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Summary:

Facebook’s first real ad network has a surprisingly narrow scope. App developers will probably take to it, but other advertisers should stick with Google for now and wait for future Facebook mobile innovation.

Facebook-money generic

No doubt Facebook has lofty ambitions for its ad network, but its current focus is extremely limited. The company unveiled its initial plans for the Facebook Audience Network – note naming, no mention of mobile, or of apps – at its first developers’ conference in years. While it addresses some app developer needs, in its current incarnation the Audience Netowrk won’t re-invent mobile or social advertising, and it’s no threat to Google.

What it means

You’d think that when Facebook finally announced an ad network, it would be a big deal. While the company is sensibly cautious about pushing ads too aggressively, this is a rare example of too much humility. And, perhaps, too much “mobile-first.” It is almost totally focused on app downloads, advertising for which has already propelled Facebook to the number two spot in mobile ad spending (and is a big part of its web ad business, too). But wouldn’t a cross-platform ad network, powered by Facebook’s ubiquitous log-in and Like services and targeting capabilities, better suit the company’s ambitions?

Fair enough – the network debuted at a developers’ conference, not AdTech. And there’s plenty of hubris in Facebook’s middleware strategy to end-run mobile operating systems. Presumably, it is not dragging along too much leftover legacy technology from Facebook’s Atlas purchase. Still, while I’m tempted to say “Audience Network” may be a hint of bigger things to come, I’ve got to point out that its nearly 2-year-old, web-focused FBX “exchange” is not a true exchange yet. At least not one where advertisers can buy across a network of networks (see report).

There’s a real need for what Facebook is doing. When Gigaom Research surveyed European developers as part of our EC-sponsored project to better understand the EU app economy (see report), they told us that business issues were far more challenging than technology, talent, or EU market conditions. I expect US developers would say the same. Only 16 percent of EU developers said they were “very satisfied” at achieving their business objectives. Nearly half (44 percent) were trying to make money charging for the apps themselves or in-app charges (30 percent), while less than a third (31 percent) sold ads. App discovery and promotion frustrates them, or costs too much.

Facebook mobile ad network could help with app discovery, monetization
Top business and financial challenges for EU apps
Source: Gigaom Research EU independent developers survey, 4Q2013 N = 197

Whom it affects

Apps developers should appreciate the Audience Network for the reasons above, although Facebook isn’t telling how it will share ad revenue, and it will take some time to see how ad pricing will shake out.

Google has little to worry about, at least not from Facebook. It’s far and away the leader in mobile advertising, though that’s primarily based on mobile search spending. But Google has a much broader collection of mobile ad offerings: budding location targeting, click-to-call, a mobile network suitable for both brand advertising and direct marketing, and YouTube mobile video. Big advertisers can run campaigns across mobile and web, and tie in display and search. Google’s problem is one of internal comparisons: mobile search clicks are less valuable than web-based ones. That’s the opposite of Facebook, whose increasing prices for mobile are more a reflection of how low its web CPMs are.

Apple has never shown itself to be serious about selling advertising, and Facebook could emerge as a viable alternative in app discovery and distribution. I’ve always been baffled why a developer can’t buy promotion in the App Store. It’s not payola, it’s paid search. Apple must respond.

Other mobile app ad networks should be relieved that Facebook is focusing on app downloads and dabbling in other interactivity options. Geo-targeting, search integration, click-to-call, offers and referrals, video – there’s lots of open mobile turf.

Brands and other advertisers should observe how Facebook’s network works for app developers, and see if Facebook learns anything about other interactions. But FAN doesn’t offer them much right now if they don’t have apps.

  1. Madhavi Podishetti Sunday, May 4, 2014

    I do my blogging (myinvestmentideas.com) advertising thru Facebook on regular basis. Surprised with these facts…. Suresh…

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  2. Sarah Smith Sunday, May 4, 2014

    I’ve been using a video technology called http://www.modulates.com that allows me to connect an image instantly to their video player and add my shopping cart url to the image on the video. I broadcast the video in facebook and twitter and it allows people in my circle to start shopping directly from the video player.

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  3. Facebook needs to be transparent if it wants to succeed by virtue of courting advertisers and developers. There’s a ton of ad networks out there that offer style over substance. If Facebook can truly land among the best of the best mobile ad networks today – I’m talking Airpush or MM quality – then it will take off. I love what I see so far.

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  4. PromotedApp Monday, May 5, 2014

    App discovery continues to be an alarming problem everywhere you look. Facebook, Twitter and Google are rolling out mobile advertising utilities that exploit the problem, not solve it! Cost per app installs have risen from $0.30 to almost $3.50 per install, according to various research groups and the problem of sustainable app discovery and retaining users post app downloads continues.

    PromotedApp is taking an entirely different approach, starting from a Pinterest like platform for apps, with deep sharing attributes that will help visualize discovery, engage and retain users over the long term.

    App Developers and Brands can have complete “Media App Boards” and more to market apps cost effectively, message and retain users. Users can have free personal App boards for life, so friends can follow. We are at the very beginning as there is lots more to come, including algorithms and further iterative software development.

    Thanks! http://www.promotedapp.com

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  5. Tdiindia Mad Thursday, May 8, 2014

    For many clients of Mobile Advertising Agencies, the most notable chance, which the platform of Mobile Advertising deals, is the ability of round-the-clock targeting. Such a platform provides great freedom for implementing innovative campaigns and thus, simply qualifies as the smoothest way of advertising.

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