Facebook’s recent IPO struggles have been a hot topic over the past month or so. While few doubt Facebook’s positioning as the dominant social networking platform in the world, many investors have concerns around the Menlo Park company’s business model and potential for additional revenue streams. Specifically, investors are questioning how Facebook will increase their ad-generated revenue, taking into consideration the continued shift towards mobile web browsing.
How does Facebook make money? In 2011, 85% of Facebook’s revenue was from advertising (those little ads on the right side of the Facebook screen). The company’s marketing strategy has typically focused on selling ad space optimized for PC web browsers. However, this spring, for the first time, consumers started spending more time on Facebook via Facebook’s mobile site and apps then they do on the full website. This presents an interesting challenge that Facebook has yet to successfully embrace: monetising mobile traffic.
The problem with monetising mobile traffic is simple: real estate. There simply isn’t enough space on a Facebook mobile web page to surface advertisements that are as impactful as ads on the full website. Thus, marketers are generally unwilling to make significant investments in mobile advertising if they can achieve the same (and potentially greater) level of audience targeting via Facebook ads on the full website.
Facebook purchasing or partnering with a web browser company has been a popular rumor in recent weeks. Supporters of the idea think it makes sense for several reasons: A Facebook branded web browser will further engage users by encouraging them to have a Facebook homepage, increasing traffic and creating additional ad-generated revenue. And, more importantly, a partnership with a mobile web browser company will create the opportunity Facebook desperately seeks: control over mobile browser market share in order to create a scalable, revenue-generating mobile ad platform.
Opera Software, owner of the Opera web browser and Opera Mini, seems like a likely partnership candidate. The Opera web browser currently has just 2% of global market share. However, it possesses a loyal user base and has been a trendsetter in the browser industry, having introduced new features that were later adopted by major browser companies. Opera Mini is one of the most popular mobile browsers in the world, with 168 million users as of March, 2012. Additionally, through recent acquisitions of mobile publishing platforms, Opera Software now has a total reach of 330 million mobile customers, making it one of the leading mobile advertising platforms in the world.
No one can dispute Facebook’s dominance as a social media platform. Their market share is unrivaled anywhere in the world. But Facebook’s revenue pales in comparison to many similarly sized, global technology companies. In order to increase revenue, and prove investor’s skepticism unfounded, Facebook must find a way to monetise the mobile web. Can they achieve this through a high-profile partnership? We’ll have to wait and see…