Facebook is on a roll. Recently released Q4 2014 earnings show full-year revenues of $12.47 billion, a 58% year-over-year increase. Most of this growth is driven by ad revenues, which reached an all-time high of $3.59 billion for Q4 alone, and specifically mobile ad revenues, which represented 69% of total Q4 ad revenues. This is a far cry from the spring of 2012, when the world's biggest social network openly acknowledged it had a mobile ad monetization problem. Shortly thereafter, Zuck and crew did an about face and went all in on mobile. And they've been cashing in ever since.
At first a few and then a lot of businesses followed suit and flocked to Facebook mobile ads. Their investments have enjoyed varying levels of success, where success is often credited only after intended campaign objectives have been realized. From what I've experienced firsthand and read from others, it seems as though companies using Facebook mobile ads for the purposes of high-level branding and engagement (to drive top-of-the-funnel (TOFU) awareness) are seeing the highest ROI, although the picture is a bit more complex than this.
One thing is for certain: a lot of businesses are truly bullish about Facebook mobile ads. This blog is meant to help you decide whether yours should be too.
Facebook Mobile Ads are Hot
Facebook mobile ads are hot, I mean really hot. In each of the past seven quarters, mobile ads accounted for over 90% of Facebook's revenue growth. Driven by 745 million daily mobile users (34% increase year-over-year), mobile ad revenues hit nearly $2.5 billion in Q4 2014 alone.
Photo Credit: Facebook
Indeed eMarketer predicts that by 2017 Facebook will derive 75% of its total revenue, or $13.64 billion, from mobile ads. If these numbers come in anywhere close to the mark, it'll make buying mobile ads on Facebook a much more expensive proposition.
Right now, the majority of Facebook's mobile users (123.1m) come from the US. However, eMarketer believes this will change in coming years, with India overtaking the US by 2018, and countries like Indonesia, Mexico, and Brazil emerging as major centers of Facebook mobile activity.
Overall, it's probably safe to assume that Facebook mobile ad revenue is heading north for the foreseeable future. New findings from Kinetic Social, a Facebook Preferred Marketing Developer, offer anecdotal evidence as to why this is the case.
In an analysis of its clients' Q4 2014 advertising campaigns on Facebook and Twitter, as reported in SocialTimes, mobile accounted for 49% of ad buys. Moreover, CTRs for mobile were nearly 4X those of desktop. Previous studies show Facebook mobile ad CTRs as much as 13X higher.
So Facebook's mobile users are clicking on ads. But are they becoming leads or customers?
Are They Converting?
The answer, in short, would seem to be a resounding "no," or perhaps more accurately, a "not really." This is in accordance with the findings of a report issued last month by Marin Software as reported in Adweek which noted that, while 63% of clicks on Facebook ads came from mobile devices in Q4 2014, only 34% of conversions (i.e. leads or purchases) were generated on smartphones and tablets. In the same period, Marin found that Facebook's desktop ads enjoyed a 1.1 percent conversion rate, while its mobile ads reaped a mere 0.3 percent conversion rate.
The study also revealed how unfavorably Facebook's mobile ad click-to-conversion performance compared with Google search ads, which enjoyed near parity at 39% of paid clicks from mobile devices to 31% of purchases from ads on mobile devices. Moreover, the study found that paid search on Google and other engines achieved a 10.1% conversion rate for desktop ads and a 6.6% conversion rate for smartphones and tablets - much higher than Facebook's respective 1.1% and 0.3% conversion rates.
Long live search.
So what's the bottom line? What conclusions can we glean from a single blog and an admittedly highly limited data set? At this point, what information we do have suggests that your brand may want to use Facebook mobile ads to generate top-of-mind awareness and branding at the TOFU stage, while investing in paid search advertising to drive MOFU and BOFU lead generation and conversion. This of course is a gross generalization that may not neatly apply to your specific situation: as always, your business objectives and intended target audience(s) should be the primary drivers of all marketing initiatives. Moreover, this calculus could change on a dime with any number of new inputs from the consumer or producer (in this case, Facebook) side of the equation; such is the nature of marketing in the digital age. With that said, the data would seem to support the logic of this approach for your business.