Facebook, Mobile Advertising, and the New Economy

A decade ago, when Facebook was just starting out and MySpace ruled the internet, if you wanted to write an essay or a book about the economy, you wrote about Walmart. Walmart was ascendant and triumphant at that point–a giant behemoth that shouldered around whatever local economy it planted itself in and had the overwhelming influence to change national supply lines, product creation, and distribution on a macro level. In short, right at the dawn of Internet 2.0, a brick-and-mortar store was the most powerful thing going, the blue hypergiant around which whole galaxies revolved.

Things change. Walmart is now reacting to national moods regarding everything from civil rights to the Confederate flag, rather than setting them. Tech giants are changing the conversation. So it is both interesting and telling that on Monday of this week, San Francisco’s Facebook officially passed Walmart in terms of total market value, at $238 billion to Walmart’s piddling $234 billion. That number in and of itself is a lesson in the new economy and the true power centers of the 21st century. But, digging deeper, we see that Facebook’s enormous market valuation comes not because it lets us tell our various aunts we like their various souffle recipes, but because of mobile advertising possibilities. This can change the way we interact with our smartphones and tablets.

The Power of Mobile Advertising

As recently as three years ago, a full 50% of Facebook’s users only interacted with the website on a desktop or laptop. It wasn’t at all a mobile company. That changed rapidly. Most people use both their phones and computers to access the site now, and there is an increasingly large number of mobile-only users. The latest report, from last year, showed that 30% of global users are mobile-exclusive, and that number is going to keep rising. Facebook’s mobile user base has grown 31% on a year-to-year basis, far surpassing its other numbers. Total mobile users are currently at 1.25 billion people. [1. Hamburger, Ellis, “Facebook’s new stats: 1.32 billion users, 30 percent only use it on their phone.” July 23, 2014. http://www.theverge.com/2014/7/23/5930743/facebooks-new-stats-1-32-billion-users-per-month-30-percent-only-use-it-on-their-phones]

Facebook has been pretty quick to react to this trend. Two years ago, it had no mobile advertising revenue, but that now accounts for almost 75% of the company’s total revenue. The mobile ad experience is where Facebook has a chance to change the market entirely.

To say that mobile advertising is clearly the big thing in the tech economy is an understatement: it has the potential to become the tech economy. Indeed, mobile ad sales are expected to break roughly even with desktop ads this year, with each coming in at around $28-29 billion, and next year mobile ads are predicted to far surpass desktop ads. [2. Murphy, Mike, “Biz Break: Facebook hits record on mobile-ad possibilities.” June 23, 2015. http://www.siliconvalley.com/ci_28367576/biz-break-facebook-hits-record-mobile-ad-possibilities] As recently as two years ago, mobile ad sales were barely one-third of desktop sales, and that was six years into the smartphone era. Once something catches on, though, it keeps rising, and that’s what we’re seeing now.

You’ve certainly noticed an increase in ads on your smartphones and tablets, which can be frustrating for many. I know I have trouble not clicking on them, not out of any fiduciary duty but due to clumsy fingers (the sausage-handed among us were meant for a simpler era). It’s changing the mobile experience–with more popups, crawls, and subscripts. Of course, it is also helping to keep a lot of our mobile web experience “free”, but at what point does it get so overwhelming it ruins the mood? For good or for ill, that may be up to Facebook to decide.

Facebook, The Red Hypergiant

Earlier I compared Wal-Mart to a blue hypergiant, which is a really, really big star. Those are dwarfed, though, by red hypergiants. It’s unfortunate that neither science nor marketing makes these color schemes a perfect metaphor, but we’ll go with it as a size comparison.

While Facebook might falter, it seems unlikely. I know we’ve read a raft of stories about it being “done”, but those were misleading. Let’s think about that stat above, how 30% of its users are mobile only. That 30% represents approximately 399 million people, considerably more than the population of the United States. When a part of your share of the mobile market can be defined as “all of America, and what the heck, throw in Germany”, you aren’t going anywhere. Facebook might not be cool anymore, but it is something way more important: it is ingrained. It’s akin to how almost no one says “The Beatles” when asked their favorite band, but everyone listens to them and loves them. They exist outside of that kind of discussion. Now, obviously, if I had to choose between The Beatles and Facebook, I stand with the lads, but that just shows how Facebook is part of our society.

Because of that, of its weight as a cultural entity and the sheer force of its economic power, how it decides to integrate ads into the mobile experience will set the market tone. It will certainly continue to make them user-generated, personalized, and targeted. This is the dominant trend in advertising now.

Interactive Mobile Advertising Trends

Facebook wants to make ads immersive, interactive, and a seamless part of the experience. Chris Cox, the Chief Product Officer, announced just yesterday that they are looking to make mobile ads something the user can play with, that you can scroll around, change perspectives, and explore. If you see an ad for a new burger joint, you can dive into their menu, look at calorie counts, use mapping to explore where you can get this delicious burger, and so on. Facebook wants to make ads a dynamic part of how we use our mobile devices. Whether that is a nice way to deal with the inevitable or sand in the oyster is up to you.

However, it seems clear that in order to keep up, other companies are going to need to do the same with their mobile ad ideas, and that advertisers are going to have to work hard to meet these standards.  In this way, Facebook has become much like Wal-Mart: changing markets, and making people bend to their ideas. It’s up to us, with our user habits, to make sure that is a force for good.

Continue following the ClickAway Blog to stay up to date on mobile and digital trends and issues. You can find all the services provided by ClickAway here. Just watch some of the technology problems our customers face every day.

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