Facebook??s mobile ad network is shockingly unambitious
Source: David Card

Facebook’s first real ad network has a surprisingly narrow scope. App developers will probably take to it, but other advertisers should stick with Google for now and wait for future Facebook mobile innovation.

No doubt Facebook has lofty ambitions for its ad network, but its current focus is extremely limited. The company unveiled its initial plans for the Facebook Audience Network �C note naming, no mention of mobile, or of apps �C at its first developers’ conference in years. While it addresses some app developer needs, in its current incarnation FAN won’t re-invent mobile or social advertising, and it’s no threat to Google.

What it means

You’d think that when Facebook finally announced an ad network, it would be a big deal. While the company is sensibly cautious about pushing ads too aggressively, this is a rare example of too much humility. And, perhaps, too much “mobile-first.” FAN is almost totally focused on app downloads, advertising for which has already propelled Facebook to the number two spot in mobile ad spending (and is a big part of its web ad business, too). But wouldn’t a cross-platform ad network, powered by Facebook’s ubiquitous log-in and Like services and targeting capabilities, better suit the company’s ambitions?

Fair enough �C FAN debuted at a developers’ conference, not AdTech. And there’s plenty of hubris in Facebook’s middleware strategy to end-run mobile operating systems. Presumably, FAN is not dragging along too much leftover legacy technology from Facebook’s Atlas purchase. Still, while I’m tempted to say “Audience Network” may be a hint of bigger things to come, I’ve got to point out that its nearly 2-year-old, web-focused FBX “exchange” is not a true exchange yet. At least not one where advertisers can buy across a network of networks (see report).

There’s a real need for what Facebook is doing. When Gigaom Research surveyed European developers as part of our EC-sponsored project to better understand the EU app economy (see report), they told us that business issues were far more challenging than technology, talent, or EU market conditions. I expect US developers would say the same. Only 16 percent of EU developers said they were “very satisfied” at achieving their business objectives. Nearly half (44 percent) were trying to make money charging for the apps themselves or in-app charges (30 percent), while less than a third (31 percent) sold ads. App discovery and promotion frustrates them, or costs too much.

Facebook mobile ad network could help with app discovery, monetization
Top business and financial challenges for EU apps



Source: Gigaom Research EU independent developers survey, 4Q2013 N = 197

Whom it affects

Apps developers should appreciate FAN for the reasons above, although Facebook isn’t telling how it will share ad revenue, and it will take some time to see how ad pricing will shake out.

Google has little to worry about, at least not from Facebook. It’s far and away the leader in mobile advertising, though that’s primarily based on mobile search spending. But Google has a much broader collection of mobile ad offerings: budding location targeting, click-to-call, a mobile network suitable for both brand advertising and direct marketing, and YouTube mobile video. Big advertisers can run campaigns across mobile and web, and tie in display and search. Google’s problem is one of internal comparisons: mobile search clicks are less valuable than web-based ones. That’s the opposite of Facebook, whose increasing prices for mobile are more a reflection of how low its web CPMs are.

Apple has never shown itself to be serious about selling advertising, and FAN could emerge as a viable alternative in app discovery and distribution. I’ve always been baffled why a developer can’t buy promotion in the App Store. It’s not payola, it’s paid search. Apple must respond.

Other mobile app ad networks should be relieved that Facebook is focusing on app downloads and dabbling in other interactivity options. Geo-targeting, search integration, click-to-call, offers and referrals, video �C there’s lots of open mobile turf.

Brands and other advertisers should observe how FAN works for app developers, and see if Facebook learns anything about other interactions. But FAN doesn’t offer them much right now if they don’t have apps.