Facebook Tests Mobile-Ad Network, Challenging Google and Apple

Facebook Will Partner With Ad Exchanges to Serve Banner Ads on Mobile Apps

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Facebook took another small step toward building a web-wide ad network today, and put itself on a collision course with Google and Apple for mobile-ad revenue.

Facebook said today it will start testing ads on third-party mobile apps, launching what is essentially a mobile-ad network that could become a significant player in the mobile-ad market, expected to grow to $4.4 billion in the U.S. in 2013, according to eMarketer.

The company is working with an undisclosed number of ad exchanges to deliver the ads on iOS and Android devices for its advertisers, who can still target using Facebook's array of options such as age, location, education and interests.

It isn't the first time Facebook has sold ads on third-party websites and mobile apps. In June, Facebook ran a test with Zynga where its "sponsored stories" news-feed ads appeared on Zynga.com and to users of mobile games. Unlike that test , Facebook's new ads on third-party apps won't necessarily look like Facebook ads; rather, they'll be standard banner and interstitial ads, the kind that can be standardized across many mobile environments.

Facebook has long been anticipated to get into the ad-network business, and the fact that it's testing the waters with mobile ads makes sense, given recent comments by CEO Mark Zuckerberg. At his appearance at TechCrunch Disrupt, CEO Mark Zuckerberg emphasized the company's commitment to building mobile products, but also said that its mobile performance was being underestimated. ("There is no doubt we had a bunch of missteps on this, but we've transitioned now and we are a mobile company," he said.) The markets responded, and Facebook stock gained 7.8% the following day.

According to an eMarketer estimate, Facebook is on track to bring in $72.7 million in mobile-ad revenue this year, compared to Twitter's heftier projected $129.7 million. However, the future could be rosier for Facebook, which eMarketer predicts will be the second-largest seller of mobile ads by 2014, after Google.

Facebook spokeswoman Annie Ta declined to say which advertisers are participating in the new test , but noted that the ads will be designed to drive specific actions on mobile phones, such as visits to a mobile website and app installs. She also said that the back-end measurement that 's being put into place is similar to what was instituted for Facebook's recently unveiled mobile-app ads, which are sponsored results for games or apps that are shown alongside organic suggestions on Facebook's mobile apps.

"In the event people are running ads for mobile apps, we'll do our best to help them measure installs," she said.

Ms. Ta also declined to say what the financial terms of Facebook's deals with the partnering ad exchanges are. Its arrangement with Zynga is a revenue split. Generally in revenue-sharing ad deals the seller of the ad takes the majority share, 70% in many cases.

And while the prospect of a Facebook ad network is bound to spark privacy concerns, Ms. Ta said that no personally identifiable information about users will be accessible to the ad exchanges. Facebook will be able to match up the users its advertisers wish to target against the exchanges' audience pool through anonymous syncing, she said.

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