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Facebook ad network expansion underscores value of buying history for mobile ads

The social media site said all publishers and developers would be able to use the network, which monetizes apps by showing Facebook ads to users, after it had optimized it to improve performance. Given that the more than 1.5 million active advertisers on Facebook could use Facebook information such as a person's age, location and what books they like to send tailored ads to consumers? smartphone apps, the move has the power to reshape mobile advertising and boost in-app spending.

?Expanding beyond selling mobile ad inventory in its own media will enable Facebook to take a larger slice of spend transitioning increasingly to mobile,? said Nitesh Patel, director of wireless media strategies for Newton, MA-based Strategy Analytics. ?It provides advertisers a one-stop place to buy targeted audiences within Facebook and also across other publishers that plug into its ad network. 

?Competing mobile advertising networks, such as Google?s AdMob, Millennial Media and Twitter among others, will now face increased competition for ad dollars,? he said. 

Facebook did not respond to inquiries by press deadline. 

Attractive partner
Facebook has an edge over its rivals in its ability to provide targeting based on user behaviors, likes and dislikes and demographic information. 

Audience Network ads.

?This richness of profiles combined with Facebook?s scale of mobile users makes it an attractive partner for serving mobile ads,? Mr. Patel said. 

The move could put pressure on giant Web retailer Amazon to try to one-up Facebook by providing targeting based on previous purchase history and behavior.

?That data could really drive mcommerce related advertising significantly,? the analyst said. 

The ad network expansion is a major step for Facebook, because it  widens the network?s ability to collect revenue. 

While Facebook?s mobile advertising business keeps growing ? mobile represented a whopping 62 percent of ad revenue during the second quarter ? the social network is under pressure on the app marketing front as a growing number of competitors come out with their own, often compelling offerings.

Facebook?s mobile ad network and app install ads drive much of the mobile ad revenue but the company continues to look at ways to broaden its mobile ad business. 

Facebook reported in July that its overall revenue grew 61 percent for a total of $2.91 billion during the second quarter of 2014. Of that, $2.68 billion came from advertising, a 67 percent jump from the same period a year ago. 

Growth in mobile use on Facebook continues to outpace general use, with mobile daily active user increasing 39 percent for a total of 654 million while mobile monthly active users grew 31 percent for a total of 1.07 billion. In comparison, overall daily active users grew 19 percent for a total of 829 million and monthly active users increased 14 percent for a total of 1.32 billion. 

The company also posted a 138 percent increase in net income for a total of $791 million.

Facebook continues to advance its mobile offerings to better meet marketers? needs. 

In late July, it enhanced targeting capabilities for mobile app ads, enabling developers to reach people using specific mobile devices such as a Samsung Galaxy S5, iPhone 5s or an HTC One. Previously, developers could only target iOS or Android, minimum OS version and Wi-Fi only users. 

The expansion of Facebook?s ad network speaks to the growing importance of mobile apps in marketing.

?In-app advertising expenditure has been dominated by driving app installs primarily, and is likely to continue to do so,? Mr. Patel said. ?We estimate that in-app advertising to handsets will rise from $2.7 billion in 2013 to over $5.2 billion by 2018, driven by consumer appetite and usage of games and apps. 

?Mobile apps are increasingly important for engaging with existing loyal customers, by providing an optimized experience on the device that pure mobile web based experiences are unable to,? he said.

?Native apps can draw on device APIs (location, gyroscope, calendar) that mobile Web cannot to the same extent. I don?t expect this dynamic to change, and therefore it is essential for companies with their own apps to encourage customers to download and use them.? 

In its announcement, Facebook said early tests of the ad network were successful and that apps that hosted Facebook ads were the mobile game ?Kim Kardashian: Hollywood,? and the music-recognition app ?Shazam.?

Inevitable move
Facebook?s move was seen as inevitable, given its need for another revenue source. 

Mission statement emphasizes connecting world via social.

?Facebook has been heading down this road for the past year,? said Sheryl Kingstone, Toronto-based research director with Yankee Group. ?However, the real pain is also that many businesses are also trying to address is marketing attribution.

?With more competition for marketing dollars, it?s critically important to close the loop through better understanding of user behavior across Web and mobile no matter which device,? she said. 

?It may or may not be the last-click approach to measurement currently rampant among attribution models today. A company must consider all impressions so that Facebook can attract more advertising dollars.

?Brands want to solve this attribution problem, so I expect Facebook to not only address this within their Facebook ad marketing, but also potentially in their broader mobile ad network for both on and off Facebook in a mobile environment in order to differentiate from the competition,? she said. 

Final Take
Michael Barris is staff reporter on Mobile Marketer, New York.