Sorry, Facebook shareholders, but your company won't succeed in mobile until it can engage participants with ads.
Initial reaction to Facebook's new mobile-ad network yesterday was upbeat, with some generously describing the beta test as a new way to make money without irritating Facebook members.
Facebook will deliver ads to its members based on their preferences, even when they’re using apps other than Facebook on their mobile devices.
The news closely follows Facebook's decision earlier this month to open its Facebook Exchange advertising program to more advertisers.
Reaction to that move also has been positive, but fans are myopic here. More than $1 billion was spent on mobile advertising in 2011, but it generates low profits for publishers including Facebook because the ads are cheap to buy and don't result in sufficient conversions.
In Facebook's latest moves, it is tackling ways to put relevant ads before its members' eyes, which is fine as far as it goes. But these two tactics don't address the most attractive aspect of Facebook for advertisers -- its ability to enage people, ideally leading to ad conversions.
"Watching (Facebook) push display ads to people seems akin to buying an iPhone 5 to use as a paperweight,” said SocialTwist President, Sanjiv Agrawal, who was formerly Google's head of product marketing.
“From an advertiser's perspective, the [new mobile platforms are] a brilliant forum for engaging and sharing with their customers," said Agrawal. But Facebook will miss its "best trick" if it stops with pushing ads. It needs to perfect "how to convert these customers into willing advocates for their products and brands.”
J.T. Hroncich, president of Capitol Media Solutions, said Facebook will ultimately lag behind Twitter in mobile-ad revenue growth simply because Twitter has long been optimized for mobile, making it more effective at mobile conversions.
Hroncich predicted Facebook will follow Google's travails, watching mobile ads "cannibalize their site advertising at a lower margin since mobile ads are considerably cheaper.”
In other words, more-effective targeting of Facebook mobile ads across apps and mobile Web properties is a good start for solving Facebook’s mobile problem, but it's not the solution.