Facebook Enter Mobile Advertising: What Does It Mean For The Social Network?

It has now been nearly 2 years since what was considered as one of the biggest IPO flops ever but it appears that Facebook are still persisting with growing the business. When Facebook was created by Mark Zuckerberg he never had the intention of floating on the Stock exchange but the growth of the social network and strength of the brand has meant that it was almost impossible to resist. The latest venture from Facebook is mobile advertising. What impact is Facebook Mobile Advertising expect to have on Facebook and its shares and how does Facebook compare to its competitors?

History of Facebook Stock

When Facebook applied for one of the biggest IPOs (initial public offerings) in technology and internet history there were great hopes especially as the IPO raised $16 billion. However, there was a bit of an issue, Facebook was never intended to be a business and the scale of the trade for an internet company was unprecedented, Facebook was valued at four times what Google was valued at in 2004. Within a short time of launching on the stock market shares had dropped to $31.00 wiping a massive amount off the initial share price. This has meant Facebook had to look at ways to keep investors happy.

Facebook Business Model

Being a free subscription service Facebook has had to rely on cost per click Display Advertising to generate revenue and compared to other paid advertising services such as Bing, Yahoo and Google, the CTR (Click Through Rate) for Facebook display ads is regularly lower than 1%. This means that although the Ads are seen by thousands of people they are not clicked on, which leads to lower revenue than hoped from Facebook especially with 1.23billion active users. However, over the past few years Facebook has improved its targeting which has helped to improve the ad delivery and the introduction of sponsored stories has increased the number of companies including Facebook in its advertising mix. As a result in the fourth quarter of 2013 the profits increased by 63% to £316million.

Mobile Advertising

Facebook are entering the mobile advertising market just at the right time, with a growing number of smartphones and massive success stories on the App market (we all remember flappy bird!). In 2013 Mobile advertising revenue increased by 93% to £1billion. Facebook are in a great position to deliver relevant Ads based on the understanding of the user and their geographic location. How Facebook will succeed in a market that has already has a number of keep competitors is still to be seen. Although Google seem to get social networks wrong, with Google+ being a massive flop, they cannot be matched in the advertising market. Google have been running Remarketing (Retargeting) Ads for a while and can grow the number of people to target have a huge audience to choose from thanks to their remarketing pixel that can target people that have been on a website by a number of different means. It will only be a matter of time until Google start to use cross device tracking to deliver Ads. The only issue at the moment is the customers would need to be logged into their Google Account. This is where Facebook will benefit, as the profile is created via user information and there is more chance that a user will be logged into their Facebook account.

Will Facebook be a Mobile Advertising Success?

Facebook have to be extremely careful not to break any privacy laws but they certainly have the number to make a success of mobile advertising. The social network is moving out of its comfort zone, the same as Google did with an attempt to create a social network, so only time will tell if they will crack the market.

Daisy Burgess is a technology blogger with 3 years experience writing on both a personal and professional level. Statistics are taken from a number of source including BBC News and Mobilyse Smartphone Review site.

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