Facebook mobile ad dream

May 5, 2014, 1:00 PM UTC


FORTUNE — Facebook has made billions of dollars selling mobile ads for its social network. Now, it hopes to make billions more by selling mobile ads for other companies.

Facebook (FB) unveiled a mobile ad network on Wednesday that coordinates and places ads for app publishers. The system taps the vast trove of data that Facebook collects about its users to help to help marketers target their messages.

“This is really the first time that were going to help you monetize seriously on mobile,” Mark Zuckerberg, Facebook’s founder and chief executive, told the audience of developers at his company’s F8 conference in San Francisco.

Facebook’s mobile ad network, called Audience Network, opens a potentially huge new business for the company by letting it make money even when people visit apps outside its social network. The push also directly challenges Google, which has had a similar ad network for five years and currently dominates mobile advertising.

Facebook has already proved that it can sell mobile ads on its own social network. In just a few years, mobile has gone from being an insignificant part of its business to being the cornerstone. In the latest quarter, Facebook took in $1.3 billion in revenue from mobile advertising, or nearly 60% of the company’s overall revenue. A year ago, mobile accounted for $377 million, or 30% of total revenue.

Like with much that has to do with digital technology, Google is the biggest player in mobile advertising. But its grip is slipping as Facebook ramps up. Google will grab a 47% share of the $31 billion mobile ad market this year, down from 52% two years ago, according to eMarketer. Facebook’s share is expected to approach 22%, or nearly four times greater than in 2012.

Earlier this month, Twitter also started selling ads on behalf of mobile publishers. A number of smaller companies compete in the space including Millennial Media, which faces a tough challenge competing against such giants.

Success in mobile ads is critical because of shift in online behavior. People are spending less time on their desktop computers while increasingly staring at their smartphones and tablets to shop on eBay, play Candy Crush and follow the latest news headlines.

U.S. adults will spend close to three hours daily on their mobile devices this year, up close to half an hour from 2013, according to eMarketer. Time spent on desktop and laptop computers will drop to two hours and 12 minutes, seven minutes less than last year.

Facebook’s decision to sell mobile ads for others has been expected for some time. But questions remained about whether the company would take a gradual approach or move in quickly. At first, Facebook will only sell mobile ads that encourage people to install an app or to use an app more frequently. In future, marketers will be able to buy other kinds of marketing messages like banner ads that are tougher to measure in terms of a campaign’s success.

Of course, Zuckerberg’s grandiose plans haven’t always panned out. Over the years, he has appeared on stage to pitch a number of new products that, in the end, turned out to be duds. People have yet to warm up to Facebook Home, a smartphone larded with social networking services, for example. Nor did they flock to Facebook’s email, which the company introduced in 2010 and then recently decided to shut down.


Zuckerberg’s focus on revenue is a big departure from the past few months. During that time, he spent with abandon on start-ups that make little or no money. First came his acquisition of WhatsApp, a mobile messaging company, for $19 billion. Then came his $2 billion acquisition of Oculus VR, a maker of goggles that give people a glimpse into virtual reality.


During his relatively brief appearance on stage, Zuckerberg never mentioned the spending spree. Instead, he and his colleagues tried to hammer home the message that Facebook wants to better serve the developers who build products around its social network and to create a better overall experience for users.


Trying to counter concerns about privacy, Facebook said it is testing a way for people try out third-party apps anonymously, for example. Instead of logging in with their Facebook IDs, users will be able to click on a black button marked “anonymously login” that does not require them to share their names. When people do sign up for an app using their real identities, they’ll soon be able to limit the personal data they disclose to the developer using a checklist that includes their e-mail address, birthdate and likes.


“People want more control over how they share their information, especially with apps,” Zuckerberg said. Facebook has been a frequent target of criticism for its privacy practices, which Zuckerberg acknowledged is bad for business. Fewer people will sign up new online services apps if they fear that their personal information will be shared and abused.


Over the years, Zuckerberg has repeatedly promised to make privacy setting easier to use. Despite the personal pledges, however, the effort is still a work in progress.

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