Since not all mobile operating systems support Flash and there's considerably less real estate on a smartphone or tablet, mobile advertising comes with at least a couple of handicaps against traditional desktop digital advertising. But social media juggernaut Facebook has made considerable success with its in-stream (read: native) ads. A year ago, the company made virtually no money from mobile advertising; in Q2, it comprised a staggering 41% of its $1.81 billion in earnings.
What the company has not lacked in recent years are mobile users. By the end of the quarter, there were 819 million monthly mobile users (MAUs), 57% of which use the site daily (DAUs). Interestingly, 27% of its monthly mobile users access Facebook exclusively through their mobile device.
Naturally, the value of a mobile user is largely determined by their geography. While there isn't a breakdown in the company's 10-Q of mobile revenue by geography, overall ad revenue by MAUs in the US and Canada was a record $3.67, while it was $1.67 per European MAU and $0.68 per MAU in Asia. Mobile revenue probably tracks reasonably closely to overall revenue.
So how do these posts look?
They're similar to the in-stream, native ads that Facebook has been using in the desktop browser version of the social network. Looking at my personal ad history, I see a mix of app recommendations along with more traditional ads (for Sprint, Virgin America, etc.) App recommendation ads mention if a Facebook friend has used the app, games mention the rough number of people who have played them, and those associated with Facebook Pages mention the number of likes. Note that ads are different from sponsored stories, since they don't necessarily have to be associated with Pages.
Why has Facebook had more success than Google or Yahoo with mobile advertising? It probably has to do with the feed-focused nature of using Facebook, which makes natively-positioned ads feel more natural to users. Since there is one way to consume Facebook, the company can format and place ads in a consistently scalable fashion. Not so for Google and Yahoo who place ads on a wide variety of sites with a plethora of media consumption patterns.
What does the future hold?
Facebook announced that it would begin featuring in-stream autoplay video ads (delayed until the fall), although it remains to be seen if there will be a mobile implementation. But bandwidth-hogging autoplay video would unlikely be received well by mobile users who are paying for each megabyte.
But, as it was the case before, the eyeballs are there. The average user spends 17.39 minutes per day using Facebook. If $3.67 is all that Facebook is able to extract per quarter from that much time spent on the site, it suggests there is ample room for ad revenue growth.