Facebook Invents the Holy Grail of Mobile Advertising

Facebook (NASDAQ: FB  ) has expanded its commerce offerings by getting into the gift card business -- with a bit of a twist. With Facebook Card, users will be able to send gift cards to their friends, who will receive it in the mail for use in stores. Currently, Jamba Juice, Olive Garden, Sephora, and Target have signed on for participation in the program. The twist is that one card can store multiple balances for different retailers simultaneously, positioning the Facebook Card as the universal gift card, earning a permanent place in your wallet. According to First Data, it's estimated that more than $43 billion in gift cards were purchased during the 2012 U.S. holiday season, which poses a huge business opportunity for Facebook. Industry support for a product like this likely to be strong, since gift cards often lead to additional purchases and provide valuable exposure for a retailer.

An offline goldmine
From an advertising perspective, the company that can best tie online and offline activity is poised to make fortunes. Google (NASDAQ: GOOGL  ) plans on bridging these two worlds together by leveraging mobile and its Android platform. Earlier in the month, Google introduced Google Zavers, a digital coupon book that's accessed through your smartphone. Users first add coupons to their account, which are then applied at the register with a single scan. Naturally, Zavers can be integrated with Google Wallet and any coupons are automatically redeemed when you tap to check out. From a marketing perspective, Zavers has positioned itself as a way for manufacturers to get a real-time pulse on activity. CEO Larry Page believes this market is still within the early stages of unlocking value for consumers, advertisers, and manufacturers. In other words, Google has yet to invent the Holy Grail of mobile advertising.

The Holy Grail
The key to this all boils down to improving ad analytics by capturing more areas of data. Ad analytics is a fairly new process for Facebook, and it wasn't until "pretty late in 2012," according to COO Sheryl Sandberg, that Facebook was able to connect sales data into its advertising measurements. Facebook has gone a step further and developed a method that can track a user all the way from seeing a mobile ad to when that user makes a purchase at a store. It sounds like Facebook has just invented the Holy Grail of mobile advertising by working deeply with retailers. If Facebook can figure out a way to standardize this process, it would undoubtedly create an advertising goldmine for its business.

A PayPal threat?
As stated earlier, if more data is needed to perfect and standardize Facebook's methodology, it stands to reason that Facebook has a high interest in pursuing the mobile payments business. Such a move would allow Facebook to connect even more valuable data on its users, which would ultimately lead to improving its analytics, proving to marketers that its platform is unique. This could potentially hurt eBay (NASDAQ: EBAY  ) and its PayPal business, which has seemingly become an established leader in the mobile payments space. Combined, eBay and PayPal conducted $27 billion in mobile transactions in 2012. Not to mention, PayPal has partnered with Discover Financial to bring the PayPal experience offline, opening up PayPal to over 7 million outlets by the middle of this year.

IDC predicts that worldwide purchase volume over mobile devices will exceed $1 trillion by 2017. Consider this with the fact that Facebook has nearly nine times the active user base of PayPal. It wouldn't take much for Goliath to slay David and completely disrupt the mobile payments business.

Three priorities
During the conference call, Facebook CEO Mark Zuckerberg discussed the company's top three priorities. The first is for Facebook to build products and tools that create value for every type of marketer. The second is for Facebook to prove that value to marketers. And finally, it's key for Facebook to capitalize on the unique opportunity it has in mobile. The Facebook Card is the first step for Facebook to connect the online world with the offline world in a standardized way. It allows Facebook to collect even more personal data on its members, which will further improve its ad analytic technology. These efforts certainly align well with Facebook's top priorities. Perhaps Facebook isn't a one-trick pony, after all?

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  • Report this Comment On February 05, 2013, at 6:12 PM, scott1020 wrote:

    We keep hearing all of these great "potential" items for Facebook. The Facebook timeline and now social graph are what they have to show so far, oh yea, and an acquisition of Instagram.

    Most people who use Facebook, do not use these implemented items. Some, especially younger generations use Instagram instead of Facebook, how much money is Instagram making?

    Most people still use Facebook primarily just to look at pictures and to communicate.

    The platform was created for a specific purpose and it has maximized its utility. Now Facebook, thinks it can get all of its users to engage in other services? Not so fast.....

    People like things for what they equate the value of the service to be, and frankly, I think Facebook's agenda goes beyond user value perception. Tread lightly on this.

    Facebook still has much to prove and their recent claim to be a mobile force is premature and nothing more than posturing.

  • Report this Comment On February 12, 2013, at 9:30 PM, dsciola wrote:

    Steve,

    Interesting piece, apparently no one else is seeing the value here.

    Qwik question, how would retailers / FB discern the ad 'nosie' from the purchase 'signal' if you will?

    What I mean here is say i see 100 ads tomorrow, one of which is for McDonalds. can't remember any ads, but at the end of the day I buy a McD's Big Mac because i am hungry. How does FB / retailer know I bought that Big Mac cuz I saw the ad vs I bought it because I was hungry, habitually eat big Macs, I wanna fatten myself up, etc?

    Perhaps one could argue FB doesnt need to deipher nosie from signal for retailers, just convince/scare them into believing the ads work.

    Curois to hear ur thoughts here. Also, do u mean above on PayPal that they plan on making a bricks and mortar bank w/ Disc Fina?

    Thanks,

    Dom

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