Did you think that Facebook’s amazing mobile ad story — mobile was a big, troublesome zero two years ago, and 62 percent of the company’s ad revenue yesterday — was fueled by app install ads?

Sheryl Sandberg wants you to know that this isn’t the case. Or, at least, that Facebook isn’t dependent on app install ads, which are just what they sound like — ads that try to get phone users to install apps like Candy Crush.

Here, via Seeking Alpha, is what Sandberg said yesterday during Facebook’s earnings call, when an analyst asked about the size of her app install business:

“I do think sometimes people think that mobile app install ads are all of the revenue or a great majority of revenue and they’re not. They’re only part of the mobile ads revenue. Our mobile ads revenue is pretty … it’s broad based. We have large brand advertisers, small SMBs, direct response advertisers as well as developers using our mobile ads. The mobile app install ads, which are run not only by developers but also by large companies that want to get people to install apps are growing. They remain a good part of our mobile ads revenue and we’re excited about the opportunities there. But we see our opportunities in mobile ads as much broader than just installing apps.”

See? It’s big. But not that big.

But note that the only qualifier Sandberg offers is that app ads don’t represent all or the “great majority” of Facebook’s revenue. Which could still mean they are very, very big.

In the past, I’ve heard industry people guesstimate that app ads account for half or more of Facebook’s mobile ad revenue. If that were true, that would mean app ads generated some $800 million for Facebook in the last quarter alone. J.P. Morgan’s Doug Anmuth thinks they now represent 20 percent to 25 percent of mobile revenue — something in the $400 million range. Even that makes them a billion dollar-plus business on an annual basis.

Whatever the number is, it’s big, and the envy of everyone in the ad world. That’s why Twitter, Google and Yahoo are all trying to catch up. So why wouldn’t Sandberg want to boast about it?

Two theories, which aren’t mutually exclusive:

  • Facebook isn’t sure that app ads, which showed up out of nowhere, are going to stick around. Developers are buying app ads because they work. But now that lots of people are using the ads, it’s not nearly as cheap and easy to acquire app users this way. And there’s also something about app ads that triggers flashbacks to AOL in the boom years, and Facebook doesn’t want any part of that.
  • App ads don’t fit Facebook’s larger narrative.. Facebook’s goal is ultimately to take big chunks of money that brand advertisers are spending on TV. There are some brands spending money on app ads. But they’re not the ones driving that business, because people don’t use brands’ apps (besides Starbucks, do you have any big brands’ apps on your phone?). So Candy Crush money is great, but it’s not GM and P&G and Coke money, and that’s what Sandberg really wants.



4 comments
outtanames999
outtanames999

The only salient question to ask here is who else other than app developers are capable of profitably monetizing FB mobile ads to the extent that it is a sustainable growth story for FB? What happens when every ma and pa has "tried" FB ads and gets burned out? Who will be left other than app installers that will want to play on mobile?

ouriel ohayon
ouriel ohayon

Peter, i believe the reason Facebook does not want to brag about it is....Apple....


They don t want to show they have that much impact on the App store discovery when Apple is obsessive about controlling it....

themoosieman
themoosieman

 I think Facebook realize these app install units won't last long.


The first banner ads had CTR's of 30%, THIRTY PERCENT.


Then people realize that the experience is not good.


I've clicked on 40% of the first click to download ads, I installed 20 apps, they were all total junk, I deleted them all. I am not alone.


If an App isn't good enough to spread organically, it's crap. So buy definition I won't ever be downloading an App that wasn't good enough to get talked about.

Sava
Sava

You could have written this story for the previous quarter as well. Doug Anmuth is the only reasonable estimate you cite. If you "CTRL+F" through the past 5 or so earnings call transcripts here is what you would have found:


Q2 2013 - "Mobile app install ads we think are -- they're small but they're important and they're growing rapidly."

Q3 2013 - No color really.

Q4 2013 - "we are excited about our mobile app install ads and our mobile app engagement ads. It's a small but growing category."


Q1 2014 - "On mobile app ads, we've seen really strong adoption, and this is a very nascent, but growing market. I think people sometimes think that a lot of our mobile ad revenue is coming from this one type of ad, and our mobile ad revenue is very broad-based. "


And you of course wrote an article about Q2 2014. So as of two quarters ago, it was a "small category." Not sure they would use language like that on an ad category that is more than 10%+ of mobile ad revenue.


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