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July 31, 2013

Monetization on Mobile: Facebook and Google lessons

by Carlo De Marchis

Last week two news, giving conflicting signals, caught my attention:

“Just a year ago, Facebook had hardly any mobile ad products at all, but in the second quarter earnings presented Wednesday, the company announced that mobile advertising now makes up 41 percent of all ad revenue — easily the greatest percentage since Facebook was founded, and up from the previous high of 30 percent last quarter.” (cit. GigaOM Eliza Kern article)

“Google reported strong revenue growth for the June quarter, but fell shy of Wall Street’s estimates, sending the stock down by as much as 5% in after hours trading. The search giant reported earnings per share of $9.54 on revenue of $14.11 billion for the quarter, a 19% increase in revenue from the same quarter a year ago. However, Wall Street had expected Google to report earnings per share of $10.4 on revenue of $14.4 billion. To make matters worse, Google reported a 6% year-over-year drop in the average price for cost-per-click for ads it served, presumably due to the increasing number of mobile ads it serves at a lower cost.” (cit. Mashable Seth Fiegerman article)

FB ad revenue

I read different interesting aspects in both news:

• Firstly, there is a shift of audiences from Print and TV to web to mobile, but the business has not yet found a way to follow this trend with sustainable monetization strategies
• Secondly, there is a clear challenge for monetization on mobile but at the same time an even bigger opportunity
• Thirdly, Facebook vs Google – what is the difference between them in mobile monetization

Sheryl Sandberg (Facebook COO): “Obviously the transition to mobile is a really big one. We had almost no mobile ads a year ago, and we’re up to 41 percent this quarter,” she said. And how exactly did Facebook get there? “We’ve done a lot of work around targeting. The most important work we’ve done over the past year is around custom audiences.”

Sandberg said that as Facebook has drilled down into specific audiences by demographic and interest — as specific as someone who is currently looking to buy a car, for example — that focus has meant that the company has been able to serve up more ads in the News Feed without losing user interest or attention (even if it’s still unclear how that will hold up once everyone transitions to the new News Feed design.)

Being able to serve up more ads without losing user attention is key to making money.

“You’re going to see a lot of companies transitioning and trying to emulate this model because it’s working so well. That’s why last night Facebook announcement was a true watershed moment,” said Ben Schachter, an analyst at Macquarie Research.

Internet company executives have long been concerned that mobile advertising is inherently less lucrative than traditional desktop PC advertising, due to the smartphone’s limited screen size and possible consumer resistance to a flood of ads on their devices.
(Cit. From a Reuters Article)

This shows that if you find the right strategy, mobile can be successfully monetized.

Why is facebook doing better than Google (if this is a correct statement) on mobile monetization? I think this may be due to how the Google experience has been brought onto mobile devices vs. how the facebook experience developed.
Advertising has to be tailored for each specific user experience – it is crucial to have continuous innovation in this space.

At deltatre we are digesting all these lessons learned and shaping our mobile advertisement strategy accordingly with the following features:

• introduction of in-stream ads and branded posts in our LiveBlogging product
• introduction of contextual advertisement in our Diva product
• introduction of specific advertisement techniques in our second screen offering

I also think second screens may prove to be a great opportunity for monetization on devices through advertising when connected with TV adverts, but creativity is crucial in that area. That is the new space to look carefully at in the next months if second screen experiences develop as expected. Further ahead I am curious to see how the Internet of Things and wearable devices may become new monetization opportunities and if advertising will still be the major revenue stream.

About the author

Carlo De Marchis
Chief Product & Marketing Officer

Carlo De Marchis aka cdm is the Group Chief Product & Marketing Officer, responsible for Strategic Product and Technical guidance, active in Business Development and Strategic Clients sponsor.

Innovator, challenger, visionary, curious, passionate, assertive, early-adopter.

Known for his fanatical user-perspective attention to the quality and usability of what deltatre delivers to clients and end-users. He has started to work for deltatre in 1988 and has participated to every step of its impressive growth. An early adopter of the web, since 1994, he is now driving the company efforts around social media and multi-platform digital solutions introducing the Holistic User Experience concept.

Has experienced the highest level sport events worldwide under different point of views and has lately been focusing on the deltatre’s Olympic efforts.

He lately focused on achieving wider business culture attending an Executive MBA and various other higher education opportunities with HBS and FIU.

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