ‘large, strategic’ ad tech investments to boost mobile revenue

The strategic shift has been a long time coming for the social network with the relaunch of its Atlas ad server last month a key step in its efforts to give marketers the ad targeting and measurement tools needed to serve personalised branded content at scale.

Further additions to Facebook’s ad tech armoury are coming as it looks to press home its advantage in the mobile space in the battle for ad revenues with Google, Twitter and Yahoo. The company’s advertising revenue jumped 64% year-on-year to $2.96bn in the three months to September, with two thirds of that coming from mobile.

The average price of its ads more than tripled year-on-year, according to Facebook, a sign that it has avoided the struggles its rivals face in adapting its advertising business to the mobile-focused demands of marketers. On mobile, 1.12 billion people now use Facebook each month and 703 million people every day, nearly 40% growth from this time last year.

Speaking on a conference call to analysts yesterday evening (28 October), Facebook chief operating officer Sheryl Sandberg said the future of its ad tech offering would prioritise showing how online and mobile ads lead to in-store purchases. The investments will be funded by a sharp increase in spending next year on hiring and acquisitions. Expenses are expected to rise by 55% to 75% year-on-year in 2015, far more than analysts had predicted.

“On ad tech, I think we’re in the middle of what is a very fundamental shift from marketing that is cookie-based on a PC, to people based marketing on multiple devices that affects those online and offline sales on mobile. So I think we’re pretty far from being fully deployed on even this big shift,” added Sandberg.

“But I think in our industry nothing is ever fully deployed. As soon as we catch up here, there is going to be another movement and something else that happens that we have to react to and build the technology for. We’re a long term company run by a founder with a long run vision and we want to keep our eyes ahead on these changes and technology and keep deploying against them.”

Facebook’s planned ad tech investments underpin its deeper push into video advertising. Through Atlas and video ad tech startup LiveRail, which it acquired earlier this year, the business has one of the most comprehensive video ad-serving networks on the market as well as the ability to push inventory and Facebook data beyond its ecosystem.

Facebook chief executive Mark Zuckerberg said: “We’re investing in ad-tech for a simple reason. Consumers are shifting quickly to mobile and the advertising industry is not keeping up. One of the main reasons the budgets aren’t moving as quickly as consumers is that advertisers haven’t yet had an effective way to serve ads and measure their returns on mobile. Current solutions work well for a person with one device, especially, a PC and for sales that happen online.

“Similarly marketers are not confident that they can measure mobile ad performance. Many of the most commonly used measurement systems over emphasise the value of the last click. This does not make sense, given that studies of Facebook campaigns show that over 90% of ad-driven in-store sales come from people who saw an ad but didn’t click on it.”

It represents a more long-term view from the company following a string of recent acquisitions including the $19bn deal for messaging app WhatsApp and a $2bn purchase of virtual reality headset maker Oculus Rift.

Additionally, the business reaffirmed its plan to monetise Instagram slowly and said it would not look to turn it into a major advertising platform until its 200 million userbase had hit 1 billion.

Zuckerberg added: “Over a five year time frame, we have a number of services, which we think are well on their way to reaching a 1 billion people. Messenger, WhatsApp, Instagram and Search are a number of them. And once we get to that scale, then we think that they will start to become meaningful businesses in their own right.