It’s not that the site is losing its grip. Facebook has the most popular app in the United States — alone, it accounts for 23 percent of all U.S. app use. But that distinction is a mixed blessing.
Mobile advertising does not make as much money as ads that appear on laptops and desktops, and it’s much harder to catch a user’s eye on a smaller screen. Just 14 percent of Facebook’s revenue came from mobile products last quarter. That number must jump, a lot, to meet analyst expectations in its fourth-quarter earnings report Wednesday.
So while it’s good news for Facebook that its users are numerous, always plugged-in and engaged, it also underscores a pressing challenge for the company.
Facebook hasn’t shied away from that obstacle. Chief executive Mark Zuckerberg has said that people underestimate how much the company can benefit from the shift to smartphones, and has been dogged about creating mobile advertising products.
That focus has paid off. The social network is projected to edge Google out for the top spot in mobile display advertising in 2012, despite having no mobile display products in 2011, according to the advertising analysis firm eMarketer.
In a December report, eMarketer said Facebook had managed to essentially “redistribute revenue from mobile to desktop through its native display products” to pick up 18.4 percent of the mobile display market — an estimated $339 million for the year.
The company has run tests of several other advertising products, including those that tap its user base for money rather than its advertisers. Ideas such as promoted posts, which prompt users to pay to give their updates greater in-network visibility, and Facebook Gifts, which lets them buy goods straight from the site, have both come out of Facebook’s labs this year as new ways to make money. The company has also introduced a series of new stand-alone apps, such as Poke, Facebook Camera and improved versions of Facebook Messenger, to varying degrees of success. But each plant the company’s flag in the ground as a source for all manner of multimedia — voice, video, photo and text — messaging.
And the site has been evolving as well. Earlier this month, Facebook also introduced it’s so-called “third pillar,” Graph Search, which it hopes will become as central as user profiles and the site’s running news feed. The feature, which lets users sift through any information that Facebook’s billion users have shared with them, is still in its testing mode. It’s not even on the company’s all-important mobile site yet. But it has a lot of potential for disrupting the search market, particularly recommendation engines such as Yelp, because Facebook is in the unique position to tap its enormous bank of social data. In other words, Facebook’s banking on the fact that you trust your friends more than you trust anonymous strangers.
There are a lot of things Facebook has to work through before it gets to that point, however, including delivering Graph Search to all of its users. So while analysts will be eyeing the results for hints of early impact of all of its initiatives, it’s too soon to expect them all to deliver. What will be interesting to see is if Facebook offers any clues about which products it thinks are worth the company’s future investment.
Analyst consensus puts Facebook’s revenue at $1.5 billion for the quarter. On Wednesday, Facebook was trading over $31 per share shortly after the market’s open, up around 2 percent from the previous day’s close.
(The Washington Post Co.’s chairman and chief executive, Donald E. Graham, is a member of Facebook’s board of directors.)