Home How Ads In Mobile Apps Could Send Facebook’s Revenue Soaring

How Ads In Mobile Apps Could Send Facebook’s Revenue Soaring

The Platform is a regular column by mobile editor Dan Rowinski. Ubiquitous computing, ambient intelligence and pervasive networks are changing the way humans interact with everything.

Amid all of Mark Zuckerberg’s iconoclasm Wednesday at Facebook’s F8 developer conference, it was easy to miss the biggest news for the company—and the mobile world it hopes to dominate.

Yes, throwing out Facebook’s “move fast and break things” philosophy is significant, as is anonymous login. But of far more financial consequence, both for Facebook and the developers it courted at F8, is the Facebook Audience Network.

Facebook May Finally Have A Google-Like Ad Product

It may well prove to be the equivalent of Google’s AdWords and AdSense products. On their face, when Google introduced them, they seemed like simple tools for buying targeted ads (AdWords, in 2000) and placing them on other websites (AdSense, in 2003). But they proved to be powerful financial engines, ones that still fuel the company’s growth more than a decade later.

The Facebook Audience Network—Facebook’s new advertising product—could be the biggest idea that the social network has ever produced. While it failed to reinvent advertising on the desktop, where Google dominates, Facebook has a shot at doing so in mobile.

It’s easy to overlook developments in advertising and marketing technology. On a day-to-day basis, the only people who really care about it are advertisers, publishers, and the companies building advertising technology. I’ve purposefully avoided writing about ad tech for years, because, to be quite honest, nobody really gives a damn.

Quick Thought: Facebook App-Linking The Competition

The other news that has people talking from F8 yesterday is the company’s new “App Links” proposal. Essentially, Facebook is trying to create the same type of linking URL structure for mobile apps on iOS and Android that has long existed on the Web.

First, we must acknowledge that links between apps has definitely been a problem for developers. Mobile leads itself to a fragmented Web where apps function as their own little individual fiefdoms, not connected to the outside world or each other. App Links wants to solve that.

But, as Jay Yarow from Business Insider correctly points out, why would Apple and Google just let Facebook waltz in to become the de facto middleware for mobile app developers? Facebook wants to control the pipes between mobile apps (like it does on the Web), but Google and Apple have far more control over their own operating systems than they do on the Web.

With Google I/O and Apple’s WWDC coming up soon, we may see the platform operators crush Facebook’s dream of App Links before it even takes off. Only a strong embrace by developers, whom Apple and Google desperately want to please, will give App Links a shot.

But here I am, writing about ad tech on The Platform for the second time in a week. Why? Because we are beginning to see an epochal shift in how advertisers handle mobile. With its Audience Network, Facebook has launched an economic engine that could make a huge difference for the company’s own revenues and the bottom lines of app publishers, brands, and advertisers. 

As noted in The Platform earlier this week, programmatic ad buying mixed with contextual computing is beginning to turn mobile advertising into a viable medium. Facebook knows more about its users than just about any other company outside of Google—and arguably more, since Google’s efforts to force its users to log in via Google+ have met resistance, while Facebook’s users are always logged in. 

Facebook Ads, Off Facebook

Facebook will now be able to sell personalized, targeted ads off of Facebook and into the rest of the mobile application ecosystem. The goal of the Audience Network is to provide a way to monetize apps across iOS, Android, and soon Windows Phone. Just as Facebook moved to spread itself across the Web with Facebook Login and the “Like” button, it’s now doing the same for mobile—with advertising dollars as the lure. 

The dirty secret of Facebook’s advertising business to date is that social advertising, which it launched to much fanfare in 2007, hasn’t paid off. Instead, it has succeeded mostly through its unprecedented scale. Advertisers can’t ignore its 1.28 billion monthly active users, which produced nearly $8 billion in revenues in 2013. It is still growing quickly: It pulled in $2.5 billion in the first quarter of this year and is solidly profitable. Yet while Facebook holds its place in the pantheon of Internet giants, its revenue and employee base are actually quite small compared to the likes of Google or Amazon, which made $15.4 billion and $19.74 billion last quarter respectively.

To put it in perspective, Facebook is just a little bigger than Google was in 2005, a year after the search company’s IPO. That’s when Google’s maturing advertising technologies really started printing money, adding $4.5 billion in revenues in 2006, $6 billion in 2007, and $5 billion in 2008.

Facebook has the opportunity to take advantage of the new mobile era of computing to build its own dollar-stacking empire, if everything falls into place.

Consider that Facebook’s own mobile ad revenue, generated through its own apps, was about $1.33 billion in the first quarter of 2014, about 59% of its total advertising revenue. Just a few years ago, that number was zero: Facebook didn’t sell ads on mobile at all. The Audience Network could take that mobile revenue to the next level.

Quote Of The Day: “This is a world where people eschew sex to write a programming language for orangutans. All programmers are forcing their brains to do things brains were never meant to do in a situation they can never make better, ten to fifteen hours a day, five to seven days a week, and every one of them is slowly going mad.” ~ Author Peter Welch in a brilliant essay dubbed “Programming Sucks” on StillDrinking.org.

Advertisers, developers, brands and publishers—basically, every stakeholder in the advertising game—have long waited for Facebook to make the move to bring its advertising off its own platform and into the rest of the connected world. The Audience Network does not invade the Web, as of yet, which is likely wise: Why take on Google in its stronghold, when Facebook can dominate a faster-growing business?

The potential could be profound. As of yet, no company has fully cracked the realm of mobile advertising to reap the type of profits that Google’s AdWords eureka brought it on the Web. There’s a lot to like here. 

Photo of Facebook CEO Mark Zuckerberg by Selena Larson for ReadWrite

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The ReadWrite Editorial policy involves closely monitoring the tech industry for major developments, new product launches, AI breakthroughs, video game releases and other newsworthy events. Editors assign relevant stories to staff writers or freelance contributors with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

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