Among the many compelling sections of Facebook’s landmark S-1 filing last week—which included Zuck’s “The Hacker Way” founder’s letter, its $1 billion in profits last year and of course, the money spent on private jets—one area really stood out among the numbers and hyperbole. The risk, and of course on the flip side, massive opportunity, that mobile represents to the future of Facebook.
In an admission that surprised many, Facebook revealed that while its monthly usage figures on mobile were of course jaw-droppingly huge, the company still hadn’t figured out a way to make real money from those mobile users. As the S-1 states: “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.”
Recent reports now state that Facebook is readying its first foray into mobile ads, with the launch of “sponsored stories” – a well-timed move if so, knowing that its mobile vulnerabilities would be revealed in the S-1.
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So, now that Facebook is finally ready to commit to mobile revenues, how can it reap the rewards of having such a huge mobile user base (a stunning achievement of 425 million monthly active users)? What are the secrets behind encouraging high grossing user behavior across the mobile platform?
In my role as VP of Mobile at Badoo, I’ve experienced first hand the challenges and the rewards of scaling mobile users and revenues on a global scale. Here are some of the lessons I’ve learned:
Mobile ads aren’t Always the easy answer
To allow ads or not to allow ads – that’s the philosophical question that founders like Zuckerberg have long wrestled with. Facebook famously delayed advertising on its primary site until it had a critical mass of users that were already hooked into the experience, had willingly given up mounds of personal data, and who wouldn’t desert the addictive platform if ads came along.
So when it came to mobile, they took the same approach. “Users first, revenues later.” Of course, in the case of Facebook’s mobile strategy, it turned out to be revenues “much later.” But, many companies struggle to even get scale in terms of mobile users, and Facebook has managed that better than anyone – nearly half a billion monthly users.
And while we’re on the topic of mobile ads, let’s be clear, turning on an integrated ad platform is no simple task. And while the mobile advertising market is now projected to grow to $17.6 billion by 2015, for a long time, it’s been the runt of the litter in terms of overall digital ad revenues. So while Facebook has been slow on the uptake, it’s hard to fault them for prioritizing other revenue streams that speak to its Internet roots, while quietly building an unparalleled mobile user base.
The challenge for Facebook now is to “turn on” mobile ads effectively, without sacrificing users. At Badoo, we chose not to go the ad route and embraced a freemium model that enhanced the user experience and paid dividends across both web and mobile platforms.
Make the right decisions on what to mobilize
The features that have attracted millions of users and developers to the Facebook Web platform are not just the widely emulated social functions, but the FB “app” platform, messaging and credits, to name but a few. What differentiates mobile at this stage, compared to say, the Web four years ago, is that so much of what makes Facebook special on the Web has already been executed brilliantly on mobile.
Messaging? You’ve got that out of the box on mobile, or you can download apps that will talk to any one or all messaging platforms. Apps? As a mobile developer, I have loads to choose from and they are really rich. I can even get them to talk to Facebook and get access to the social gold mine they’ve built. Credits? Yes. (Although paying for anything on mobile globally is still a challenge.)
And in the latter case, the value chain is very long, from banks and card processors, through mobile carriers, aggregators, specialist payment providers and even Google, Amazon, Apple, etc. – none of whom will want to hand over this key part of their business to Facebook (although some might be too dumb to prevent it).
So Facebook’s challenge has a meta-layer – not how to “port” FB to mobile, but what to mobilize, and how to pull users from apps they might already be using. How they can offer people more than they’re already getting?
Build high grossing user behavior into the DNA of your mobile app
When it comes to mobile apps, analysts predict that in-app purchases and a freemium approach will become the dominant apps business model in the future, and that paid apps will decline as a main source of revenue.
So when considering how to make a freemium model work for your mobile app, you should think about the following:
- Are you making your users do the work? If you’re asking users to make purchases from within a free app, you need to make sure that purchase is a no-brainer and that it leads to some tangible and instant gratification.
- Is there a logical flow to the user experience, where purchases make sense? In Badoo’s case, we offer “Super Powers” which are micro-payments that help you stand out in an online crowd. If you want to meet new people using our app, Super Powers will help, so even though the core of our product is always free, there is real value from upgrading your account.
- Are you thinking beyond games? While Zynga regularly tops the chart of high grossing free apps, there is life beyond social games. So think about how to make your monetized features fun and engaging in different ways. And always link it back to the core user experience, and how an in-app purchase could deepen your relationship with your user.
- Location-based behavior can help encourage higher grossing user behavior, but remember users buy into products and services – not technologies. Your location-based services need to add to your product, rarely are they a product in themselves.
Think global, but respect local
There are many challenges inherent in scaling a mobile strategy globally. There is clearly huge diversity in terms of mobile user behavior, platforms and devices, as you look region by region, country by country and even sometimes city by city.
So, how can you build something that represents your global brand, but is local enough to appeal to every user and therefore unlock a high percentage of revenue-generating behavior?
It’s a lot of work. At Badoo, we’ve spent the last 18 months designing and deploying to acquire millions of users in 180+ countries onto our multiple mobile platforms including iOS, Android, Blackberry and WAP (for non-smartphones). And when you think about the hugely complex billing and carrier aspects of a global mobile deployment, which need to be carried out without a whiff of disruption to the user experience, it’s easy to see why mobile engineers are in such high demand. It’s a huge job, it isn’t easy and it takes time.
We built location-based behavior into the core of our product, guaranteeing local relevancy to every user, wherever they were in the world. But getting them there, keeping them there, and encouraging them to make purchases, was and still is, a mammoth undertaking.
There’s currently no good substitute for the hard work of identifying local partners for things like payment integration. In our case, our London location and hugely diverse team from over 25 countries gives us a great head start in building out our local services globally.
Interestingly, when it comes to our mobile revenues, we’ve found that our mobile web users are almost as likely to pay for additional features as our app users. This insight provides some useful cues for companies looking to build a mobile audience that goes beyond “early adopters” in highly developed countries and into the global mainstream.
While apps are clearly hugely successful, and we’ve talked about the potential for in-app monetization, there’s still plenty of room for the mobile web, particularly when building a global product. Don’t neglect core mobile web users at the expense of iPhone and Android users if you want to build a truly global path to mobile monetization.
Facebook has consistently innovated and executed at a rate that has left most of us breathless over the last few years. While its mobile revenue strategy might have taken a back seat until now, the revelations in the S-1 have surely lit the fire. The path to mobile monetization still has many turns ahead, so it will be interesting to see how Facebook explores the global mobile opportunity.
Facebook on Android phone photo: Johan Larsson/Flickr
VentureBeat is holding its second annual Mobile Summit this April 2-3 in Sausalito, Calif. The invitation-only event will debate the five key business and technology challenges facing the mobile industry today, and participants — 180 mobile executives, investors, and policymakers — will develop concrete, actionable solutions that will shape the future of the mobile industry. You can find out more at our Mobile Summit site.
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