On the web, there’s plenty of room to throw a scattershot of ads at people and hope one resonates. On mobile where there’s reduced real-estate, you have to make every pixel count by targeting ads with surgical precision. That’s how Facebook succeeded in Q4 2012, and why the social network is actually well equipped to weather the shift to mobile. There’s no room for the shotgun approach on the small screen.
“Most people underestimate how fundamentally good the trend towards mobile can be for Facebook.” That’s how Mark Zuckerberg started Facebook’s Q3 earnings call. Today on the Q4 call, he proved it, citing how Facebook’s ad targeting prowess attracted buyers to grow mobile ad revenue to 23% of Facebook’s total ad revenue.
The reason Facebook is making quick progress in mobile ads is how much it knows about you. Think of it this way. What targeting information does a company need to show you a relevant display ad on mobile?
Mobile advertisers like Facebook, Yahoo, Microsoft, and AOL can collect some info about you automatically. This includes your location, maybe your device type, and operating system, your connection type, and what you’re currently viewing. Google knows all that too, plus your search history, and any biographical data you’ve entered into Google+.
But Facebook, it’s got more up its sleeve. It knows all that (except your web search history). Then it’s got biographical data you’ve volunteered on your profile, who your friends are, what apps you’ve installed, what you’ve done in those apps, your Graph Search history, and your Likes. Through embedded Like buttons, it’s know where else on the web you go. It’s learning that from its retargeted ads program Facebook Exchange too, and will likely show retargeted ads on mobile eventually, though Sandberg refused to say when FBX would expand beyond Facebook.com.
Basically, Facebook has the means to let advertisers pinpoint their audience. On the web, that’s important. On mobile, it’s essential. A mobile ad often takes up the entire screen, and therefore is inherently interruptive. If it’s poorly targeted, it will piss someone off. If it promotes something they’re actually interested in, it can assume all of their attention. Without a dozen other tabs and applications perched in their desktop dock, they might even click.
Some certainly are. COO Sheryl Sandberg announced today that the 20% of the top 100 grossing iOS apps are using Facebook’s new mobile app install ads. These apps wouldn’t be spending on Facebook ads if they didn’t work. Sandberg also cited comScore research that reported Facebook is the top driver of awareness of new apps, and those that learn about apps on Facebook mobile click straight through to the app stores, often via ads. 65% of Facebook’s advertisers now run news feed ads, many of which are shown on mobile. That’s up from 50% at the end of Q3.
To put it bluntly, Facebook was making $0 on mobile ads at the end of February 2012. Ten months later, it’s making $305 million a quarter and growing. And surprisingly, those ads didn’t drive Facebook users away, as Facebook says those marketing messages reduced news feed engagement just 2% in 2012.
In Q4, Facebook successfully grew overall revenue fast enough to beat projections, while simultaneously transitioning its revenue source from web to mobile at a healthy rate.
Zuckerberg started today’s earnings call saying “there is no argument. Facebook is a mobile company.” If it can keep up this pace, it will successfully become a mobile business too.