Social giant will belatedly cash in on its mobile growth from 2012, say reports, but Apple is slashing its rates to chase Google.
Facebook has repeatedly said its future growth lies in mobile, but it needs to translate that promise into concrete revenue streams ahead of its possible $10bn IPO next year - and as it faces rising competition from Google+ and other social tools. In the light of all that, the company plans its first move into mobile advertising during the first quarter of 2012, sources told Bloomberg, though this comes at a time when mobile ad networks like Apple's iAd are feeling intense pressure.
The insiders said Facebook is considering various ways to harness existing well-known features of its service for mobile advertising, and differentiate its offering from those of Google, Apple and others. One idea may be to put its Sponsored Stories ads, which focus on friends' interactions with brands, within the mobile News Feed for viewing status updates and other content. Such tactics would push Facebook's obvious advantage - its huge store of information about its users' behaviour and preferences, which could be used to target ads precisely.
It is perhaps overdue for the social giant, which sees 350m of its 800m users accessing the service from mobile devices, to get into advertising, taking on iAd, Google AdMob and Millennial Media. Indeed, Facebook is reported to have originally planned a mobile ad launch earlier this year, when it added new capabilities such as location-based discounts and promotions.
Facebook's revenue is predicted to reach $6.9bn in 2012, up from $4.27bn this year, according to research firm eMarketer, with almost 90% of the 2011 figure coming from advertising revenue, and most of the rest from Credits, which takes a commission on in-app transactions.
However, there are risks in the mobile ad model, as Apple knows. Google has achieved a major lead over iAd in the past year - at the start of 2011, AdMob and iAd had 19% of the market each, according to IDC researchers, but Apple has since fallen to third place on 15%, behind Google on 24% and Millennial Media on 17%. The main reasons, according to disgruntled advertisers, have been Apple's high prices, rigid contract terms, and its famous demand for creative control of the ads themselves. It insists on making sure ads support the quality of experience of the iDevices and use rich media formats optimized solely for iOS.
This has driven advertisers to broader and more flexible platforms, particularly Android, and this tide will only rise as the Google OS comes closer to Apple in terms of app download volumes. This has led Apple to become more flexible over iAd terms and conditions, according to The Wall Street Journal, which says the firm will now consider deals priced as low as $400,000, far from its original minimum rate of $1m per campaign. Apple is also agreeing to install a cap on CPM costs and providing mobile marketing training for free to clients.
The iAd changes are also designed to improve the revenues developers receive, and therefore maintain loyalty in the face of Android's challenge. "Hordes of developers have activated iAd, but they say that Apple hasn't sold enough to make any meaningful revenue for them," the WSJ says.