Facebook can still win the mobile ad war
Given that Facebook has lost almost half its value since its floatation in May, it was no surprise to hear the company’s 28 year old founder Mark Zuckerberg expressed his “disappointment”.
A range of industry analysts have been quick to offer their explanation as to what’s gone wrong. Some have suggested that the stock was over-priced to begin with, while others noted that some of the recent losses were the result of Facebook’s earliest investors being allowed to sell more of their shares.
One reason seemed to be cited more frequently than any other: analysts fear that Facebook has, so far, been unable to find a way to make money from its mobile users, the fastest growing sector of its business.
Recently, a defiant Zuckerberg insisted that many industry pundits are seriously underestimating his business and failing to understand how good the rapid rise in mobile usage will be for Facebook.
I’m inclined to agree with him. My own opinion is that it’s way, way too early to write-off Facebook’s chances of commercial success in the mobile space. On the contrary, I would argue that Facebook is still in great shape to benefit from the next big movement in mobile advertising: indoor positioning and more precise hyper-local positioning in general.
The future is indoors
Accurate positioning on phones is extending far beyond the ‘traditional’ uses of maps, navigation and ‘where am I now’ services. Instead, location information is becoming tied into and used by systems and apps at a much more fundamental level.
I strongly believe that indoor location services are the next untapped frontier in mobile marketing. The opportunities to monetize indoor location, in advertising, coupons and app functionality, are vast.
For example, a woman posts on Facebook that she’s going into town to buy a handbag for a wedding. When she reaches the shopping mall, it would be useful if she could receive news of offers on handbags from retailers in the mall direct to her mobile; because the marketing information is both relevant and hyper-local it is welcomed rather seen as an annoyance.
Likewise, the owners of the mall could benefit from the business intelligence that indoor positioning can deliver, for example, measuring footfall in different parts of the mall. This information could then be used to help set rents for individual retail units or influence the marketing strategies and use of signage.
However, gathering reliable up-to-date indoor location information is not easy. It’s simple to see how Facebook could obtain decent indoor maps, (through conventional crowd sourcing or the purchase of third-party maps) however, what really counts is how phones actually locate themselves in space in the absence of GPS satellites, and how accurately this is achieved.
Fundamentally there is only one economical approach to maintaining consistently accurate, self-correcting indoor positioning and this is the automatic crowd sourcing and cross-referencing of RF beacons. This technique works by employing users’ devices to automatically fingerprint and position individual RF beacons as they pass through them. Automatic crowdsourcing is also self-correcting ensuring up-to-date high quality location information.
Whether Facebook buys its indoor maps, or has people manually submit them remains an interesting question, but I have no doubt that automatic crowd sourcing is the way to go in terms of providing the reference database by which individuals are positioned on these maps.
In Facebook’s favor
Rather than being on the ropes, I believe Facebook is currently in a fantastic position to tap the commercial potential of indoor positioning for the following reasons:
1) Size matters
Facebook is expected to sign-up its one billionth user later this year. With a user base of that size, it could easily build up one of the world’s largest dynamic location databases that would be self-correcting should the RF reference points be moved around. Facebook could foster a system that essentially builds and maintains itself; a system that its competitors would find it very difficult to rival.
2) It’s all about context
People share an enormous amount of data on Facebook about their likes and dislikes, their geographic position, their friends and family and their plans for the future. For marketers, this information is pure gold, allowing them (providing the appropriate permissions are in place) to data-mine this information and identify the most relevant, local marketing messages to target individual consumers with.
Given the massive amount of personal data being shared on Facebook, its competitors would, again, have a hard time trying to provide the same level of ‘context-aware’ marketing.
3) Mobile marketing works
In June of this year, Facebook began allowing advertisers to specify that they wanted their ads only shown on mobile and there are already signs that the social media giant has reason to remain optimistic. According to a new study by TBG Digital, Facebook’s mobile ads are already outperforming their desktop equivalents in terms of click-through rate (CTR) and generating sales. The study’s findings suggest that Facebook is getting 1.93x the CTR and earning 2.65x as much on mobile sponsored stories compared to on the web.
One thing is for sure. Despite the doom-mongering by analysts, Facebook itself is still very much focused on a mobile future: rumors abound that Facebook is currently working on a hyper-local mobile ad targeting product; whispers persist that the company is planning to make moves into the handset market; the new Facebook Exchange real-time bidding system lets advertisers compete to reach specific mobile users.
Make no mistake, in terms of the future of mobile marketing, Facebook is still in a great position.
Rob Palfreyman is CEO of Sensewhere