Facebook mobile revenue share grows to 23%

I have written before about challenge monetizing mobile traffic. Facebook has been the most interesting company to watch as more than half of Facebook users log on using their phones or tablets. Half a year ago Facebook did not have any mobile revenue.
In the previous quarter mobile revenue was reported $150+ million, 14% of total advertising revenue.
This quarter Facebook has doubled it reporting $300 million (23% share of total revenue).
"Today there is no argument Facebook is a mobile company," said Zuckerberg during earnings call.

With more than half users using mobile devices I would expect mobile revenue to grow exceeding half of overall revenue at some point. Still with the size of the overall mobile advertising market of $4 billion Facebook share is over 10%, which is impressive considering 1/2 year Facebook was on the sideline.

Facebook mobile Sponsored Stories high CTR and low CPC will attract advertisers

Nanigans, Facebook advertising agency, just published an interesting report. The report shows that

• CTRs for mobile Sponsored Stories are on average 12 times higher than CTRs for desktop Sponsored Stories
• CPCs for mobile Sponsored Stories are on average 45% less expensive than desktop Sponsored Stories

the combination of lower cost and higher response will start attracting advertisers, especially when 'average American smartphone subscriber spends nearly 15 minutes a day on Facebook from their mobile devices.'

Intel is getting into the mobile space, focusing on Android

For years WinTell partnership racked up hundreds of billions for both Microsoft and Intel with PC sales. The world has changed. First laptops outsold desktops. Smartphones outsell PCs. Mobile devices are not run on Intel chips any longer. ARM is the leader in that category. Microsoft announced that next version of Windows 8, which will run on tablet devices, can be run on ARM based system as well on Intel.

Intel chips can perform well better than competition, but people do not buy just chips. Intel has been trying to enter mobile space looking for a partner with ability to scale. Nokia has ability to scale but its Meego operating system is dead. Instead Intel now is working with Samsung to make Bada run on its chips. Samsung can scale world-wide but unfortunately its Bada OS is lackluster having only 2% global market share.

Now I am reading articles that Intel is working with Google and Motorola (which is the same company now) to have Ice CreamSandwich run on Intel chips.

Web search goes mobile

Adoption of smartphones is growing. Smartphones enable users to run apps on the devices and also browse the internet. Internet search is used more and more often and is eclipsing search from PCs.

Bernstein research reported that in year 2015 amount of search queries submitted from mobile devices will be approximately the same, surpassing next year by 3%. Google reported that today 2/3 of the queries come from the iPhone. Another article confirms that even though Android dominates phone sales web browsing happens on the iPhone. This is a risky dependency for Google who’s mobile revenues reached $2.5 billion last year and on track to surpass $4 billion this year. The risk is that Apple may switch the iOS mobile operating system to default alternative search engine cutting Google’s mobile search revenues.

Facebook “featured stories” to monetize mobile traffic before IPO

In the SEC filings Facebook warned on the absence of monetization of the mobile traffic today. We did not wait for too long to read about “featured stories” - articles in the news feed as a way to make money in the mobile frontier.

BusinessInsider article said: Facebook Wants Mobile Ads To Go Live Before Stock Starts Trading
I am looking forward to better understand details and comment as they become available.

Facebook IPO: Mobile is a major risk to Facebook financial sustainability

Facebook has around 850 million users. About half of the users access Facebook from mobile devices where Facebook does not show display ads. Today 85% of Facebook revenue from display advertising on a desktop browser and mobile traffic is not monetized.

That is a growing problem considering the portion of mobile traffic continues to increase. In its SEC filing Facebook outlined the following mobile related risk factors:

·         Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results

·         Facebook user growth and engagement on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that we do not control;

·         Increased user access to and engagement with Facebook through our mobile products, where we do not currently directly generate meaningful revenue, particularly to the extent that mobile engagement is substituted for engagement with Facebook on personal computers where we monetize usage by displaying ads and other commercial content

As the filing said: We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. Accordingly, if users continue to increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, our revenue and financial results may be negatively affected.

MMO also expressed the same concern and made case about monetizing search. One thing at a time.

One-trick pony no more: mobile revenue becomes major contributor for Google

Google Android mobile OS is free to license for any OEM who makes phones or tablet computers. Google's business model is to monetize its mobile operating system through advertising:

• Android Market takes percentage of paid apps sales
• AdMob - advertising platform - provides ads for mobile apps and mobile websites
• In addition, AdSense is is optimized for mobile websites
• Google web search advertising is mobile optimized

Google mobile business has reached $1 billion in 2010 and reached $2.5 in 2011. Piper Jaffray estimates the revenue to exceed $4 billion in 2012. I think the trend of 150% anual revenue growth is most likely to continue in year 2012 considering competition is catching up.
Post 2012 Android ecosystem will start expriening growth problems due to

• Increased competition (barriers of entries and swtitching costs are very low)
• Android ecosystem internal problems

Mobile Apps vs. Mobile Web

There is a certain move towards HTML5 from the developer community. Benefits of uniform standard across the mobile platforms are obvious. Adobe is abandoning Flash Mobile. Silverlight’s future is in question as well. However, it will be up to the users to choose if they want to use the native apps or web apps. Flurry analytics published data on consumption of web vs. mobile apps. Starting June 2011 users prefer native apps based on the minutes spent.  

	Web (minutes per day)	Apps (minutes per day)
June 2011	74	81
Dec 2011	72	94

Users prefer apps to the web. I do not see how mobile platform owners: Google, Apple, Microsoft incentivized to move away from the apps towards web apps. Current business model where those companies take a cut from sold apps is too big to abandon.

Microsoft gets $5 for every HTC Android phone

This is interesting. Google makes no revenue from Android operating system sales, but Microsoft does (Android OS is free for any OEM). ZDnet article reports "Microsoft is getting that money thanks to a patent settlement with HTC over intellectual property infringement". The downside of a late entrant into a crowded market, such as Google Android into mobile space, is that many essential intellectual property rights are taken by earlier entrants.
Because Google needs to catch up with competition the company is trying to buy Nortel patents for almost $1 billion and has paid $4.9 million to acquire the patents of defunct Israeli phone maker Modu.

RIM's demise

This quarterly report is the beginning of the end for the Research in Motion, which is in motion to exit the mobile business by the year 2015. Year 2010 has ended two platforms future: Symbian and webOS. The RIM leadership will deny the company is on the rim of sliding, but the facts picture a telling story: sliding world wide market share, declining sales, low interest in new products (Playbook), stagnant apps count, deep vertical integration tying business units together in the tight grip.

this FT.com article describes the state of RIM well.

My prediction is that Microsoft will be taking over RIM market share because of the primary BlackBerry target segment is enterprise customer, segment where Microsoft is the most comfortable and has track record or success, when iPhone and Android are more consumer products.