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Facebook Tunes Up Bango for Mobile Advertising

Posted by Sheila Shayon on February 10, 2012 03:01 PM

It’s just a matter of time until Facebook starts monetizing mobile ad revenue, says Buddy Media CEO Michael Lazerow, and when it does, it will create huge growth, as he commented to the Washington Post.

That may be an understatement. With mobile ad spending projected by eMarketer to reach $2.6 billion in 2012, up 80% from $1.45 billion last year, it’s an enormous hurdle for Zuckerberg and troops to scale, as quickly as possible.

“It’s a huge Achilles’ heel for them,” said Susan Etlinger, a consultant at the Altimeter Group, to the New York Times. “There’s clearly a movement toward more social media consumption on mobile devices, and Facebook doesn’t have a revenue strategy for that shift. They haven’t figured it out yet.”

Facebook’s IPO filing highlighted the brand's lack of mobile advertising to date, anticipating mobile users will “exceed the growth rate of our overall monthly active users for the foreseeable future,” but also flagging the lack of mobile monetization as a risk factor in their offering. 

One barrier to entry — the dominance of Google and Apple’s Android and iPod devices — may be handled in the social network's new deal with Bango, a mobile payments startup that has deals in place with BlackBerry-manker RIM, Amazon, Electronic Arts, and mobile games pioneer, Gameloft.

“The board believes it is too early in the relationship to accurately forecast the level of business which it may generate,” Bango said, even as shares in the company leapt by a third on the announcement.

“Bango provides many kinds of mobile payments and analytics services, but most interesting to Facebook is likely to be its carrier-billing capabilities," FT notes. "Allowing Facebook’s 425m mobile users to pay for apps or buy virtual goods in games on their smartphones without having to fiddle around with inputting payments details on a small screen will be critical if the social network is to build out its Credits business in emerging markets.”

“Many people with mobile devices in emerging markets are not going to have credit cards or bank accounts. A lot of people in those markets will only access Facebook via mobile devices and the only way they can transact online is through something like Bango, where you can charge it back to the mobile operator… It’s very hard to see someone like Facebook agreeing to pay Apple 30 per cent. They are effectively another platform operator,” said Ian Maude, head of internet at Enders Analysis.

Of equal note, “it is interesting that Facebook is taking the road less traveled by companies like Apple and exploring routes to align itself with carriers as it expands what it does on mobile. It’s not the first time: Facebook has a whole swathe of non-smartphone users that can update their statuses by mobile; many of those feature phone Facebookers are using SMS, which also require carrier interconnections to operate,” comments PaidContent.

Facebook’s toe-in-the-water approach to mobile advertising being pitched to agencies is featured stories in user’s mobile news feeds.

“I’m surprised Twitter has taken its time [rolling out mobile ads], but Facebook surprises me even more,” said David Berkowitz, 360i's VP, emerging media, to MediaPost. “Has there ever been a media property with more than 400 million consumers that hasn’t been monetized?” 

Speculation is that Facebook’s delay in mobile apps may be a strategic move to spur users entry through a mobile web browser instead, thus avoiding “the Apple toll booth,” notes the New York Times.  “It’s the art of war,” said Shervin Pishevar, a serial entrepreneur and advisor at Menlo Partners VC firm. “If the app is making users insane, they are just going to go to the browser version of the site. Which is a big win for Facebook because it gives them an advantage over Apple.” 

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February 14, 2012 08:04 AM #

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