How Facebook Makes Money through Mobile Advertising: A Brief Talk from SooBest

May 20, 2013, 09:00 ET from

NEW YORK, May 20, 2013 /PRNewswire/ -- Here is a brief talk on "How Facebook Makes Money through Mobile Advertising" from B2C SooBest, an online retailer with a wide range of products such as fashionable women's clothing, men's clothing, digital watches, charm jewelry, etc.

Facebook reported its 2013 first quarter earnings on May 2. Its financial report shows that its mobile advertising revenues accounted for a substantial rise to 30%, which is impressive compared to the same period last year, when it was just 14%.

In the widely criticized mobile advertising field, Facebook has finally ushered in good growth. As many know, Internet businesses that have realized gains on mobile platforms have been far fewer than on PCs. Even for mobile games, Zynga was only 1/3 of the ARPU on the PC. Mobile advertising, due to small phone screens, are not the favorite of brand advertisers. The preliminary results of mobile advertising easing into the market challenged Facebook. So, how has Facebook made it in the field of mobile advertising?

First, Facebook's success comes in part from the many Asian market mobile applications that supported the outstanding performance of advertising in the first quarter. About 3,800 developers used these ads to promote nearly 25 million downloads. Among the top 100 developers, 40% of them use this kind of advertising. In July last year, Facebook launched its own applications (App Center) , which means Facebook has an application store similar to Apple's App Store, where users who click on the application they want are taken directly to the appropriate store for download. Developers would like to pay a sum of the advertising expenses. It seems the mobile application distribution is an important advertising model for the future of social networking.

Second, consider the data of the mobile advertising platform.

In the mobile advertising platform, Facebook needs to cooperate with mobile advertising agents to help Facebook's advertisers bid for mobile advertising platforms' (such as AdMob and iAd) advertising space to filled in advertising content.

Facebook uses its own massive database of user information for income-generating through other mobile products' flows. With all the user information available to it, Facebook has more advantages than other advertising platforms in the precision of advertising.

Third is the existing realizable assets of mobile advertising.

As Facebook news feeds display ads that arouse more users' attention, they pull in higher ad prices with the growth of user stickiness. In addition, video advertising and the commercialization of the acquisition of Instagram is in full swing. At present, the three regions of the United States, Canada and Europe account for only 41% of monthly active users, but their revenue accounted for up to 74%, meaning that the markets of other countries have the continued potential and space to realize revenue.

Facebook in the past has had very bad performance in the mobile sector, but this year it made continued integration of mobile assets, which have finally reached the stage where they are ready to harvest.

Future Challenges of Facebook

There are two major challenges: the first is the income of mobile advertising in general still is lower than that of lucrative PC ads, which will affect Facebook's operating margin. Facebook's operating margin was 26% in the first quarter, a marked decline from 36% in the same period last year.

The second major challenge is the growth of Facebook's total global subscribers has been slowing. Even many users in the United States have started to abandon the social network. Young people in the United States are beginning to shift to cool mobile applications.