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Facebook’s Future Dependent on Mobile

Fri, 05/18/2012 - 7:19am
Andrew Berg

As Facebook today offers what is being billed as the largest tech IPO in history, one question looms: Can the company figure out how to monetize mobile?  

In Facebook's filing with the Securities and Exchange Commission (SEC), its mobile strategy was listed under the “Risk Factor" section, phrased as such: “Growth in use of Facebook through our mobile products, where our ability to monetize is unproven, as a substitute for use on personal computers may negatively affect our revenue and financial results” and “Our culture emphasizes rapid innovation and prioritizes user engagement over short-term financial results.”

While Facebook and its 900 million users are often credited for having fundamentally changed the way people view and use the Internet, it's also well known that a large percentage of the site's traffic comes from mobile devices, approximately 33 percent, according to venture capitalist Mary Meeker.

That's a third of Facebook's overall traffic that can't be monetized.  

Anne Frisbie, vice president and managing director of North America for the mobile advertising network InMobi, says that understanding mobile is critical for any business these days.

"In the U.S., people are spending about 142 minutes a day on their devices, compared to 135 minutes for TV and 96 minutes on PCs, making mobile the primary media consumption channel in the nation," Frisbee said in commentary, "yet mobile ad spend has not increased at a proportionate rate."

Frisbee says the primary reason behind this is mobile requires a "completely new way of thinking, a new set of rules and standards and a fundamentally different strategy."

That's a tough trick for a company that was born as a desktop-centric, Web-based social network. 

And yet, Facebook might have a leg up in its approach to mobile, according to Marco Veremis, president of Upstream.

“Facebook has acknowledged something about mobile that no other major player has been prepared to recognize to date: that the growth in impressions available to marketers as mobile penetration grows does not equate to an opportunity to monetize the channel by bombarding people with advertising," he said. 

Veremis stresses the personal nature of mobile. Upstream recently released research that showed 72 percent of mobile users in the U.S. find advertisements on their mobiles or smartphones irritating. What’s more, only one in six Brits and 15 percent of Americans who have surfed the Internet on their mobile phone have ever even clicked on a mobile advert.

Veremis says the move to denounce current practices by as big a name as Facebook "bursts the bubble around the inevitable growth of mobile marketing" driven by growing impressions and calls for greater emphasis to be placed on consumer response and conversion rates.

"To get consumers to respond over mobile, a brand needs to speak less and employ the right technologies and formats that achieve true relevance and impact," he said. "Very few companies truly possess these tools and as such monetization so far has been disappointing despite the smartphone boom."

It’s wait-and-see time for Facebook in this, its first day as a publicly traded company. By the time this piece goes live, shares of Facebook will undoubtedly have leapt to new heights. But the company’s success on the mobile front could very well ultimately determine whether the stock will be able to maintain such lofty prices.

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