Facebook Taps New Mobile Revenue Stream: App Ads

Developers Can Now Pay to Promote Their Apps in Mobile News Feeds

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Facebook is trying a new ad unit to capitalize on growing use of mobile phones, a trend which threatens to cannibalize its advertising business.

The new ad unit will allow advertisers to promote their mobile apps, and it joins Facebook's "sponsored stories," which is the social network's core product for brand advertisers. The new ad unit will be targeted at different advertisers -- those looking for installs of mobile apps -- and priced on a cost-per-click basis.

The promoted app will surface as a recommendation alongside apps that are being recommended organically based on a user's history and social graph under the headings "Try These Games" and "Try These Apps", but will be flagged with the text "sponsored." Like any other ad, it can be targeted to users based on age, gender, location, likes and interests.

Facebook declined to disclose its beta partners for the launch, but it's safe to assume that plenty of game developers who depend on visibility and social sharing on the Facebook platform to market their games will be interested. For instance, Zynga partly attributed its weak second-quarter earnings in part to unforeseen changes on Facebook that led to a reduced number of "stories" about active games, which in turn cut back on the volume of users to feed its virtual-goods business.

Facebook looking to social gamers for revenue is also nothing new. Zynga was the source of 15% of Facebook first-quarter revenue (through both ads and the cut it takes from payments made for virtual goods).

Zynga didn't respond to a request for comment about whether it was participating in the beta for the new mobile ad.

Clicking on a promoted app will send users to the App Store if they have an iOS phone or to Google Play if they have an Android device. According to the announcement on Facebook's developer blog, the platform has sent users to those sources 146 million times in the last 30 days via clicks in their news feeds, timelines, bookmarks and the App Center it rolled out in May.

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