Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Facebook's Mobile Ad Network Makes So Much Sense

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Facebook  (NASDAQ: FB  ) , which had previously focused its sales efforts on selling ads on its own site and apps, plans to launch a mobile ad network.

The network could launch as soon as later this month, according to re/code, which said that the social media network will announce the plan at its F8 developer conference in San Francisco on April 30.

"Facebook will pitch the ads to publishers and developers as a way to leverage the social network's vast database of user information for better ad targeting," the technology site reported, 

Facebook benefits by being able to offer advertisers an even broader platform and the company might take some business from rival Google's  (NASDAQ: GOOG  ) mobile ad network.

Why is Facebook doing this now?

Facebook had to get is own mobile advertising house in order before it could consider creating a network. Though the company struggled with mobile early on, it clearly turned the corner in the fourth quarter of 2013 -- mobile advertising revenue represented approximately 53% of advertising revenue for that quarter, up from approximately 23% of advertising revenue in the prior year. With overall ad revenue for the quarter at $2.34 billion (a 76% increase from the same quarter last year), that means the company took in $1.24 billion in mobile advertising. 

A large piece of that revenue -- maybe 50% or more -- comes from "app-install" ads, re/code reported. Those are ads that prompt users to download new apps or use apps they already have installed. This was not originally expected to be a large part of the site's revenue model, but it has proven incredibly successful and it's a model that will likely be part of the company's ad network strategy.

Facebook already controls a decent percentage of the overall mobile ad market -- which Gartner predicted was $13.1 billion in 2013 -- and has the power to grow that number if it monetizes its newly purchased WhatsApp messenger service by adding ads. Creating a mobile ad network opens up a large chunk of the rest of the mobile ad world to Facebook and allows it to take on Google's AdMob mobile network. 

Google did not break out revenues for its mobile ad network specifically, but operating an ad network (across mobile and non-mobile) platforms has been huge for the company. In the first quarter of 2014 Google's partner site generated $3.4 billion -- 22% of total revenues -- which represented a 4% increase over the first quarter of 2013. While it might be hard for Facebook to take on Google's entrenched position in the non-mobile ad world, it's still relatively early in the mobile game.

How big is the mobile ad market?

Global mobile advertising spending is forecast to reach $18 billion in 2014, up from an estimated $13.1 billion in 2013, according to Gartner. The market is expected to grow to $41.9 billion by 2017. 

One of the biggest factors inhibiting growth is a lack of available inventory to sell. By launching a network Facebook will get access to inventory beyond what its own mobile products generate.

"Over the next few years, growth in mobile advertising spending will slow due to ad space inventory supply growing faster than demand, as the number of mobile websites and applications increases faster than brands request ad space on mobile device screens," said Stephanie Baghdassarian, research director at Gartner. "However, from 2015 to 2017, growth will be fueled by improved market conditions, such as provider consolidation, measurement standardization, and new targeting technologies, along with a sustained interest in the mobile medium from advertisers."

Facebook already has critical mass

Launching a mobile ad network for Facebook is easier than it would be for nearly any other company. Because Facebook itself generates so many potential mobile ad impressions (as do Messenger, WhatsApp, and Instagram) the company already has an enormous amount of page views to sell. And with $1.24 billion in mobile advertising already on board Facebook clearly has relationships with advertisers. The company also has a virtual copy of the micro-ad model Google uses for its AdSense service, which allows anyone with even the tiniest of budgets to spend it with Google.

In launching a mobile ad network Facebook won't be starting from scratch. The company should be able to leverage existing relationships to grab a bigger share of the ad pie. If soft drink company A is already spending big with Facebook, why wouldn't it increase its buy if the company can offer desirable impressions on network sites? Similarly if individual users are buying ads on Facebook's sites and mobile platforms why wouldn't they consider extending their reach?

A Facebook mobile ad network just makes sense and it should be a success that continues the company's tremendous mobile ad growth.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2924297, ~/Articles/ArticleHandler.aspx, 9/4/2015 7:33:27 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Daniel B. Kline

Daniel B. Kline is an accomplished writer and editor who has worked for the Microsoft's Finance app and The Boston Globe, where he wrote for the paper and ran the business desk. His latest book "Worst Ideas Ever" (Skyhorse) can be purchased at bookstores everywhere.

Today's Market

updated Moments ago Sponsored by:
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASD 4,683.92 -49.58 -1.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 3:59 PM
FB $88.26 Up +0.11 +0.12%
Facebook CAPS Rating: ***
GOOG $600.70 Down -5.55 -0.92%
Google (C shares) CAPS Rating: ****