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Facebook's mobile headache

Kathryn McConnachie
By Kathryn McConnachie, Digital Media Editor at ITWeb.
Johannesburg, 02 Aug 2012

Over 102 million people are accessing Facebook from their mobile phones only. This is according to statistics included in Facebook's most recent filing with the Securities and Exchange Commission.

The high number of mobile-only users highlights the importance of Facebook's efforts to find ways to better monetise its mobile platform. The mobile-only user numbers have increased by 23% since March.

While Facebook does not provide a demographic breakdown of its mobile-only users, it has been noted that social networking is growing rapidly in mobile-first areas such as South East Asia and Africa. The 'Facebook for Every Phone' app released last year, has also led to an increase in users with feature phones in emerging markets accessing the social network. In developed markets though, it is noted that the shift to smartphones is also driving a decline in desktop users.

According to the filing, 18.7% of Facebook's 543 million monthly mobile users did not even touch the desktop site. According to the social network, sequential quarterly growth of daily active users (DAUs) from 526 million to 552 million is almost solely driven by mobile.

“Overall growth in DAUs was driven largely by increased mobile usage of Facebook. Relative to 31 March 2012, DAUs increased from 526 million to 552 million, due to an increase in mobile users. During the second quarter of 2012, the number of DAUs using personal computers was essentially flat, and declined modestly in certain key markets such as the United States and Europe, while mobile DAUs continued to increase.”

Facebook also says the increase in number of ads on the platform is lower than the rate of increase in users - primarily due to the increase in user engagement on mobile devices, where fewer ads are shown.

While Facebook has introduced sponsored stories to its mobile platform, the social network has been cautious about negatively impacting the user experience, so has kept the number of sponsored mobile stories to a minimum.

“In the US, where smartphone use continues to grow, the overall number of ads delivered decreased 2% year-over-year despite a 10% increase in DAUs and despite an increase in ads per page resulting from product changes, as DAUs on personal computers in the United States declined,” says Facebook.

“We expect that the trend of ads not growing at the same pace as user growth will continue as Web usage grows more slowly than mobile usage and declines in certain markets where smartphone adoption is occurring most rapidly.”

Payments problem

Apart from its targeted ad business, another area negatively impacted by the shift to mobile is Facebook's payments business. The social network's revenue from payments increased by only 3.6% quarter-over-quarter, rising from $186 million in Q1 2012 to $192 million in Q2 2012.

Facebook says: “Payments revenue has been relatively flat over the last three sequential quarters, we believe due primarily to the fact that gaming in general has been growing faster on mobile devices where our payments system is generally not utilised.”

Facebook CFO David Ebersman said during the earnings call that the poor growth in revenue is attributed to the shift towards mobile gaming and platforms that Facebook is yet to be able to monetise. A key issue for Facebook has been the discoverability of applications on the platform - especially via mobile.

This is an issue Facebook hopes to address with the global release of its new App Centre - a concerted effort by the social network to diversify its revenue stream. The App Centre introduces the concept of paid-for apps for the first time on Facebook, with the company getting a 30% cut of app sale revenue (the same cut it receives from in-app purchases). The App Centre went live globally yesterday.

Facebook CEO Mark Zuckerberg has indicated that mobile is a key focus area for the company looking forward: “Mobile is a huge opportunity for Facebook. On average, mobile users are around 20% more likely to use Facebook on any given day. So mobile not only gives us the potential to connect more people with our services, but it also gives us the ability to provide more value and a more deeply engaging experience.”

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