How Facebook Mastered Mobile Ads (and Publishers Can Too)

By Blurring the Lines Between Desktop and Mobile, Facebook Boosted Revenue

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The rapid rise of Facebook's mobile ad business over the last year is casting the social network in an unfamiliar new role: a paragon for other publishers to imitate.

Facebook's mobile ad business surged last quarter to comprise 41% of its ad revenue, up from virtually nothing the year before. It's a Cinderella story that has prompted even consistently bearish BTIG Research's Rich Greenfield to upgrade his rating of the company's stock. But is it a tale with a moral for other web properties?

If you consider that Facebook built a strong mobile ad business by blurring the line between mobile and desktop inventory when it developed news-feed ads, the answer looks like "yes."

"[Facebook is] the first big digital ad player that's really said, you know what, we're not going to draw a big artificial line between desktop and mobile from an ad product standpoint," said Chia Chen, Digitas's senior VP-mobile practice lead.

The simplest explanation of Facebook's mobile success is that its news feed ads that appear in desktop and mobile streams are delivering results for advertisers -- who are accordingly increasing their Facebook budgets -- without irritating users to the extent that they stop opening the app to look at friends' selfies and engagement photos. And unlike a banner ad, the format is attention-grabbing and offers a creative canvas to marketers.

Screen agnostic
While much of Facebook's success in mobile has to do with its unmatched scale and the propensity of smartphone owners to use their devices for social networking, a lot of it is the result of company strategy. It elected to integrate the desktop and mobile user experience, as well as the ad experience.

Thus, news-feed ads look the same on either screen, and advertisers have been largely agnostic about which they appear on, according to Marc Grabowski, chief operating officer at the social-ads company Nanigans and a former top Yahoo sales executive. (He noted that advertisers have begun to ask for more granular targeting, by screen or even by mobile device type, with greater frequency, however.) It's a significant advantage over companies who've created mobile experiences that are different from the desktop ones that consumers are used to.

"With Facebook there's a lot more continuity," Mr. Grabowski said. "Users learn how to view content in a single way. And you can have continuity between the types of ads you run between desktop and mobile also."

Pricing is another aspect of that continuity, and there's no significant difference between the cost of desktop and mobile news-feed inventory sold in Facebook's auction. The blurring of the distinction is something that Google is attempting with its "enhanced campaigns" introduced in February, which allow search advertisers to manage their AdWords bids across devices and platforms in a single campaign, Mr. Chen said. (Advertisers place a desktop bid and then enter what percentage more or less they would pay to have those ads run on mobile devices.)

The assumption is that the move will lift mobile ad prices -- which have dragged down Google's overall ad prices -- when it's fully rolled out. In a sense, Google looks like it's following Facebook's lead.

Blurring lines
Facebook's mobile news-feed ads are designed to blend in with the flow of posts from friends and brands that users choose to get updates from. They're so similar to desktop versions that advertisers can use the same creative for desktop and mobile.

However, the social network has perhaps unintentionally benefited from the dynamics of its walled garden-style platform, Mr. Chen observed. When advertisers buy mobile ads on Facebook, they don't need to have a mobile-optimized website to drive people to. Instead, their ads will point to a Facebook page, elicit a "like," or lead to an app install.

"It makes it easy for brands who aren't veterans to play in mobile," he said.

Though Facebook's integration of content between screens might be instructive for publishers, some aspects of its success with mobile are unique because of its scale. The early success of mobile app install ads -- a "small" but "important" part of its business, according to chief operating officer Sheryl Sandberg -- look like an example of that. They're flourishing because of Facebook's massive audience and targeting capabilities, which mobile ad networks can't replicate, according to Krishna Subramanian, CMO of the mobile-marketing company Velti.

"I don't really see dollars shifting from Google or Millennial to Facebook's app installs," he said. "[Facebook is] growing the market because for once you get a ridiculous amount of scale that you don't get anywhere else if you're a direct-response advertiser."

It's also possible that the temperament of Facebook users is a boon to its mobile ad business. Though users may wish they hadn't accepted so many friend requests over the years, their bloated social graphs affect the way they look at content on the network. Users looking at Facebook on their phones are likely to be engaged, but not engrossed to the extent that they're upset when they see an ad, according to David Hewitt, SapientNitro's global mobile lead.

"A tighter group of friends might alienate the ads more," he said in an email.

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