Behind The Increase In Ads On Facebook: There's A Battle Raging On Your Smartphone

Getty/Sean Gallup

If like most people you use Facebook on your mobile device, you’ve probably noticed more ads amongst your friends’ updates. But what you may not realize is that a battle is raging among the savviest of ecommerce companies not just to get their ads onto your phone screen, but to get a more permanent spot on your smartphone. And it is being driven by one of the fastest growing advertising phenomena ever seen – the targeted Facebook mobile app ad. 

Facebook has grown their mobile advertising revenue very quickly, now at 30% of their advertising revenue in the last quarter. All of these ads are in stream, distributed amongst content in the Facebook News Feed.  

It’s not just about game apps anymore. Well-known ecommerce companies like, Expedia, 1-800 Flowers, Groupon, and Gilt have been pushing their apps on Facebook.  Here’s an example of what one of these ads looks like on an iPhone:

Our company, Optimal, sees companies like these spending (on average, mostly in the US) from $0.50 to $2.50 cost per install to get these applications onto shoppers’ phones, and many of them are ecstatic at acquiring users at these levels and are pumping up their spending on these types of ads. Doubling their spend every month at this point, based on early results, is not uncommon. And while we still see slightly higher install rates for larger devices which run iOS or Android apps like iPads, for example, the volume there is much smaller. This is a brewing, broad-based smart phone install revolution.

From ringtone to app, today’s smart phone is a super customizable device. Companies bribing carriers or handset makers to be “anchor tenants” on mobile devices will probably always happen, but in our consumer-driven app world this may backfire too (“how do I get this stupid Blockbuster app off my phone??”) and is far less relevant to distribution today than targeted app install advertising with the very important twist that (because of the power of “top app” lists) reviews, install velocity and word-of-mouth matter a LOT. 

Here why Facebook plays an important role in this revolution, especially as we move beyond games:


  • Hundreds of millions of daily authenticated users. Mobile ad targeting without any knowledge of the user is very limited, and often just consists of device- and “what app or site are they using” type of targeting. Google and Facebook are the two companies most likely to “own” targeting on mobile. Big advertisers who know their target audience can combine device targeting with interest and demographic targeting.
  • Ability to promote apps to existing, loyal customers on mobile. With a feature called “Custom Audiences”, companies can get their apps to (I talked about it here) their best customers first instead of scattershot promotion. They can also combine this with the other Facebook ad targeting. This is still one of Facebook’s best but most underutilized advertising features.
  • Big canvas. (As you can see from the image above) Facebook’s large ad units are completely interruptive and though they are not forced in front of you for a set amount of time like television ads, can consume the entire screen. This means, however, Facebook have to keep a close eye on user behavior/usage patterns. 
  • Higher quality users. You’re already selecting for a more affluent customer by selecting someone who owns one of these devices, but also we’ve seen that people who install non-game applications has a degree of tech savviness that means they can immediately find and use

rob leathern optimal

Rob Leathern / Twitter

Optimal’s Rob Leathern.

Retailers have been on a quest to connect their disparate databases, tie the web to offline point of sale and become more efficient at delivering the right offer at the right time. This has led to a ridiculous growth in loyalty, gift cards and frequent purchase programs – not just national retailers, but also the coffee shop down the street – and instead of carrying another card in your wallet or barcode on your keychain, many of them will straight for a spot on your device, or as retailers like Nordstrom or Macy’s do now, will start by asking you for your email address at the point of sale to get your receipt emailed. How long till you start syncing coupons to and from your device at the checkout, or get a loyalty discount for having their app AND paying with your phone? 

It’s still early. Retention and app usage will be an issue as more retailers and ecommerce companies adopt this strategy. The consumer experience will have to be safeguarded, but the hope here is that more targeted advertising will help. But one thing is for sure: your smart phone is the ultimate battleground and we’re going to see a lot of money spent by companies to get there and to STAY there.

Now read: Amazon Is Working On A Plan To Deliver Your Groceries

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