Facebook, Inc. Makes a Mobile Move

By Carol Kopp  JAN 10, 2014 9:10 AM

The social site goes to India to find a tech team that can fine-tune its offerings.

 


In the latest sign that Facebook (NASDAQ:FB) takes its move to mobile seriously, the company has acquired a young start-up company based in Bangalore, India, and is moving its entire engineering team to Menlo Park, California, to help improve Facebook’s mobile apps.
 
The acquisition is one of two big developments at Facebook this week, and the second one will be much more visible to users, at least at first.
 
As of early April, those notorious “Sponsored Stories” that include apparent endorsements from users in paid ads displayed to their friends, are dead.
 
But the functionality itself—that is, the marketing of users’ “likes” and “shares” in advertising—could actually be much more widespread on the site.
 
Both moves say a lot about Facebook’s plans for future revenue boosting.
 
First, there’s that acquisition in Bangalore, India.
 
Little Eyes, in business for less than two years, builds performance-optimization tools for mobile apps. Their tools automatically monitor an app’s consumption of system resources, and provide reports that developers can use to tweak the apps. Its customers paid a monthly subscription fee for their services, which apparently will no longer be available to Facebook outsiders after June 30.
 
The Little Eyes team consists of seven engineers who describe themselves as “program analysis geeks.”
 
Terms of the deal were not disclosed officially, but the cost was widely reported to be in the range of $10 million to $15 million.
 
That’s a modest acquisition in dollar terms, but suggests the importance of mobile revenue in Facebook’s future world.
 
As is often noted, Facebook is now the Internet’s top seller of online advertising, after Google (NASDAQ:GOOG). But that’s a big “after.” Google was projected to earn $38.6 billion in ad revenues in 2013, roughly 33% of all online ad revenue, according to data from eMarketer.
 
Facebook was projected to earn $6.4 billion. Still, that second-place finish puts it far ahead of the third-place contender, Yahoo (NASDAQ:YHOO), which is expected to be at $3.5 billion for 2013.
 
For now, Google also is way ahead in mobile advertising, the fastest-growing segment of the industry. Mobile already accounts for about 28% of the overall online ad market.
 
Google was projected to earn $16.65 billion worldwide in mobile last year, half of the entire market.
 
But Facebook is getting all the positive attention for its quick rise in mobile revenue, from basically zero in 2011.  EMarketer noted that Facebook was steaming ahead in its quest for mobile ads. Its global share was expected to reach 15.8% last year, from only 5.35% in 2012, the first year it made a serious push for mobile dollars.
 
That would make it the only player in the mobile field besides Google to reach double digits in market share.
 
Those figures were released at the end of August 2013.
 
We may get a better sense of the final annual numbers soon, as earnings season continues. Facebook announces its latest quarterly results on Jan. 28. Google follows on Jan. 30.
 
That other big announcement from Facebook this week was easily misinterpreted.
 
The company said it intends to discontinue sales of Sponsored Stories, a widely-loathed but presumably lucrative form of advertising, after a run of nearly three years. A Sponsored Story ad is displayed to a user’s friends after the user “likes” the advertiser’s site, with an automated endorsement by the user, such as “Joe Doakes likes Cheesy Poofs.”
 
A closer reading suggests that, while it is ending this particular format, it is actually expanding its practice of marketing its users’ “likes” as endorsements.
 
The announcement this week was buried in a blog for developers that is written in a head-banging pidgin-English that mixes tech-speak and corporate lingo.
 
A somewhat more lucid Facebook Newsroom notice last June offered the first clue to the policy change, and a clearer idea of what it means.
 
That update reported that Facebook was working to streamline its advertising offerings, and would in future automatically “include the best of sponsored stories in all ads.”
 
Those user endorsements, or “social context” as Facebook terms them, will  now be available throughout the company’s advertising offerings. The company’s posting said that research from Nielsen, comScore, and Datalogix all indicate that such endorsements “can drive awareness and return on ad spend.”
 
Facebook settled a class action suit over the ads for $20 million. The suit alleged that Facebook did not obtain a user’s consent for the practice.

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