According to Mr. Zuckerberg, Facebook’s modus operandi is to ‘make the world a more open and connected place’.
But hey, if massive profits and the opportunity to build a generation defining media and advertising business comes along with that mantra, then all the better eh?
Realistically, since ‘going public’ last year, Facebook has made a number of intelligent strategic decisions that, while perhaps not making the world ‘open and connected’, have certainly served to future proof the business and impact on revenue.
Only recently, we’ve seen the true scale of the site’s attempt to decrease brand’s organic reach. The average number of fans reached by a fan update has dropped from around 16% to around 6% since last October. This has been mooted as a means to improve user experience amid fears that relevant personal posts, like a friend getting married, could be getting lost into the ether of brand communications. But whatever truth there is in that, it’s also quite obviously a monetisation move also. Brands must now pay extra for sponsored posts to reach the fans they already have.
On the strategic acquisition side, we’ve also seen the purchase of two hot social apps that do things Facebook don’t – Instagram and WhatsApp. While both purchase prices (for Insta, for the social messaging app) were both hugely inflated, there was a lot of business logic to the decision.
After queries around the relevance of Facebook to teens and concerns about decreasing usage amongst those under 19, both of these purchases essentially grow Facebook’s relevance, while also affording millions of potential ad impressions. The purchases, again while not strictly speaking the best option for an ‘open and connected’ society, basically subsume two large communities into the existing Facebook userbase. Perhaps most importantly, it’s also an insulation effort that stops two potential competitor networks from getting too big and actually competing with Facebook’s scale.
And the biggest strategic move has just been announced.
Move to Mobile
For the last 3-4 years, Facebook has been growing its ARPU (average revenue per user), trialing and improving advertising options and essentially growing into the world’s largest mobile first ad portal – over 59% of ad revenue now comes from mobile ads, mobile ads within the newsfeed are the most effective forms of advertising on the site, and at the same time, nearing 60% of Facebook usage is from a smartphone or tablet. 1bn people around the world use Facebook on their phone.
Facebook advertising is perhaps the most targeted form of online display available. While it doesn’t have the immediate purchase intent of a Google search ad, advertisers can target based upon device, demographics, interests, other page likes and even use friends faces to create a ‘social proof’ element that’s much more effective than regular brand advertising.
Yesterday, at the F8 developer conference in New York, Facebook announced it is to launch a beta version of a mobile app ad display network. While this had been coming for a while, it’s still bound to come as a warning shot to Google, and other large publisher networks like Twitter’s MoPub, who for so long has owned site and app advertising.
Facebook has long tried to forge connections, whether it’s between people or the relationship between someone’s Likes and the advertisements they might be willing to click or tap on. Now, similar to embedding itself into websites with like buttons and social login options, it’s trying to embed itself directly into the many apps and services that many consumers use all day, every day.
Audience Network is a huge departure, essentially allowing developers to make money without having to sell their own ads, and a creating means for advertisers to extend their campaigns beyond Facebook and into other mobile apps.
For users, the Facebook data that’s used to tailor adverts for them will similarly be called up in other apps, meaning, hypothetically, more relevant targeting, but also the ability for apps to integrate friends activity into their adverts.
Effectively developers can tap into the plethora of brands who use Facebook for advertising, and deploy Facebook banner ads straight into their apps by just inserting a tiny piece of code.
According to Techcrunch: ‘The launch represents a big shift in how Facebook’s business works, from monetising engagment on its own properties to earning money from its ad targeting data elsewhere. Until now, Facebook’s revenue has essentially been directly proportional to how many ads it showed in the News Feed and how many users visited.
The ad network will let it grow revenue without cluttering its own site and apps with more ads.’
On the face of it, it’s win-win-win for all three involved parties.
The new Audience Network comes with targeting and measurement tools that currently apply in Facebook ads today, including Custom Audiences, core audience and lookalike audiences.
Crucially, it’s also simple to integrate. According to Facebook, “for marketers already running News Feed ads on Facebook, using the Audience Network takes just one click. The Audience Network will be available in all ad interfaces, as well as the API. Once a campaign is running in the Audience Network, our system handles optimisation and delivery.”
How might this look? Well think of a large brand that’s involved in music sponsorship, that’s already running ads on Facebook. If a streaming app, the likes of a Spotify or Deezer, decided to be part of the network (launch partners are being sought at the moment) the brand could target users of the app using their Facebook data like age, sex, page likes on Facebook, interests etc, and include data about their Facebook friend’s activity.
This should be seen as a hugely important strategic decision from Facebook. While mobile is certainly seen as the next frontier for digital advertising, nobody has really cracked the formula yet. While this isn’t the holy grail, it’s certainly a step in the right direction for a brand that’s just beginning to flex its potentially enormous muscle. What that means for our ‘open and connected society’ though is anyone’s guess, but it’s certainly opened up the world of in app mobile advertising for marketers.