Facebook, Google, and Yahoo Will Succeed with Mobile
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As a growing number of consumers switch from desktop Internet usage to mobile internet usage, a barrage of tech firms have to re-tool strategies that have worked for years.
Facebook (NASDAQ: FB), for example, led Google (NASDAQ: GOOG) and Yahoo (NASDAQ: YHOO) in sales of display ads, ads that include graphics, interaction, and video. However, Google is expected to take the lead.
Facebook is struggling to find its advertising identity in the age of mobile – but it is not alone. As tech firms face increased mobile phone usage, they must confront smaller screen sizes that hold less space for advertising.
The Search for Distribution
Of the three tech giants, Google is positioned best. Approximately 50% of all advertising dollars are poured into search ads, where Google holds a tight 95% grip on the market. Google’s strength is one reason that it is expected to be the top generator this year in all three areas of ads – web search, mobile ads, and display ads – and Google’s rollout of YouTube ads has been a boon for its display ad presence.
However, Google’s web search business will come under attack as consumers conduct an increased number of searches from their phones. However, Yahoo and Facebook have more to worry about than Google.
Google’s devices, such as Android phones and its Nexus 7 tablet, come equipped with Google’s apps that boost consumer usage. Yahoo cannot say the same.
According to The Wall Street Journal, Yahoo’s most heavily downloaded app for Apple’s iPhones and iPads is Fantasy Football – and it ranks a paltry #192 on the list of top downloads. For Android devices, Yahoo’s mail app sits at #38, still far down the list.
Yahoo has a major distribution problem.
To gain users – which will correlate to increased advertising revenues – Yahoo must find ways to put top apps in app stores. Moreover, it must find more innovative ways for advertisers to target users.
For example, Yahoo could find new ways for advertisers to run ads. Comcast (NASDAQ: CMCSA), for example, has an especially innovative method. Comcast ads direct users to a phone number that calls Comcast directly. Comcast says that its click-through rates for mobile ads are four times higher than for PC ads, which has led to mobile users comprising 10% of online sales. One way to bring in dollars is for Yahoo sales reps to help create innovative new mobile ads for existing clients that deliver more value.
Like Yahoo, Facebook needs to update its mobile ad method. Facebook ads on the desktop comprise the right side of the screen – but mobile screens are too small to allow for so many ads.
One solution is for Facebook to steal a page out of Pandora’s (NYSE: P) playbook. Pandora runs full-screen ads with voiceovers between certain songs. Personally, I find the Pandora ads to be non-intrusive and infrequent enough to not be a bother. Also, the Pandora ads are relevant. As users scroll through pictures, for example, Facebook could operate an ad similar to that of Pandora.
Also, Facebook could use short video ads like those on YouTube. Quick video ads – especially for movies – could work. However, users with smaller data plans could rack up unwanted data usage and could abandon Facebook mobile altogether.
For Google, Yahoo, and Facebook, their bread-and-butter strategies are in need of refreshing. Google is best positioned to handle the jump to mobile – its Android phones, Nexus 7 tablet, and flurry of great apps have users constantly using the service.
To succeed in the face of the impending Mobile Cliff, Yahoo must find ways to get mobile users to use its flagship products: Yahoo Mail, Yahoo’s Search engine (run by Bing), and stocks, weather, and sports. As it generates additional users, the company will have to work with advertisers to creatively target those consumers.
Finally, Facebook needs to find a way to place ads in front of its users. One way is to copy Pandora’s ad strategy. Another way is to add video, and yet another is to cut out pictures and run thin, word-only ads at the top or bottom of the screen.
In short, these firms will find ways to succeed. Regardless of the solution, tech firms encounter a changing business environment – and firms’ abilities to innovate will determine their level of future success.
ChrisMarasco has no positions in the stocks mentioned above. 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, Google, and Yahoo!. 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.