Facebook’s strength—that it has evolved beyond a social network, into a platform—appears to be its greatest weakness, at least in the mobile market.
Much has been made in the last week about Facebook’s inability to derive revenue from or otherwise monetize its mobile business. That may be one of the factors driving the company’s stock price down; since the opening moments of its IPO, Facebook’s share price has steadily declined.
Here’s the key quote, taken from the portion of its S-1 document dealing with its risk factors: “… mobile products, where we do not currently directly generate meaningful revenue, particularly to the extent that mobile engagement is substituted for engagement with Facebook on personal computers where we monetize usage by displaying ads and other commercial content.”
In other words, Facebook is worried about users posting status updates, check-ins, and posting pictures from smartphones instead of from their laptops and desktop PCs—exactly the mobile usage what rivals like Path, Color, and even startups like Instagram have sought to achieve. Of course, Facebook bought Instagram for $1 billion, a deal most now assume recognized the significance of the mobile market.
Basically, Facebook Mobile is getting killed by Facebook Desktop.
Yes, other risks include the so-called law of large numbers, which says Facebook’s growth will inevitably taper off as it attracts a larger proportion of the world’s users. And there’s always the risk that users will migrate to the next big thing. But monetizing mobile is the short-term problem that overrides all else.
Monetizing mobile means one thing: ads. And it seems impossible to believe that Facebook can’t figure out a strategy for embedding ads into its mobile Timelines—in fact, a few months ago, Facebook said it would be doing exactly that. The company said it would begin displaying premium ads and Sponsored Stories, or posts that have been paid for by advertisers, on mobile news feeds, and on the desktop log-out page. Previously, ads were only shown on the sidebar and desktop news feed. A new type of ad, called “Offers,” will also provide a “a free and easy way” for businesses to share discounts and promotions directly through their Facebook pages, Angela Moscaritolo reported from New York.
According to Noah Elkin, principal analyst for eMarketer, the two largest mobile ad networks are owned by Google and Apple —the developers of the two mobile operating systems Facebook’s HTML5-based mobile app runs on top of. That gives both Apple and Google at least some measure of control in this game that Facebook, which has yet to develop a specific version of its app for either OS, so far lacks.
Here’s the thing: merely displaying simple text-based ads on a Timeline or news feed shouldn’t be difficult; Google has made billions doing just that (the back-end sales and algorithms necessary to do so effectively are another story). But the rich relationships an advertiser can strike with a user via Timeline apps and other brand relationships simply aren’t there in the mobile space.