Facebook Could See Giant Mobile Ad Revenues


By Ryan Kim, GigaOM

Facebook, which is still puttingtogether its mobile advertising strategy, could generate $1.2billion in its first year in six markets alone. That's accordingto MobileSquared, a U.K.-based mobile research firm, whichbelieves Facebook could become one of the two biggest companies inmobile advertising next to Google ( GOOG).

With the U.S. and the five biggest markets in Europe -- the U.K.,Germany, France, Italy, Spain -- comprising about 183.5million mobile users, Facebook could bring in more than $1.2billion and an average revenue per mobile user of around $6.50 ayear, said MobileSquared.

Estimating an average usage of 12 hours per user per month andthe assumption that Facebook will serve an ad every 20 seconds viaits mobile sites or apps with a CPM model of 25 cents,MobileSquared believes Facebook could generate $653.7 million inrevenues in the U.S. over a 12-month period. The U.K. could add $166.6million in year one along witha$100 million from France, Germany,and Italy, and around $70 million in Spain.

Facebook's entry into mobile advertising could make itthe second biggest player in mobile advertising behind Google,which is expected to make $2 billion from mobile advertising in2012, said MobileSquared. But the research firm said Facebook needsto tread carefully because most of its users don't want to becontacted by brands through Facebook. Facebook could see reducedclick-through rates and banner blindness from users over time.

The pressure is on for Facebook to shore up its revenue strategyfor mobile as it preparesto go public. It said in its S-1 that it has no real revenuefrom its mobile apps and site. But Facebook is reportedlypreparing to run sponsored posts and featured stories in thenews feeds from advertisers. It has also signeda deal with Bango, which will offer payment services toFacebook.

Facebook needs to show investors that it has a way to monetizeits vast and growing mobile users. But mobile advertising will haveto be carefully implemented because ads haven't been part ofthe mobile experience so far. And it's unclear how muchconsumers will accept sponsored stories woven into their mobileFacebook experience. Mobile ads are inevitable but Facebook willneed to find the right balance for its ads to achieve $1.2 billionin year one.

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