Great to see Facebook succeeding on mobile

25 October, 2012

As you may have seen Facebook announced their Q3 results, revealing 14% of their ad revenues came from mobile. This was ahead of analysts expectations and helped drive their shares 13% higher in after hours trading.

Since the advent of the web it has been harder to make money out of publishing. A few have succeeded with novel cost and revenue models (Huff Post and Techcrunch spring to mind) but many have struggled because banner ads don’t pay much and startups took away big revenue streams like recruitment and classifieds that were no longer tied to content by physical distribution. It is often said that analogue dollars have been traded for digital pennies.

The rapid rise of mobile over the last year has exacerbated the problem. Small screens on smartphones don’t leave much space for adverts and everyone has been wondering how much worse it will become for publishers to generate revenues. People interested in this debate have focused their attention on Facebook because it is the world’s biggest publisher and because its customers are rapidly transitioning to mobile. The fact that the shares bounced 13% on the back of good mobile news in an otherwise solid but not inspiring set of results shows how worried investors were about this issue.

Facebook’s success in monetising mobile is good news for publishers everywhere, who will now be more confident they can repeat the trick on their own properties. It’s not all cookies and ice cream though. It is early days, but Facebook is monetising mobile at less than half the rate of computers (mobile is 33% of traffic but generates only 14% of ad revenues).

I expect that the potential for monetising mobile will improve going forward, for Facebook and for other publishers. There is some talk that there are too many ads on Facebook’s mobile apps, and that as many of 50% of clicks on mobile ads are accidents, but experimentation with new ad formats and improvements in targeting to improve yields, and the natural uplift in effectiveness as it becomes easier to transact ecommerce on mobile will more than compensate and keep the sector moving forwards at a rapid pace.

(Nic Brisbourne is partner at DFJ Esprit, one of Europe’s leading venture capital firms.  The post has been reproduced with the author’s permission from his blog, The Equity Kicker.)

To become a guest contributor with VCCircle, write to shrija@vccircle.com.


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Great to see Facebook succeeding on mobile

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