News outlets breathlessly reported last week that Twitter was projected to overtake Facebook in mobile ad revenue for 2012. But they were missing the bigger picture.
Twitter is projected to generate $129.7 million in mobile ad revenue this year, well ahead of Facebook’s $72.7 million. What critics and tech journalists missed in hurried analyses were Facebook’s projections that annual mobile ad revenue will grow to $629.4 million in 2013 and 2014. That’s second to Google, which is expected to generate $3.58 billion in mobile revenue in the same period.
Not bad for Facebook, a company that didn’t bring in a dime in mobile ad revenue last year and which has been plagued by questions about its mobile strategy since announcing it would go public in February.
Still, it takes more than revenue to make a profit. Look no further than Pandora, which ranked second in 2012 mobile ad revenue projections, with $226.4 million, but still struggles to turn a profit.
Opening Pandora’s Box
Pandora’s mobile ad revenue is expected to jump 86% this year, from $120 million last year. But that may not be enough to keep the company in the black, says J.T. Hroncich, president of Capitol Media Solutions.
Newcomers to mobile ads will join Pandora in trying to solve three primary puzzles:
- Mobile ad networks generally increase sales volume, but they often cut per-ad margins
- Ad auctions favor buyers. As a result, some sellers are trying to sell directly to advertisers
- Mobile ad rates are still well below those of other kinds of ads because the ads are smaller and demand is lower
“The companies that perform best in mobile advertising are typically companies earning core profits in another industry,” Hroncich said. Google does not have to rely on mobile ad networks, for instance. And Google integrates its products to create a richer mobile experience that advertisers tend to like.
Why The Focus On Twitter Beating Facebook This Year Misses The Point
Facebook will face all these issues as it tries to turn quickly growing mobile revenue into mobile profits. But the company has a distinct advantage, says Peter Friedman, CEO of LiveWorld, a social media management company.
“People really like to connect and engage socially while on the move,” Friedman said. “Eventually Facebook will monetize it, thus dramatically increasing their revenue per user.”
Indeed, Friedman said he would have been surprised if Facebook had been projected to record more mobile revenue than Twitter this year.
“It’s great that Twitter is advancing its mobile revenue this way. But one would expect them to do so, and be further along than Facebook because Twitter’s usage patterns have been more dominated by mobile or at least more focused on mobile for quite a while,” he said. “Facebook has been attending to other knitting and is further along on those aspects. Twitter’s progress in this area more proof this can be done. Both companies have a good future here.”