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article imageFacebook earnings and the war for mobile advertising Special

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By Michael Essany     May 1, 2013 in Technology
On Wednesday, as Facebook announced first quarter results after the bell, analysts, executives, developers, and advertisers from across the vast mobile advertising landscape looked for clues about the evolution of their industry in the earnings report.
Mobile advertising spend grew 88 percent in the US last year to $4.5 billion. As a result, Wall Street was looking for a bigger percentage of Facebook's revenue to come from mobile. And that's exactly what it found.
Zuckerberg and company revealed that quarterly revenue from advertising totaled $1.25 billion, which represents a 43 percent spike from a year ago. Mobile advertising revenue, meanwhile, accounted for nearly 30 percent of advertising revenue in the quarter, an improvement from 23 percent in the fourth quarter of 2012.
In April, the most recent data from IDC showed that large mobile publishers like Facebook, Pandora, and Twitter are consistently gaining control over the display advertising market. Combined, they now claim ownership of 52% of this lucrative and rapidly expanding market.
"Everyone is talking about the war between mobile ad networks and social networks," says mobile advertising consultant Ian Hayes. "But the only reason we're having this debate is because today's leading social networks are so huge that it’s falsely alluring to advertisers. All of this access to so many users must translate to a bigger and more effective reach, right? Not necessarily."
According to Hayes, social networks can't just rely on their sizable user communities to succeed in mobile advertising. Saying they lack the "poise, polish, and precision" of today's most effective and innovative ad networks, Hayes believes that social networks have a lot to prove before they deserve to take business away from Millennial Media, Airpush, Tapjoy, and others.
Sephi Shapira, CEO of MassiveImpact, agrees with the assessment that Facebook must harness its vast access to valuable user data for the purpose of making ads more relevant and engaging.
"A key to sustainable future growth in ad revenue will be a utilization of Facebook’s vast amount of user data in ad serving techniques, making ads substantially more relevant to the end user and in turn more profitable for the advertiser,” Shapira says.
"In the last six months," Hayes argues, "ad networks have done a remarkable job of expanding targeting capabilities, creating highly engaging new ad formats, and monetizing mobile in unprecedented ways for developers."
"The other part of this." he adds, "is that we still don't know if the masses are as comfortable with ads on social media as they are in their apps."
With freemium app downloads now at an all-time high, the mobile masses have illustrated their willingness to embrace ads on the small screen in return for free games and content. Given the growing sophistication of in-app ad targeting capabilities, even the most ardent iOS and Android app junkies aren't balking at mobile advertising like they used to.
"On Device Research recently published a study showing 70% of users consider mobile ads on smart phones as a personal invitation rather than an intrusion," says David Kawamoto VP of Sales & Business Development at Airpush, the second largest ad network for Android. "In addition, the study shows that users want these ads to help them explore products they’re interested in and subsequently enable them to make a purchase decision then and there."
Regardless of the evidence pointing to ad networks being superior to social networks for ad targeting, user engagement, and general ad effectiveness, heavyweights like Facebook and Twitter aren't poised to disappear from the mobile advertising industry anytime soon. But the burden of proof clearly rests on their shoulders.
"We are starting to see compelling ROI and analytics data on how ad networks are driving exceptional results for developers and advertisers," Hayes concludes. "With social networks, the results are still rather murky."
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