Things are going pretty well for Facebook right now. Recently released Q2 earnings blew away estimates and Facebook stock soared to record highs. But despite all the sunshine and rainbows pundits will still point to the fact that user growth and usage of their core product will at some point inevitably decline and stagnate. To an extent they’re right, and Facebook knows that like predecessors Google and Amazon they must expand beyond their core product offering to solidify their business for the long haul.
Establishing Off-Platform Revenue
The next big opportunity for Facebook is likely to be the Facebook Audience Network (FAN). Officially launched at f8, the Audience Network helps developers leverage Facebook’s targeting & measurement to serve ads within their apps. Facebook’s recent success in mobile has been well documented, and their mobile app install ads are the primary driver behind this. If developers can leverage Facebook’s most successful ad units in their own apps, they can charge higher CPM’s and ultimately make more money.
The largest value-add to developers for choosing FAN over other ad networks is the ability to leverage Facebook’s extensive targeting capabilities. The amount of detailed information Facebook has about its user base expands beyond what any other ad network can provide. If this translates to results for advertisers, again developers can increase the CPM’s they charge. Provided this CPM increase outweighs the cost of Facebook taking a cut of ad revenue, developers should choose FAN over competing networks. The developer makes more, Facebook gets their piece, advertisers get another medium to access relevant users; everybody wins.
Making The (App) World More Connected
Another big announcement at f8 was the release of App Links, an open source, cross-platform solution for app-to-app linking. These links can drive users to specific areas within apps instead of a browser window. Initially this could yield large advertising returns on-platform for Facebook through their Mobile Re-Engagement ads. Mobile web browsers are notorious for tracking & attribution issues due to cookie restraints (which vary browser-to-browser), so driving users to specific pages in apps both creates a better user experience and allows Facebook advertisers to more easily track results.
Can Apps Replace Mobile Browsing?
It’s relatively obvious that more developers adopting App Links improve the potential for Re-Engagement ads. The second (and potentially much more lucrative) opportunity for Facebook arises when more apps leverage deep linking to not just connect with Facebook but all other apps. An example would be a user clicking on an Rdio playlist in Messenger, and going directly to that playlist in the Rdio app (as opposed to on web and getting asked to log back in).
As more developers adopt deep linking and apps become more connected, the amount of traffic within mobile apps increase and the amount on mobile browsers decrease. Although it will admittedly take a significant number of apps adopting this to reach any critical mass, Facebook launched App Links with an impressive list of initial partners. Also the Facebook app itself is a huge driver of linked content, which should help speed up adoption.
FAN + App Links = $
The conclusion to be drawn here is that the success of App Links has a massive potential impact upon FAN. If Facebook can emerge as a premier audience network they stand to take cuts from a significant amount of in-app advertising revenue. They don’t need to clutter the newsfeeds of Facebook users with more ads, since they can take a cut of advertising in everyone else’s. And if in-app traffic overtakes mobile browsing as the dominant behavior, the size of that revenue pie just gets bigger and bigger. You don’t need to spend all of your time on Facebook; they still generate revenue through whatever else you’re doing on your phone.