Very interesting tidbit for the #stats hound in Facebook beats the street and Wall Street yawns: Facebook earnings report for Q2/2014 reveals that their App Install Ads may be driving significant revenue increases. [above chart is from the post]
But lest you think that this is a Facebook issue alone, it is really much bigger than that:
1) The rise of App Install Ads (AIAs), which for some reason according to Re/Code’s Peter Kafka “…In [the] FB [earnings] call, [Facebook’s] Sandberg tries to downplay importance of app install ads to mobile biz. Not a ‘great majority’ of $.”
… appears to prove my long-held belief that Context is the key to getting ads to work, i.e. offer people something that makes sense in the context of what they are already doing. In that light, offering people mobile apps while they are using a mobile device and likely app, is exactly the right approach.
(Compare what I wrote here a long time ago:
businessmindhacks.com/post/is-advertising-failing-on-the-internet .)
Pair it with the “Impulse Purchase Territory” pricing of between FREE and $4.99 say, and you have something that works, compared to offering them a refrigerator or car in a mobile ad.
(More on the Impulse Purchase Territory pricing concept here:
businessmindhacks.com/post/from-kevin-kellys-the-satisfaction-paradox-on-why-curation-will-be-the-only-thing-youll-still-pay-for where…
“…I’ve said previously that e.g. Sony is making a huge mistake by not going the $1/month route for complete/unlimited streaming music access with their own new offering: Because that would put it in the complete impulse purchase, don’t-need-to-think, will-likely-never-cancel-for-any-reason category.”
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BTW Amazon took another significant step a few days ago in the inevitable march to near $0 book content with its $10/month all-you-can-read Kindle eBook subscription service: nytimes.com/2014/07/19/business/media/amazon-introduces-kindle-subscription-service.html Yes, there are still the “Big 5” publishing houses as holdouts, because they wrongly believe that they have pricing power left… .)
2) The relative ARPUs shown below are particularly interesting to me from the perspective of Web or mobile service monetization strategies. As you can see, the world-wide ARPU for Facebook is creeping towards $10 per user per year, with significant — though expected — variation between various regions:
In the U.S. with $6.44 per quarter = near $26 / year, the revenue is more than double a European user, and 6 times that of a user in Asia.
I have been playing with the idea over the past 6+ months of what would happen if Web services attempted to charge their users $1/month in exchange for never having to bother them with ads, or any other form of targeting or data exploitation, except maybe for where that were specifically requested by the user (OPT-IN), in line with +Doc Searls‘ and others #VRM ideas.
For FB, the world-wide and European ARPU numbers still show this as a viable option, but for the U.S. of course one could argue that FB would be leaving too much money on the proverbial table if they went this route (they would have to charge a U.S. user $2/month to break even with their current number).
Then again, a non-public company wouldn’t have short-term shareholder interests to answer to, and could well choose to go the longer-term more sustainable route of forgoing some ad revenue for a happier, more loyal user base.
(Not that it is by any means easy to significantly drive up ad monetization on social media, as Twitter has been finding out for a good while now.)
It least that’s my current view/argument, that once ONE successful Social Media / etc. service offers this #privacy respecting option, that they will either clean up big, or force the competition to follow suit in relatively short order. Yes, we all once thought that G+ could be that option, but it was not to be…
3) Related: This chart shows the rise of FB’s mobile ads going from a mere blip around Q2/2012, to 1.5x or the stagnant desktop ads a mere two years later!
“Where Facebook’s money comes from, via @BIIntelligence”
>> twitter.com/jyarow/status/492048993053319169
Mobile is rising in the near blink of an eye (and not done yet…), and Mobile Apps have emerged as maybe THE way to monetize it beyond device sales and mobile bandwidth. Stands to reason that selling ads WITH this trend instead of against it would work.
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Tangentially related posts on Mobile and Pricing issues:
stratechery.com/2014/microsofts-mobile-muddle/
authorearnings.com/july-2014-author-earnings-report/
