How Can Facebook Monetize Mobile?

February 8, 2012

Facebook’s S-1 states that users are increasingly accessing it through mobile devices but the company does not yet monetize mobile. “Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results;” There are 425 million monthly active users (MAUs) accessing Facebook through mobile devices. See link here. 

Even though the S-1 presents this as a risk factor, this is a huge opportunity that the company must certainly be planning to address.

One big challenge withMobileis that only one ad can be shown per page. On PC based interfaces, Facebook shows several ads per page (as many as 7 ads). So the monetization potential for that single mobile ad has to be equivalent to all the 7 web based ads combined.

This means that mobile ads have to be extremely targeted and relevant to induce users to take action. Regular display or banner ads or even generic sponsored stories will not cut it. Mobile ads should be sharply targeted, and the right ad delivered at the right time.

What monetization options does Facebook have?

(1) Location based offers and ads:

Facebook can let users check-in to receive coupons and offers based on their locations. Similarly users can also receive ads and offers as they drive by a particular area. For example, if a user is on a particular street inSunnyvale, she could receive offers or ads from Coldstone Creamery in the vicinity.

(2) App usage:

Mobile devices are used extensively to reduce boredom and to pass time. Facebook can encourage users to access apps and games via its mobile device. If a user is bored they may be more open to purchasing digital goods for entertainment, or purchasing movies for view, for example, via the Warner Brothers page on Facebook.

The challenge is that users could access games and apps directly via their mobile device’s app marketplace instead of via Facebook’s app marketplace. For example a user may prefer to access the Angry Birds mobile app directly rather than Farmville through Facebook. There has to be a compelling value proposition (for eg, interaction with one’s Facebook network or apps’ unique availability only on Facebook). The user interface for accessing Facebook apps via mobile also needs to be seamless.