Just four years ago, investors were wary of Facebook thanks to their perceived lack of a mobile strategy. Since then, though, they’ve built up and consolidated a $13 billion mobile-advertising business. Facebook and Google loom over the advertising world of digital advertising, with much of the 15% sector-growth last year down to their progress.
Facebook has spent years building an audience on mobile across their array of apps - the core Facebook app, Instagram, Messenger etc - and it’s now time to cash in. In the fourth quarter of 2015, Facebook picked up a whopping 80% of its ad revenue from smartphone and tablet users, up 69% from the previous year. The numbers come as no surprise, though, with 1.442 billion of Facebook’s monthly users accessing the site on mobile and 823 million users not using desktop at all. Because mobile ads show up in a customer’s news feed, Facebook can charge more for them - the company now makes $4.83 per mobile user in ad revenue. And, with desktop only users declining quickly, the company are expected to continue their sharp shift towards a focus on mobile.
Facebook’s surge in mobile advertising came in the final months of 2015, an unexpected turnaround in what had been slowing revenue growth, with revenues in the final quarter jumping by 52% to $5.84 billion. $35 billion was added to Facebook’s stock market value in after-market trading and, had it not been for the strengthening US dollar, the company’s advertising revenue would have been up 66%.
Facebook’s retention and conversion rate for native ads is actually very good, with a report from AppsFlyer concluding that ‘Facebook is the undisputed leader in mobile advertising.’ Strong retention rates, backed by its unparalleled scale, has Facebook ranking first in almost every category of mobile advertising.
But they’re not stopping there. Canvas - Facebook’s innovative new ad unit - is set to be rolled out this month. Ads will appear as sponsored native ads on the newsfeed, much like Twitter’s ‘promoted tweets’ function, but their optimization for mobile opens up news possibilities for advertisers. Canvas ads are to load faster than Facebook’s other mobile ad units, and functions like ‘tilt to pan’ give advertisers the chance for greater user interaction. They will be full-screen, fully-optimised advertisements that can tell a brand story through video, text and imagery. Initial engagement will be required for full-screen, but the potentially invasive form of advertising will need to be implemented delicately to avoid a poor user reaction.
Similarly, plans to introduce ads to Facebook’s Messenger app will require a delicate touch. According to TechCrunch, leaked documents show that Facebook plans to allow companies to send advertising messages to customers, providing the user has messaged the business in the past - companies are, incidentally, pushing more customers to raise issues via Messenger. Facebook’s ads are, on the whole, very unobtrusive, and any move to direct advertising will not be without its detractors. In response to the apparent leak, the social media giant ensured that they do not want customers to be receiving unwanted messages and refused to confirm the reports that Messenger could see ads in the second quarter of 2016.
With Instagram having had native ads for some time now and WhatsApp - acquired by Facebook two years ago at ludicrous expense - ripe for monetization, Facebook’s grip on the mobile advertising market is only set to tighten. Given it’s recent earnings, early fears that Facebook would struggle to extract value from their mobile offerings have certainly been assuaged. Flagging rivals like Yahoo will see their market share further chipped away by social media’s gargantuan leaders and, as more users move to mobile, Facebook’s cornering of the mobile advertising market will only pay more lavish dividends.