Facebook mobile ads improve but need more work

Facebook Inc. executives are reminded how much work they have left to do in the $16.7 billion mobile-advertising market every time they glance at two large TV screens in plain view at the company’s headquarters.

The monitors, erected recently by advertising Vice President Andrew Bosworth, show a steady stream of complaints lodged by marketing customers about ads shown to users of the largest social network. Some lament that ad tools are difficult to use. Others say messages leave customers confused.

Pressure on Facebook to improve mobile ads isn’t letting up, even after the company said in July that it got more than 40 percent of second-quarter ad revenue from mobile -- up from zero at the end of 2011. Investors applauded the gains, propelling the shares 83 percent since the results were released.

“The ads are getting better, the ads are getting more effective,” Facebook Chief Operating Officer Sheryl Sandberg said in a recent interview. “Our job is to have a plan, stick to it and believe that over time that plan will come to fruition and people will understand it.” Sandberg is in New York this week for the Advertising Week industry conference.

Finally gaining traction more than a year after rolling out its first ads for smartphones and tablets, Facebook is stepping up the pace as it works to prove that its progress so far is no fluke. With rivals such as Twitter Inc. -- which has filed to go public -- already far along in mobile ads, and Google Inc. boasting a wide lead over both rivals, Facebook has to fight harder to win share in a market that EMarketer Inc. predicts will almost double this year.

Streamlined Buying

To keep up the gains, Menlo Park, Calif.-based Facebook is taking steps to streamline ad buying, adding ways to track results and courting a wider swath of business advertisers. The company will soon announce it’s teaming up with Nielsen Holdings NV to unveil a way to measure mobile audience sizes the same way marketers measure television viewers, according to a person with knowledge of the project, who asked not to be identified because the matter isn’t public.

Adam Isserlis, a spokesman for Facebook, declined to comment. Flavie Lemarchand-Wood, a spokeswoman for Nielsen, didn’t respond to requests for comment via phone and e-mail.

Facebook’s stock price has gained in step with its progress in mobile. After its $16 billion initial public offering in May 2012 -- a record for a technology company -- the shares lost more than half their value by September as mobile advertising was slow to catch on. It took the second-quarter report in July showing gains in mobile -- which now accounts for 71 percent of the user base -- to get shares back to the $38 IPO price.

The stock rose 2.7 percent yesterday to a record $48.45, after an analyst at Citigroup Inc. said the company’s growth is “sustainable” and upgraded the stock to buy.

Customers Overwhelmed

The results haven’t come without hiccups, including some that affected customers. The quick development time and rapid rollout of ad products for the social network’s website and mobile app created a buying process that was sometimes overwhelming to marketers. Earlier this year, the number of separate tools had climbed to more than 25.

The system became “fairly confusing,” especially for small advertisers, and Facebook needed to simplify and streamline those features, said Zachary Reiss-Davis, an analyst at Forrester Research Inc.

Bosworth, best known for his earlier work on user content in Facebook’s News Feed, put up the advertiser-complaint screens outside his conference room. Posters were hung up around the ad area to keep workers focused on the customers.

Slashing Products

That’s led to cultural change, said Brian Boland, a vice president who handles marketing for advertiser tools. The ad team already has unveiled plans to slash the number of advertising product options by half, he said.

“You’ll see us changing a lot of our products to make them easier to understand and simpler to use,” he said.

Facebook’s learning curve has been steep. The company rolled out its first mobile-ad products in March 2012, and just two months later and days before the IPO, it spooked investors by saying daily active users -- especially mobile users -- were increasing more rapidly than the number of ads it was delivering.

The company’s first quarterly report as a public company in July 2012 did little to assuage those concerns. In June, Chief Executive Officer Mark Zuckerberg had addressed the entire staff.

“He stood in front of the company and said, ‘We are a mobile company,’” Sandberg said. “If we’re a mobile-first company, that means mobile ads.”

No Banners

Seeking to avoid the sometimes jarring nature of promotions on smartphones on other applications, the company wanted to take a more measured approach. Instead of squeezing an ad onto handsets’ small screens, Facebook put the paid messages in the hub -- called the News Feed -- where users view updates from friends.

“It’s not a small banner in the corner of the screen,” said Cathleen Ryan, marketing manager for Intuit Inc.’s TurboTax, which advertises on Facebook mobile. “It’s a truly integrated News Feed experience.”

That doesn’t mean the ads aren’t a nuisance for some users. While Facebook says it takes precautions to avoid overwhelming the News Feed, too many promotions in a user’s stream could spur a revolt. Average members now get one ad for every 20 photos, messages or other content they view on the social network.

More Engaging

Early on, Facebook executives saw that News Feed ads generated more user response than those running on the side of the desktop screen. News Feed promotions could be eight times more engaging than the traditional ads. All mobile ads are in the News Feed.

Facebook also made it easier for mobile-ad customers to target potential shoppers by using data it already gathers on members.
“That was a complete revelation,” Boland said. “It’s very hard to get that targeting data on mobile.”

The results started showing up in the second half of 2012 - - mobile made up 14 percent of ad sales in the third quarter and 23 percent in the fourth.

Marketers have noticed. In recent months, Toyota Motor Corp. has seen more engagement with mobile ads than those on desktop computers, said Monica Peterson, Toyota’s director of social media. Facebook is getting better with targeting, making it easier to reach those who may be checking their phones several times a day, she said.

“We have to be where our people are, and give them the message at the right time,” she said. “A larger percentage of people are accessing Facebook from their mobile device.”

Small Businesses

The company is also focusing on turning more small businesses into paying mobile customers. Facebook has almost 18 million local businesses using its site, with only about 1 million of them as paying customers.

Those advertisers include Naturebox, a startup that delivers healthy snacks to consumers. The company devotes 10 percent to 20 percent of its Facebook advertising budget to mobile, and that could rise, said Ken Chen, the company’s co-founder and chief marketing officer.

Facebook remains a distant No. 2 in mobile ads, with Google estimated to hold 53 percent of the market this year, compared with Facebook’s 16 percent, according to EMarketer.

“Every six months, someone wakes up and goes, ‘Oh, we should try Facebook,’” said Jesse Pujji, CEO of Ampush Media Inc., a San Francisco-based company that helps clients buy ads on the social network. “Now, we’re seeing it’s working, and people are saying, ‘Oh yeah, I want to do more with this.’”