Lots of people love their cellphones. Facebook, so far, is not a big fan.
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Mark Zuckerberg and Facebook plan to experiment with mobile advertising, including inserting so-called sponsored stories into users' update streams.
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Bay Ismoyo/Agence France-Presse — Getty Images
Overall spending on mobile advertising in the United States is expected to reach $2.6 billion this year, up 80 percent from $1.45 billion in 2011, according to research by eMarketer
Amid the jaw-dropping financial figures the company revealed last week when it filed for a public offering was an interesting admission. Although more than half of its 845 million members log into Facebook on a mobile device, the company has not yet found a way to make real money from that use.
“We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven,” the company said in its review of the risks it faces.
In a world that is rapidly moving toward an era of mobile computing, this is a troubling issue for Silicon Valley’s brightest star — particularly since much of Facebook’s growth right now is in countries like Chile, Turkey, Venezuela and Brazil, where people largely have access to the Internet using cellphones.
Facebook is not the only company struggling to translate the success of its Web site to mobile devices, where screen space is at a premium and people have little patience for clutter or slow loading times. It is a problem that plagues companies as diverse as news publishers and the streaming radio service Pandora, and it is likely to loom larger. There were more global shipments of smartphones than of personal computers in 2011, according to a recent report from Canalys, a research firm.
But the issue seems particularly urgent in the case of Facebook, which is wildly popular among its users and is seen as a company of the future, a hybrid of social hub and information conduit, platform and publisher. In other words, if Facebook cannot figure it out, who can?
“It’s a huge Achilles’ heel for them,” said Susan Etlinger, a consultant at the Altimeter Group who advises companies on how to use technology. “There’s clearly a movement toward more social media consumption on mobile devices, and Facebook doesn’t have a revenue strategy for that shift. They haven’t figured it out yet.”
Facebook declined to comment in advance of its offering, but the company outlined its concerns in the filing, stating that it expected its mobile users to “exceed the growth rate of our overall monthly active users for the foreseeable future.” And if executives are not able to chart a path to profitability on mobile platforms, the filing indicated, the company’s “revenue and financial results may be negatively affected.”
At stake, experts say, is a large chunk of advertising revenue. Facebook brings in most of its revenue by selling space on its Web site to advertisers who want to reach its users. Overall spending on mobile advertising in the United States is expected to reach $2.6 billion this year, up 80 percent from $1.45 billion in 2011, according to research by eMarketer. But that will still be just a sliver of what is likely to be a $39.5 billion online advertising market.
Google, a Facebook competitor on the Web, was the biggest player in the mobile ad market last year with about $750 million in revenue, and Apple came in second with more than $90 million, eMarketer says.
“It’s still immature when compared to online, print and TV advertising,” said Noah Elkin, an analyst with eMarketer. “But it’s growing at a faster pace, even though its revenues are still dwarfed by the other formats.”
One big problem with mobile ads is that users are less receptive to intrusive advertisements when they are focused on a goal like quickly posting a status update or finding an address. People using the Web on a computer tend to click on online ads up to eight times as often as those on mobile devices, Mr. Elkin said.
“We’ve had ads on our desktops for 15 years and we’re used to them,” he said. “But on the smaller smartphone screen, they’re distracting and viewers tend to notice them more even though there are usually fewer ads.”
http://www.nytimes.com/2012/02/06/technology/facebooks-mobility-challenge.html?ref=technology