Facebook and Google: Monetizing Mobile
Andrew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
While it's true that no company has mastered the mobile ad game yet, it's absurd to think it won't be mastered.
It's equally absurd to think that "mobile ads" will be a "winner take all" type industry.
Google (NASDAQ: GOOG) and Facebook (NASDAQ: FB) have both seen their share prices take a major hit over the past couple months in large part because of the migration to mobile and the failure to deliver solid mobile ad figures.
I really can't understand the pessimism going forward though. The continued migration to mobile is more or less inevitable. Both companies know this and are no doubt working on figuring out what to do.
Here is the problem in a very basic nutshell: The physical size of mobile devices are very small when compared with laptops and desktops. Both Google and Facebook's ad platforms are currently designed for the desktop.
Google's small sponsored ads that accompany the desktop work great when displayed on a screen the size of a typical laptop or desktop computer, but they are WAY too small to be read by people browsing the web with a smart phone. Facebook has an almost identical problem in the sense of sizing.
I'm extremely confident that this problem will be solved and both stocks will go up a lot when that happens.
I believe this problem will get solved quickly because of the quick and constant migration to portable devices, and because of the fact that many companies are working on solving essentially the same problem at the same time.
When one company innovates first in this space, it won't be long before competitors have strikingly similar ad ideas.
Think about how many companies have services similar to Skype. Think about all the different tablets out there since the ipad. Think about all the different smart phones on the market. It's not hard to see that these companies all get their inspirations from each other. It's true that being ahead of the curve with mobile ad innovation will be advantageous for any company. I just don't believe it's nearly a "winner take all" type market.
One reason is the company that innovates first in the mobile ad space gets much less of an advantage when compared to the company that innovates first in designing a new social media platform for example. People use Facebook for a lot of reasons, but the fact that everyone else uses it is perhaps the biggest one. This isn't the case with ad networks, at least not nearly to the same extent. Another reason is that Google and Facebook are inherently different and collect different information from their users. Certain types of ads will be more fit for Google's platform and certain types of ads will be better suited to Facebook. Advertisers will likely use both companies to varying degrees.
Here is an interesting article from the New York Times about some mobile advertising possibilities we can all expect to see a lot more of. These all seem very plausible and I believe we can expect to see more of this sort of thing within the next few quarters.
It will be a challenge and a lot of things need to be re-thought, but this isn't like splitting the atom.
Expect to see a lot of location based mobile ads in the near future. It's worth a lot more to a restaurant to advertise on a mobile device to someone when that person is within 40 feet from the restaurant as opposed to when they are surfing the net from home. It's the same thing with hotels and other service industries where the customer needs to physically be at some specific location in order for a sale to happen.
Facebook and Google will help each other innovate faster in the mobile ad space. There will still be a lot of competition over major ad clients, but I think the companies are different enough where they'll figure out a way to co-exist and both rake in huge profits.
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Fool blogger Andrew Best owns shares in Google but not in Facebook. The Motley Fool owns shares of Facebook and Google and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.