Facebook's Mobile Challenge Part II: The Apps

Facebook's rapid growth over the last five years has been driven entirely by its success on desktop/notebook PCs, but if the firm is to maintain that growth rate, it needs to duplicate that growth on the mobile side.

Good luck there. Research from marketing agency Greenlight published in April showed 44% of Facebook's users say that they will "never" click on sponsored posts or display ads on Facebook.

General Motors figured that out and, with considerable media hoopla, pulled its ads from Facebook just days before the Facebook IPO, bringing much unwanted attention to Zuckerberg and company when they least needed it.

The Greenlight findings and GM move illustrate the challenge of selling advertising on Facebook, and that's on a 21-inch monitor or 15-inch laptop screen. Imagine the challenge of trying to do that on a 3.5-inch iPhone screen.

"The Web experience does work reasonably well, at least on tablets if not on smartphones. One of Facebook's challenges of advertising in the margins stuff doesn't work so well," said Carl Howe, vice president of research for The Yankee Group.

"Even if [users] get a great experience on mobile, [Facebook] loses some of their ability to monetize it because their traditional advertising model of showing stuff in the margin falls apart on smaller screens. You can't just throw it off on the margin," said Howe.

Poor Mobile Experience

Actually, you can't throw anything on those apps. The Facebook mobile apps for smartphones, quite frankly, stink. The iPhone app is clumsy and inelegant, and the Android version isn't much better, with numerous complaints on Google Play about its quality. Thus far, only Windows Phone integrates the Facebook experience into the operating system, which brings a very good user experience but there is no room anywhere for ads.

Gerry Purdy, principal analyst with Mobile Trax, thinks Facebook wants to keep its users on their PCs. "Facebook doesn't want to take a position of the mobile user because that's not in their interest. They want traffic on their site. Users want the effective experience. Facebook is mostly images and comments about images," he said.

Greg Sterling, founding principal of Sterling Market Intelligence, has an even stronger conspiracy theory. "They have almost no ads in mobile. My own belief is people are also using the mobile apps because they are less cluttered. They may not be elegant experiences but they are less cluttered than the PC version, and whether it's conscious or unconscious, people ignore the ads. They just focus on a specific experience and ignore the clutter," he said.

But there is some hope for a decent user experience on your smartphone. Windows Phone 7.5 fully integrates social media, merging your contacts from LinkedIn, Facebook and regular phone and email contacts. And with the announcement of iOS 6 at the recent Worldwide Developer Conference, Apple is fully integrating Facebook into the next version of its mobile operating system.

Now to Make Some Money

Howe said it's not just Facebook that's failing to monetize the mobile market, many firms are. "They need to find new ways of advertising that are not just an ad in the right or left column. This is not exclusive to Facebook. I believe most mobile advertising is failing at the moment because they are trying to just transfer over things from the desktop," he said.

Purdy believes Facebook is under pressure to improve its crummy smartphone apps and is doing something about it. "They have to know mobile is so much more of a big area or they wouldn't have paid all that money for Instagram. There should be no question about that. They will either fix it and build it right or buy somebody to make it right quicker," he said.

Sterling sees multiple opportunities already. "In light of Yahoo's browser, why doesn't Facebook make one? There's a lot of stuff they can do with Facebook credit, loyalty points in the offline world. Some businesses that give Facebook credits you can use online. If they can develop that further they may have something," he said.

In the end, he expects them to build an adSense-like network. "People are targeted when they sign in. I think they will be compelled to do some of these things. All these sites are using Facebook Connect to sign in. Why wouldn't they leverage that?" said Sterling.