Facebook and Google’s Billion Dollar Ad Strategy
Facebook and Google continue to be at the forefront of the mobile advertising market, as Facebook posted a 39 percent increase in revenue last quarter, nearly three-fourths of which came from mobile advertisements. This jump in Facebook’s revenue highlights how companies are spending more money to advertise on Facebook. Companies feel that they are better reaching their target audience and achieving a higher return through these advertisements. Facebook allows these companies to target specific users based on the users’ interests and other relevant data, similar to the keyword-based advertising created by Overture as discussed in class. Instead of using a search query to get users to express their intent, Facebook has a system that displays behavior-based advertisements, creating a market out of the millions of people with similar behavioral tendencies. For instance, when Wendy’s launched a spicy chicken sandwich, it used Facebook to target users who like spicy food and advertised to those users.
According to estimates, consumers spend between one-fifth and one-third of their time on mobile devices on Facebook or other Facebook owned applications, equating to approximately 46 minutes a day on one of these mobile applications. Accordingly, Facebook needs to find the right balance between fewer, more tailored, higher quality ads and more ads in general; a mobile user should not be agitated by advertisements as they scroll through his or her news feed, yet should still be impressed upon by advertisers. Under Facebook’s current advertising strategy it is likely that as people scroll through more content on Facebook, the “organic content” that people see will increasingly be ads. This is analogous to dispersing ads throughout the organic search results from a web search. This coupled with some other usage estimates results in the prediction that together, Facebook and Google will capture just over half of the 69 billion dollar mobile-advertising market this year. As mobile devices come to play a larger role in our lives, I expect more companies to implement a similar behavior-based advertising strategy, joining Facebook and Google in expanding the mobile-advertising market.
http://www.wsj.com/articles/facebook-revenue-rises-39-1438200350
http://www.cnbc.com/2015/04/14/facebook-stands-behind-its-controversial-ad-strategy.html