Facebook's IPO has the business press all excited, but for me the detail of their mobile operation that's emerged from their S1 filing document is more interesting:
- Of their nearly 900 million users around 500 million access Facebook by mobile.
- Comscore says mobile users spend 13% more time accessing Facebook than web users (and that number is increasing).
- Facebook's mobile apps are free to use and advert-free.
- Facebook say they don't make any 'meaningful' revenue from mobile users.
This has (some) analysts upset. 85% of Facebook's $4bn revenue came from advertising in 2011. How, they ask, will the firm grow if users are shifting to an interface without ads?
I think they're missing the point:
- Facebook's web pages deliver up to 6 adverts per page normally. Screen-estate alone means this isn't feasible on mobile.
- Whilst 'rich media' ads can increase 'click through' (the measure that gets advertisers paying) even optimistic improvements only claim a tripling.
- The global mobile advertising market was $3.3bn dolars in 2011 according to Gartner - to match mobile ad revenue with the Facebook would need to increase the market by about 60%.
Mobile advertising is still immature - it isn't ready to drive Facebook's mobile growth as it did for web (although they will use it). Instead they'll take the same approach as they always have - grow the community and then seek innovative ways to make money from it as their understanding grows. They suggest as much in the S1, mentioning a Facebook platform and payment mechanism. This is smart because providing a platform (especially one that spans multiple mobile ecosystems with so many users) will attract others' innovation too whilst sharing the gains - just as Zynga have in social gaming on the web (now generating 12% of Facebook's revenue).
In numbers terms, 'Facebook Mobile' is bigger than Vodafone's total global customer-base. Earning money from these users won't be easy - relying on ideas that haven't even been dreamt of yet - but attracting the users in the first place was the biggest hurdle.