Facebook likely to reject traditional mobile ad types in quest to monetize

With mobile growth outpacing overall monthly active user growth, Facebook knows how critical it will be to monetize its mobile users. But for the company that has long shunned traditional types of advertising, the solution is not as simple as putting banners in its mobile apps.

More than 425 million users accessed Facebook from mobile devices in December 2011 — up 21 percent since September 2011, and 70 percent since March 2011. In its filing for an initial public offering, the company acknowledged business will suffer if it cannot monetize this space. The global mobile advertising market was $1.5 billion in 2010 and is expected to grow to $17.6 billion in 2015, according to the filing.

Here we break down the social network’s options for mobile advertising.

Sponsored Stories – Most Likely
Sponsored Stories promote users’ interactions with pages, whether it’s liking a page, liking a particular post, checking into a place or using an app. This is the most probable way Facebook will bring advertising to the mobile experience, and the company even mentioned it in its filing for an initial public offering. Because Sponsored Stories require a person’s friend to validate a piece of content by interacting with it in some way before it is shown as an ad, Facebook is not giving companies a direct ticket into the News Feed. The social network has already added Sponsored Stories to Ticker and is in the early stages of testing them in News Feed. The lack of negative feedback from users could lead Facebook to bring Sponsored Stories to mobile without backlash sometime this year. We detailed what mobile Sponsored Stories might mean for advertisers here.

Mobile Ad Network – Likely
Facebook could eventually develop something similar to Google AdSense and AdMob, which allows websites and mobile apps to display ads that are targeted based on information Google has collected. This would be the most ambitious approach both technically and in terms of how it could expand Facebook’s business. This could be years away, but seems like an obvious direction for the company to achieve its full revenue potential.

Page Post Ads – Less Likely
Currently page owners can use Marketplace to promote their posts as an ad unit on the right hand side of the site. Facebook could introduce sponsored page posts into the mobile News Feed, but it might not want to allow companies to pay their way directly into people’s streams. Twitter does this, however, and it does not seem to have a significant negative effect.

Check-in Deals – Possible But Not Likely
Since being released in November 2010, check-in deals have been a free, self-serve option for businesses to offer deals to customers who indicate to their friends that they visited a place. While it is possible for Facebook to charge to feature deals, it is unlikely the company would implement a fee for something that was formerly free. Check-in deals have not been a runaway success, so it would be difficult to convince businesses to pay for something they didn’t take advantage of at no cost.

Location-Based Push Advertising – Unlikely 
Advertisers would be more interested in a location-based solution that pushed messages out to users, particularly since Facebook’s demographic and interest data would provide a new layer of targeting beyond location. Location-based push advertising is typically opt-in, and it would be very controversial for Facebook not to do the same. Perhaps by liking a page and opting in to location-based push notifications, users could receive messages and deals on their phones based on where they were. Users, however, might be wary of letting Facebook track their location at all times.

Mobile Banner Ads – Very Unlikely
Facebook has never given ads much real estate on the site. Even now with up to seven ads on the right hand side of the page, sponsored content gets a small percentage of screen space. We do not envision Facebook giving up room to banner-style ads in its mobile experience. If the company did, these ads would likely have a strict format with text and perhaps a small thumbnail, as Facebook requires for its online display ads.

Interstitial Ads – Very Unlikely
Interstitial ads pop up between actions and typically require users to wait a certain amount of time before moving onto what they had been doing within an app. While popular in many free apps, it would be highly out of character for Facebook to compromise user experience in this way. This is by far the most unlikely, if not unimaginable, option for Facebook to employ.