The Cult of Web 2.0 Mobile Monetization

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Nearly 60% of the people in the US don't go an hour without checking their phone.” “Around 54% check their phone while in bed, after waking up and even in the middle of the night.”

These were some of the findings from a study conducted by Lookout security app in the US. These findings show the power of smartphones and all other aspects associated with them. The kind of interface these platforms provide, keeps the users engaged and addicted on the move. As the mobile craze progresses, there are a wealth of options available for the web 2.0 companies wishing to deliver content digitally. I was just going through the 'Social Media Report' released by Nielsen for 2012, which shows the solid relationship between social media and mobile devices. It says there has been a 63% growth (y/y) in time spent on social media on mobile apps and the mobile web. According to this report, users spend more time on social networking than on any other category of sites and it is about 30% of their total time spent in using their mobile devices. Let's see the below mentioned tables for some interesting figures. 

<table> <tbody> <tr> <td> <p><strong>Social Networking Apps</strong></p> </td> <td> <p><strong>Total Minutes Spent on Mobile Apps (~)</strong></p> </td> <td> <p><strong>% change Y/Y</strong></p> </td> </tr> <tr> <td> <p>Facebook</p> </td> <td> <p>27.0B</p> </td> <td> <p>61%</p> </td> </tr> <tr> <td> <p>Twitter</p> </td> <td> <p>3.6B</p> </td> <td> <p>48%</p> </td> </tr> <tr> <td> <p>Foursquare</p> </td> <td> <p>1.9B</p> </td> <td> <p>154%</p> </td> </tr> <tr> <td> <p>Pinterest</p> </td> <td> <p>721.0M</p> </td> <td> <p>6056%</p> </td> </tr> </tbody> </table>


<table> <tbody> <tr> <td> <p><strong>Social Networking Site</strong></p> </td> <td> <p><strong>Unique US Audiences on Mobile Web ('000)</strong></p> </td> <td> <p><strong>% change Y/Y</strong></p> </td> </tr> <tr> <td> <p>Facebook</p> </td> <td> <p>74,274</p> </td> <td> <p>85%</p> </td> </tr> <tr> <td> <p>Twitter</p> </td> <td> <p>42,366</p> </td> <td> <p>140%</p> </td> </tr> <tr> <td> <p>Blogger</p> </td> <td> <p>19,979</p> </td> <td> <p>100%</p> </td> </tr> <tr> <td> <p>Linkedin</p> </td> <td> <p>9,671</p> </td> <td> <p>114%</p> </td> </tr> </tbody> </table>

Source: Nielson Report 2012

The report also presented some highly appealing facts about the consumer’s sentiment towards advertising on social media. It says that nearly one-third of the users complain that they find the ads on social media annoying. This figure depicts the declining user interest in online advertising. It clearly remains a huge challenge in front of the companies to make their advertising on social media more effective along with keeping the consumer sentiment positive.

The biggest question which arises in this situation is, whether the mobile monetization initiatives taken by all Web 2.0 companies will really pay-off? Keeping this in mind, I have picked up three Social media giants and their advancements towards mobile ads.

Let’s talk about Facebook (NASDAQ: FB), which is all set to revamp its position after its IPO didn't get the desired success. Advertising continues to be the most important revenue generator for the company with ~86% of the total revenue coming from it. And mobile advertising was the central theme for the advertising revenue contributing 14%. The new players in the market are certainly catching up the user's attention. However Facebook is in a leading position with its revenue being multiple times that of its next rival which gives it a complete competitive edge. It has been hardly 8-10 months that the company had started its monetization efforts into mobile advertising, but is now keeping the mobile platform at its first priority for the future.

Facebook is focusing on ads which are high in quality and are in tune with the user experience to achieve a successful monetization in mobile. Facebook launched 'Mobile App-Installs' for the apps developers and their marketing partners as an advertising product. This was initially available for all iOS and Android developers that have integrated Facebook in their apps, but now the company has opened up the ads for all developers. The company is not selling apps like the other players Apple and Google, etc; rather it is positioning itself as a guardian for the developers who want to make their apps a hit. In July '12, Facebook sent users to Apple's App Store and Google Play for around 170 million times and is putting more focus on driving traffic to these stores and generating more and more downloads. Now the company is also planning to make money from these app installs and have the developers pay for ads designed. It will ask the developers to pay for every activation these ads generate. In the future, the company is expected to make updates for improving the user experience as well as the performance of these ads such as customizing the ad unit based on the specific audience.

Moving on to Google (NASDAQ: GOOG), the social platform Google+ has failed to grab user's attention. However, the company is ahead of its peers in the online business and enjoys ~48% market share of online ad revenues in the US. Google has most of the search market on mobile which gives it a dominant position with advertisers. The company is expecting to earn ~$8 billion from mobile apps advertising and content in the next year. To achieve this target, Google is expanding its ad services like a 'Click-To-Call Button' by using call extensions. Some of the early results have already shown the positive impact in click through rates and call volumes. The service is currently available in the US and the UK and the company will be launching it in Germany and many other countries in the near future. Google also expanded this service in apps on the Google Display Network. I feel this is a favorable point for the company as the click-to-call strategy on mobile is important for any company to perform its business on a phone. It plays a key role in connecting consumers thereby enhancing the user experience.

Another professional networking site, LinkedIn Corporation (NYSE: LNKD), is also placing lot of its hopes on advertising in their mobile apps. The company has ~25% (up from 13% last year) of unique visitors coming through the mobile platform and to engage more users, LinkedIn launched its app for iPhones and iPads, Android and BlackBerry devices and is continuously making updates to it. The recent update on to this app brings one of the most desired features of editing their profiles via mobile and also merging their LinkedIn connections with their existing contacts and vice-versa. LinkedIn, with a focus on advertising business through mobile, launched a new ads API which will make it easy for the developers to manage their LinkedIn campaigns. With this API, the advertisers can now create customized ads or test different ads on LinkedIn and if they are satisfied they can invest further in the campaigns. This would definitely lead to more growth in the company's future ad revenue.

With the power to 'connect on-the-go,' the mobile users are not only embracing social networking sites, but they are now doing so with increased frequency. The sky-rocketing adoption of Mobile Apps and the flourishing social media has emerged as an important opportunity for these companies to improve their profits. These opportunities will only become better over time with the global mobile advertising market expected to grow from ~$3.3 billion in 2011 to ~$32 billion in 2017. I think this should lead to higher revenues for the companies, strong upside movement in the stock prices and better returns for the investors. 

ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook, Google, and LinkedIn and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook, Google, and LinkedIn. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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