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Mobile Matters

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Will Facebook Revolutionize Mobile Advertising for SMBs?

by: | May 3, 2012

With Facebook poised to go public sometime during the next several weeks—an IPO expected to raise as much as $5 billion—the biggest question looming over the social network’s future is how it will monetize its growing mobile userbase. Facebook now boasts more than 901 million monthly active users worldwide, including 488 million active mobile users, but the company has struggled to drive revenue from its mobile efforts.

Facebook’s IPO filing even acknowledges the challenge: “We currently do not show ads or directly generate any meaningful revenue from users accessing Facebook through our mobile products, but we believe that we may have potential future monetization opportunities such as the inclusion of Sponsored Stories in users’ mobile News Feeds,” Facebook wrote in February.

A month later, Facebook did indeed integrate Sponsored Stories—posts from friends or Pages on Facebook that a business, organization or individual has paid to highlight—directly into mobile News Feeds, as well as adding advertisements on the logout page. The firm also launched Offers, enabling businesses to share discounts and promotions directly from their Facebook pages. Consumers may then redeem Offers via email or on a mobile device.

Not much else is known about Facebook’s mobile advertising plans, but given that more than half of its active user segment is specifically active on mobile devices, expectations are high. Pivot Research Group forecasts Facebook’s mobile ad revenues could reach $490 million by 2017, representing 22 percent of the total non-search mobile ad market.

Pivot analyst Brian Weiser believes the increasing size and activity of Facebook’s mobile audience guarantees success regardless of which ad formats and models it pursues: “I think they are constantly assessing their product potential internally such that I have confidence they will figure something out,” Wieser tells Mobile Marketing Daily. “I think that in the worst case scenario they will run simpler text ads at some point.”

What does seem clear is that small businesses will play a pivotal role in Facebook’s mobile ad aspirations. Days after generating international headlines by acquiring photo-sharing application Instagram for a staggering $1 billion, Facebook quietly scooped up Tagtile, which supplies mobile loyalty and customer management solutions targeting the local business segment.

The free Tagtile app, available for Apple’s iOS and Google’s Android, enables merchants to engage customers via push notifications, customized offers, and targeted information. Users collect and redeem loyalty points, coupons and related rewards by tapping their smartphone against the Tagtile Cube, a point-of-sale reader device that plugs into any power outlet. The Tagtile app also enables users to share their customer experiences via social media outlets.

In a statement posted to its website, Tagtile said it is no longer accepting new customers but will continue to maintain the service “as is for now,” adding “Tagtile as it exists today won’t be part of what we do at Facebook.”

But wherever Tagtile’s core concepts and technologies fit into Facebook’s mobile future, it appears obvious the social network is plotting something big—something that goes beyond deals and discounts to encompass loyalty programs, localized promotions, and social media recommendations. The latter is where Facebook excels, of course, and it’s also what shapes consumer behavior: Ninety-two percent of consumers worldwide say they trust earned media like word-of-mouth and recommendations from friends and family above all other forms of advertising—up 18 percent since 2007—according to a recent Nielsen study.

Time will tell precisely what Facebook will do, but it seems inevitable it will be huge for small business.Marketing Zeus

Posted in: B2C, Banner/Display, E-Commerce, Facebook, Geolocation, Mobile Advertising, Mobile Development, Mobile Matters, Social Networks

About the Writer:

Jason Ankeny is the executive editor of the FierceMobileContent and FierceDeveloper e-newsletters as well as a regular contributor to Entrepreneur magazine and the website All Music Guide. Additional credits include efforts for publications including Rolling Stone, Wax Poetics and No Depression, along with liner notes for a number of album releases. He lives in Chicago.

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