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There’s been lots of action on the Facebook front over the past few weeks. Most recent of course is the company’s quarterly earnings. The big story there is the continued march of mobile, now up to 59 percent of its ad revenues (see our recent mobile forecast).

Where things get more interesting is Facebook’s plans to continue growing mobile revs. Percentage growth naturally slows as revenues grow linearly from a small base to a larger one, as it goes with revenue growth (just ask Google). So the mobile strategy coming out of Menlo Park will be crucial.

It’s likewise important not to misinterpret what is going on at Facebook, as the company’s trajectory in mobile will provide valuable learnings for anyone else tackling mobile advertising (as we discussed on a recent analyst roundtable). Lots of tech reporting has missed the point though.

Someone Else’s Backyard

Attention has focused on two events: The Nearby Friends feature, and a Facebook “off-site” ad network, rumored to be announced at the upcoming f8 conference. These are each interesting in their own right, but there’s been too much link-bait fueled speculation to connect them.

Stepping back, Facebook’s mobile advertising happens on a few levels. They have native news feed ads within their flagship app, and a prospective ad network that would be off-site. The latter would use all of its data on users and target ads accordingly, but within third party apps.

Facebook had a pilot program for that already and then folded it to focus energy on its own native mobile ad efforts (people often forget this). Now the rumor is that they’ll relaunch some version of this off-site network. This makes sense and my prediction is that it will be mostly app install ads.

Facebook certainly has lots of good data for retargeting users within other apps. This would require tracking/identifying users, which can happen within its existing network of apps that use Facebook Connect. Authentication at the OS level — like Twitter’s deal with iOS — is even better.

But ultimately the beauty of an off-site network is to use all of this data and positioning to continue milking demand for mobile ads, without killing the cow. Instead of over-monetizing its own core user experience, it can do so in someone else’s back yard (albeit with a publisher rev share).

For the ad strategy itself, FB will have to translate its success with mobile news feed ads to other apps (this is where the punditry has fallen apart). In Facebook’s feed based interface, native ads work great. But most other apps don’t have the same scrolling real estate / inventory to work with.

So will it be traditional banners instead? That’s not a lot to get excited about, although there’s admittedly value in Facebook’s targeting capabilities alone. That will involve behavioral targeting, and potentially location targeting. But not the way generalist tech media would have you believe (yet).

All About Local… Kind of

That’s where the Nearby Friend’s feature comes into the media blitz. In the wake of its launch, it was discovered that Facebook is thinking about using the location tracking (core to the friend finder feature) to target ads in the future. Interesting but not likely tied to the prospective ad network.

Rather, any location targeted ads resulting from this will be applied to mobile news feed ads on Facebook proper. It could apply to a prospective ad network in the future but Facebook is very careful about rolling these things out — especially anything resembling a privacy minefield.

As for any location targeting they do for their own native news feed ads — if this does indeed roll out in the near term — it could have some benefits in adding location relevance to mobile ads. But there are also some challenges that most coverage so far has ignored.

1. News feed ads are more brand based at these early stages. The calls to action in those ads have been more about branding or downloading an app and other things that have less to do with location relevance or offline transactions. App install ads are in fact a huge chunk of Facebook mobile ad revenues and they don’t have a location targeting imperative. This could change over time but that’s what we’re dealing with now.

2. Most advertisers that have adopted Facebook’s mobile ad options are large brand advertisers as opposed to SMBs (as is the case with any new emerging media or ad product). Per the point above, they are more interested in reach and branding. Location targeting is great ad boosting relevance and ad performance, but it greatly impedes reach by segmenting audiences into tiny geographic pockets. And for many brand advertisers and agencies, campaign reach is a top objective.

3. For SMBs by comparison, there is obviously less emphasis on reach and more on targeting users that are nearby a store location. However SMBs are very hard to reach from an ad sales perspective. Everyone seems to ignore that fact when news like this comes out. Relatively few SMBs self serve and the rest require capital intensive sales resources to reach in the high-touch fashion that’s required. They often need their hands held. (See lots of rich SMB sentiment data in our LCM data).

The other potential route is to partner with a sales channel such as local traditional media companies who can re-sell Facebook ads to SMBs. That’s of course what Google has done (in different fashion) with third parties like local newspaper or yellow pages sales teams or pure plays like Reach Local.

There’s lots of good debate around this channel strategy. Screenwerk recently spotlighted a bearish attitude towards sales channels from Facebook local head Dan Levy. What it will do instead is unclear (go it alone potentially), but this will be a vital factor in Facebook’s ability to unlock local.


We’ll cover this topic closely at our Leading in Local Conference in Atlanta, now just 10 days away. Email me for a discount code to register (

This Post Has 2 Comments

  1. Good note about brand based ads these days. Any of the newsfeed ads I’ve seen on Facebook are heavily branded. The question is where will FB go to achieve growth on the mobile front?….and you’ve posed some interesting points. With no location targeting now we’re dealing with some big limitations, but that is subject to change in the future. We will see.

    Great post, and I found it on kingged(dot)com, where I’ll give it a hearty vote up.

    Thanks Mike!

  2. Nice to see another super informative blogpost here. Use of mobile phones for browsing internet has increased at tremendous rate, after big screens for mobile phones has came into existence. And it’s surely gonna keep on increasing. So everyone has an eye over how to take maximum benefit from the scenario, and Facebook & Google are prime amongst them.

    Thanks for the nice info, and of course video.

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