Facebook's mobile advertising efforts could generate quarterly revenues of $300 million within the next year, eventually overtaking desktop ad revenues, according to a research note issued by J.P. Morgan analyst Doug Anmuth.
At present, Facebook derives almost all of its advertising profits from desktop display ads and Sponsored Stories promotions integrated into users' News Feeds; those initiatives yielded first quarter 2012 revenues of $872 million. In the weeks before and after Facebook's May IPO, the social networking giant has accelerated its mobile ad efforts, and last month introduced a mobile-only version of Sponsored Stories enabling marketers to target consumers exclusively on smartphones and tablets.
"We are bullish on Facebook's mobile monetization potential and we believe mobile ad revenue per user could exceed that of existing desktop levels, driving mobile ad revenue of $300M+ per quarter at some point within the next year as higher pricing and visit frequency offset fewer overall impressions," Anmuth writes. "Beyond positive early returns on mobile Sponsored Stories in the News Feed, location-based advertising could also drive greater mobile ad traction."
According to a recent Wall Street Journal report, Facebook next plans to introduce mobile ads that target consumers based on the applications and games they access on their phones. It will track consumers' mobile activities via its Facebook Connect feature, which enables users to log into millions of apps and websites using their Facebook identity. Facebook will then leverage that data to deliver targeted ads into users' mobile News Feeds--for example, if a user regularly plays Zynga'sWords with Friends on their phone, their News Feed will promote other Zynga titles. Facebook will charge marketers every time an app is installed on a user's smartphone.
Although some analysts and privacy activists believe Facebook is playing with fire, Anmuth is more optimistic. "Advertisers will be able to display ads for other mobile apps that users may be interested in based on their current mobile app usage, in contrast to Sponsored Stories that enable advertisers to amplify user preferences and activities. Facebook could potentially charge advertisers every time an app is installed on a user's mobile phone, and the [effective cost per thousand impressions] could be well ahead of existing advertising."
Facebook boasts more than 901 million users worldwide, up 33 percent from 680 million a year ago. More than 488 million users access the site via mobile device each month.
