It looks like Facebook wants to address the big weaknesses in its mobile business model before it has to deal with nagging questions from its investors. According to FT, Facebook is set to include sponsored posts in the news feeds of its phone and tablet apps as well as it mobile Website. It’s planning a launch in March ahead of its $5 billion IPO.
The news should come as little surprise considering Facebook stated in its Securities and Exchange Commission S-1 filing that it was weighing inserting sponsored ads into its mobile news feeds, rather than clutter up the limited real estate of a mobile device with display advertising. As I wrote shortly after the filing last week, the S-1 exposed a gaping hole in Facebook’s advertising-driven business model as its customers increasingly shift their usage from the social network’s desktop Website to their mobile phones.
What’s more, Facebook’s mobile problem would accelerate if it failed to monetize that traffic before expanding its scope globally. As it gains traction in developing markets, many consumers don’t have PCs and will view Facebook solely as a mobile-only platform, meaning they would never see an ad if Facebook continues with its current model. In short, Facebook’s biggest future growth depends on a platform it hasn’t made a dime from.
Such a revelation must be chilling to potential investors, which explains why Facebook may be ramping up its mobile advertising strategy quickly. According to FT, Facebook will use the “featured story” format – where sponsors pay to highlight positive posts or endorsements — it launched through the main site in December. Though different from advertising, the sponsored stories keep members within the Facebook app itself, rather than direct them off-site to an advertiser’s Web page. Mobile display ads can be tricky because they create any number of rendering problems among the myriad of different phone browsers on the market and could drive up consumers’ data plan fees – neither are good bases for a marketing relationship.