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Does Facebook's ad revenue slowdown point to a mobile problem?

7th Aug 2012
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Andreas Pouros, COO at Greenlight, examines whether Facebook is failing to manage its mobile strategy. 

With Facebook’s inaugural results perceived as being underwhelming, and Facebook looking to mobile to grow revenues, the challenge of how it monetises people’s usage of its network over mobile phones continues to be a primary concern for investors. But if a phone is now not part of its plans, Facebook has a mobile problem on its hands.

If a Facebook phone is now not on the cards, Facebook remains without a solid answer to its mobile problem. Yes, new ad formats have been and will continue to be launched by the company for mobile users, but there is a serious question over whether Facebook can integrate a compelling advertising offering on the smallest of screens which users will be comfortable with and that does not interfere with their Facebook user experience.

Suffice to say, its recent earnings call shows Facebook to be a great company that can make lots of money, but in the mobile battle, Google and Apple remain far ahead of the pack.

Why is mobile so important?

Late last year, Facebook stated that over 425m monthly active users accessed Facebook on a mobile device, approximately half of all of Facebook's monthly active users. Whilst this has increased Facebook usage, it means that users are accessing the social network increasingly on devices which Facebook has less control over, with less opportunity to make money from with advertising, mainly because these devices have less space for advertising, are influenced by third parties (Apple, Android, etc), and Facebook delivered via apps, like Flipboard, are much harder to infiltrate with advertising.

This is not the case for other companies, such as Google. Its advertising mechanisms fit infinitely more comfortably on a mobile platform.

The earnings call provided little confidence that Facebook has made any significant inroads into this problem, and many investors commented that they would have liked a more elaborate plan and forecast to alleviate their concerns over future profit growth. 

Reports in the press over the last week about Facebook and HTC having brokered a deal to produce a Facebook phone were denied in the earnings call.

Speculating one month ago on how successful such a strategy might be though, Greenlight polled 500 people globally to gauge consumer appetite were Facebook to produce its own mobile phone. 50% said they would ‘never’ switch to a Facebook phone, 8% said they ‘definitely’ would, whilst the remaining 44% stated that they would ‘maybe’ purchase a Facebook phone.

Andreas Pouros is chief operating officer at digital marketing agency Greenlightproviding search and social media services. 

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