Facebook Could See Giant Mobile Ad Revenues

By Ryan Kim, GigaOM

Facebook, which is still putting together its mobile advertising strategy, could generate $1.2 billion in its first year in six markets alone. That's according to MobileSquared, a U.K.-based mobile research firm, which believes Facebook could become one of the two biggest companies in mobile 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 183.5 million mobile users, Facebook could bring in more than $1.2 billion and an average revenue per mobile user of around $6.50 a year, said MobileSquared.

Estimating an average usage of 12 hours per user per month and the assumption that Facebook will serve an ad every 20 seconds via its mobile sites or apps with a CPM model of 25 cents, MobileSquared believes Facebook could generate $653.7 million in revenues in the U.S. over a 12-month period. The U.K. could add $166.6 million 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 it the second biggest player in mobile advertising behind Google, which is expected to make $2 billion from mobile advertising in 2012, said MobileSquared. But the research firm said Facebook needs to tread carefully because most of its users don't want to be contacted by brands through Facebook. Facebook could see reduced click-through rates and banner blindness from users over time.

The pressure is on for Facebook to shore up its revenue strategy for mobile as it prepares to go public. It said in its S-1 that it has no real revenue from its mobile apps and site. But Facebook is reportedly preparing to run sponsored posts and featured stories in the news feeds from advertisers. It has also signed a deal with Bango, which will offer payment services to Facebook.

Facebook needs to show investors that it has a way to monetize its vast and growing mobile users. But mobile advertising will have to be carefully implemented because ads haven't been part of the mobile experience so far. And it's unclear how much consumers will accept sponsored stories woven into their mobile Facebook experience. Mobile ads are inevitable but Facebook will need to find the right balance for its ads to achieve $1.2 billion in year one.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Get access to over 75 technology market experts! Understand market fundamentals with research reports and commentary from seasoned analysts. Try GigaOm Pro FREE today

Copyright 2011 GigaOM. All Rights Reserved.