In its S-I filing, Facebook cited increased mobile usage as a potential risk to the business, saying it “does not currently directly generate any meaningful revenue.”
Mark Zuckerberg just acknowledged on Facebook’s first ever earnings call that “we’re investing heavily in improving our mobile apps.”
Here’s the story:
Mobile usage on Facebook is soaring: Facebook just reported it has 540 million mobile users, up from 20 million three years ago, and 67% more than a year ago. Mobile users are 20% more likely than others to use Facebook on any given day.
But, Facebook lacks much useful location data: Facebook knows its users’ likes, habits, and friends, but it probably doesn’t know where they are right now or what’s nearby. Of those logging in, the most common activities are reading a post from a friend or posting a status update.
And users really don’t like traditional mobile ads: On mobile phones, consumers are most likely to pay attention to sponsored stories or links over other forms of ads, according to a new study from Prosper Mobile Insights.
So, sponsored stories will help: Facebook is now letting advertisers bypass its sales force to buy mobile-only “Sponsored Stories” through the ads API or Power Editor. Facebook just reported that by the end of June, sponsored stories were bringing in $1m in revenue a day — half of which was coming from mobile.
But, the real key is monetizing social discovery: In the same study from Prosper Mobile Insights, consumers cited relevance as the mobile ad factor most likely to draw their attention. Social discovery — the use of social apps on mobile devices to find nearby people and places that are most relevant to what users are doing at that particular moment — may be the key business model to make social work on mobile.
That means great mobile products, and quite possibly a Facebook phone: This explains Facebook’s mobile-first product strategy. Zuckerberg and Co. have already put a lot of the pieces in place that will be instrumental in building a mobile platform and allowing Facebook to monetise mobile via location-based advertising, mobile commerce, and app distribution. These include:
- Camera app (and acquisition of Instagram)
- Messaging app
- App store
- Payments system (Credits)
- Expertise related to location-based check-ins (Gowalla acquisition)
- Social-discovery app (Glance acquisition)
- Mobile gifting capabilities (Karma acquisition)
- It’s reportedly considering buying a mobile browser maker (Opera) as well.
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