Facebook’s Future in Mobile Advertising: It’s All About Wi-Fi

Karen Bleier via Getty Images/AFP

Out of its over 900 million monthly active users, more than half — 488 million — already use Facebook on mobile, and that number is steadily growing. But Facebook’s mobile growth could quickly become a lost opportunity if the company doesn’t dominate the mobile advertising front. Its mobile ad strategy is already showing significant engagement, with click-through rates 14 times higher on mobile than desktop ads. But Facebook is still new to the mobile game, and has more to offer. With the right strategy, it could even save the entire mobile advertising industry.

What’s the problem with mobile advertising?
An increasing number of mobile users are connecting to the Internet via Wi-Fi, which makes it impossible to use important targeting information, like wireless carrier, to send more relevant ads to mobile users. Compared to ads served to users connecting via wireless network, those served to users connecting via Wi-Fi perform noticeably worse. The following chart shows the conversion rates Moolah Media has seen across thousands of lead generation campaigns and over 100 million clicks during May and June 2012:

A mobile user’s carrier reveals a lot about who they are and how they might interact with an ad — information that’s essential for an ad to reach its target audience and to ultimately be profitable. Even the most basic facts are important: If an ad requires a credit card purchase, it makes sense to target users on a monthly billing cycle rather than those on prepaid carriers who may not have credit.

Wi-Fi is a growing barrier to the success of mobile ads, and will become a bigger point of discussion as the amount of Wi-Fi traffic picks up — it’s expected to be 51 percent of all Web traffic by 2016.

And Wi-Fi isn’t the only issue: third-party browsers also hide the device type, and since they use proxy IPs, they often conceal the country location of the user as well — which makes it impossible to accurately target relevant ads, and results in massive losses for mobile advertisers.

A step in the right direction
Though performance advertisers are often the little guys, they’re an essential part of the overall ecosystem — making up around 80 percent of mobile advertiser spending. They also depend much more heavily on making money off of actions, not just on seeing clicks.

Some performance mobile ad networks are already trying to tackle the problem of Wi-Fi’s anonymity by looking beyond the click to focus on tracking the actions that are useful to advertisers. This involves taking a more customized approach to directing ads, based on implied data — what we think we know about how users on certain carriers respond to ads.

How Facebook can help
Facebook’s data resource is unlike any other, with both serious breadth and depth on its users — all detailed, voluntary information that users provide about themselves. Facebook can reach high school seniors with ads about college or new parents shopping for baby clothes more accurately than anyone else. This kind of specific, explicit data is enormously important to mobile advertisers that are constantly fighting against the anonymity of blind networks. And in addition to information explicitly provided on Facebook, the social network recently announced that it will be looking at how mobile users interact with other apps in order to deliver ads more efficiently.

As an example of how Facebook can make clear improvements, working with a blind mobile advertising network, Moolah ran a campaign in the UK that asked users for Facebook “Likes.” But upon reviewing stats from the Facebook “Likes,” it appeared that most of them were coming from Nigeria. This demonstrates that while blind networks fail to determine country of origin, Facebook can not only provide accurate country information but also many other details that blind networks don’t reveal.

Facebook has the power to create targeted market segments, ones that are significantly more focused than just carrier name. And the now-public social network also has the resources to focus on post-click actions and backend quality — the unseen aspects of mobile advertising that truly matter to advertisers and can generate real profits.

Advertising on mobile comes with unique challenges that aren’t an issue on PC, even simple considerations like having limited space. But this is why mobile advertising needs Facebook — though Facebook will have to create smaller and fewer ads to show on mobile, these ads have the potential to be spot on in their targeting.

Filling in the black hole of anonymous Wi-Fi and proxy browser traffic with accurate, usable information is a huge step that Facebook can take in solving this glaring (and growing) issue in mobile advertising — and it will also solidify Facebook’s place as a leader in mobile.

As co-founder and CEO of Moolah Media, Shawn oversees Moolah’s vision and market execution. He was also founder and CEO of Fattext, a mobile social company that offered free messaging and picture sharing for mobile phone users, and Director of Business Development at Openwave, where he structured transactions for the messaging and infrastructure businesses.

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