Facebook To Tap Mobile Ads For Revenue

6 Feb, 2012

Facebook is set to begin showing advertisements to users on mobile devices within weeks in an effort to tap a new source of revenues before it goes public.

Several people familiar with Facebook's planning say that it has already discussed proposals with advertising agencies for displaying what it calls "featured stories" in the news feed seen by users on the site with a launch likely in early March ahead of its initial public offering, which is expected in May.

The move will test Facebook's ability to balance shareholders' interests, in maintaining rapid revenue growth, with those of its users, who may be unwilling to accept too many commercial messages on the small screen of their most intimate device.

In its IPO filing last week, Facebook flagged to potential investors that its lack of "meaningful revenue" from mobile devices, used by half of its 850m members, "may negatively affect our revenue and financial results" as a growing portion of its user base turns to smartphones rather than PCs to chat with friends.

Facebook said putting "sponsored stories" ads – where brands pay to highlight people's endorsements or interactions with them in their friends' list of online activity – on mobiles was one "potential" opportunity. It began to show these as "featured stories" in the desktop news feeds in December.

Facebook declined to comment for this story.

"More and more people are getting smartphones and spending more time accessing the internet via mobile devices," said Ian Maude, head of internet at Enders Analysis. "That is going to be a big part of Facebook's usage in the future. They've got to figure out a clever way of monetising it."

Other internet companies, too, are facing mounting pressure to make mobile pay. Analysts attributed a large part of Google's big earnings disappointment last month to a shift to lower-value mobile advertising. Twitter failed with a brief attempt to launch mobile ads last year. It was forced to remove a feature of its mobile app "the "Quick Bar", which allowed prominent placement of ads – after users revolted against it.

Facebook is holding an event for marketers in New York on February 29 at which it is expected to unveil more new features for brands, as it tries to nudge companies who may be using its platform for free to spend more on paid promotions. Carolyn Everson, the former Microsoft adsales chief who is now Facebook's vice-president of global marketing solutions, is expected to unveil a design for brand pages based on Timeline, the profile page for individuals which began to roll out last month.

Facebook may also go further towards incentivising brands to post ads which link back within Facebook, rather than going out to other sites, according to one person familiar with its plans.

Facebook is also looking to boost its own branding. Last week, it poached Levi Strauss marketing chief Rebecca Van Dyck. She previously worked at Apple on ads for the iPhone, iPad, and iPod, and was the primary brain behind Nike's "Just Do It" campaign.

Additional reporting by Richard Waters and April Dembosky

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