The next step in Facebook's monetisation push

Forrester Research

Facebook now has 819 million mobile monthly active users. That’s a huge audience. That’s actually 71 per cent of total active users.

Last week, Facebook reported they generated 41 per cent of total ad revenues via mobile. That’s pretty impressive considering they generated almost nothing from it at the end of 2011 when they had already 432 million mobile monthly users. Since the launch of mobile ads in 2012, Facebook has steadily increased the share of mobile in total ad revenues: it was 23 per cent at  the end of 2012 and 30 per cent in Q1 2013.

There is still a monetisation gap in comparison to the share of their mobile audience, but these are definitely impressive numbers for a new product.

There are a couple of reasons for this sharp increase. Time spent on Facebook is meaningful. Facebook’s mobile ads integrate well in the natural flow of Facebook’s news feeds. They are quite visible and are increasingly successful at driving mobile app installs. According to our European Technographics Consumer Technology Online Survey, Q4 2012, 16 per cent of online adult smartphone owners (ages 16-plus) who use apps report that they first learned about an app via social networking websites such as Facebook.

No wonder why the likes of Fiksu and other app boosters spent a lot of money on Facebook mobile ads.  Cost per click increased despite a lot more clicks and ads shown.

Bridging the monetisation gap

For this approach to be successful in the longer term, there are a couple of key questions to be answered:

How are these ads perceived by Facebook users? While Facebook reported that user satisfaction had not been significantly impacted and that ads only represent one in 20 stories on the newsfeed (5 per cent), there is risk Facebook is “pulling the mobile ad lever too hard” as my colleague Nate Elliott said to AFP. Nate is also worried “that Facebook seems to have taken the affront of not being able to monetise on mobile a little too much to heart". Following the IPO, I think Facebook had no choice but to demonstrate their ability to monetise.

The toughest challenge will be to balance shareholders' pressure with consumers' ability to receive ads and make sure they don't consider them irrelevant or intrusive.

How efficient are Facebook’s mobile ads? Based on conversations I had with marketers, it helped them meeting their objectives of app installs but it remains to be seen how effective Facebook mobile ads are for direct response advertising and for brand purposes.

When will Facebook introduce more rich media ad units? Not for now but no doubt that the video-sharing Instagram feature will be monetized and offer brand advertisers more opportunities helping Facebook to monetize mobile at a premium with more impactful and innovative mobile ad formats.

How quickly can Facebook monetise its audience in emerging countries? A growing chunk of Facebook’s mobile audience is coming from developing countries like Indonesia, Malaysia or the Philippines. Facebook announced they had more than 100 million users using their app designed for simple mobile phones. The majority of their mobile audience is actually not US-based while I’d expect a good chunk of the mobile ad revenues to come from US marketers.

This transition will be key to close the monetisation gap as well as Facebook’s ability to maintain the price of their mobile ads.

Thomas Husson is a Forrester analyst who serves Marketing Leadership Professionals. This piece was originally published on Forrester Blog Network. Republished with permission.