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Facebook Goes From Strength to Strength in Mobile

by Nitesh Patel | Mar 26, 2015

At its f8 developer conference on 25th March, 2015 Facebook made several significant related announcements that I feel strengthens its ability to drive mobile revenue:

  • Open up Facebook Messenger platform to third-party developers: Following the lead of Asian messaging platforms LINE Kakao, and WeChat, Facebook is enabling developers to create apps which will be distributed via Facebook Messenger. Enriching the messaging environment with add-on applications takes the onus off Facebook to innovate sticky non-core communication features, such as voice filters, games, and emoticons. More importantly, the Facebook Messenger platform is likely to evolve to provide developers and content creators with an audience of over 600 million monthly active users (MAUs) to monetize through premium or sponsored content.  This effort will be aided by the upcoming launch of its payment platform, Facebook Pay, in the US, as it gathers users’ payment information. Notably, LINE Messenger generated over $1 B in gross revenue in 2014, largely from in-app transactions generated by games and sales of stickers. Therefore, while WhatsApp continues to focuses on its “no gimmicks” approach, Facebook Messenger is clearly evolving its platform for content distribution to supplement its core communication functions.
  • Live Rail to benefit from Facebook audience profiles: Facebook acquired video ad-exchange, Live Rail in July 2014, allowing Facebook to generate revenue from video ads served beyond Facebook owned sites. However, the power of Facebook’s (anonymized) audience profiling (combined with its audience scale of course) is clear to see. In 2014 Facebook generated just under $2.5 Billion from mobile advertising, which equated to 69% of total ad revenue – having started from zero in 2012. While almost all of Facebook’s mobile ad revenue has been driven from driving app downloads via its newsfeed ads, mobile video represents a strong growth opportunity for Facebook, both within Facebook newsfeed, but also video content streamed to other sites. Strategy Analytics forecasts solid growth in mobile video advertising, with revenue approaching $3 Billion by 2018, up from $1.6 B in 2014 - although we are likely to raise this forecast further in our next update given interest from publishers in using video to drive higher CPMs, while brand advertisers shift their spend to reach users on mobile devices. In short, I expect Facebook to benefit from the combination of Facebook targeting the growth of the mobile video ad market.  
  • Provide in-app analytic tools to developers: As stated above, the vast majority of Facebook’s extraordinary mobile ad revenue growth comes from driving app installs promoted via Facebook newsfeeds. Facebook aims to go a stage further, by allowing app developers to better understand users that have downloaded their app via Facebook, such as their gender, age group, and other interests, among other data. This information is vital for helping developers understand their target market and how to best optimize any subsequent marketing, promotion, or even app design. Facebook also claims its app analytics tool allows publishers to assess performance across mobile app and PC. Consequently, providing in-app analytics provides another opportunity for Facebook to attract developers and publishers to its mobile app install platform.

With Facebook continuing to build its mobile advertising machine we will be keenly watching moves from Google, Twitter, Apple and other players fighting for a greater share of the $40 Billion global mobile advertising opportunity.  

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