facebook-advertising-future

For all of their hip, innovative, Silicon Valley beginnings, in 2014 Google and Facebook are essentially the Coke and Pepsi of mobile advertising. In the wake of contrasting Q1 earning reports — Google stagnant, Facebook surging — as well as a slew of big Facebook announcements at this week’s F8, we’re seeing a small shift in momentum in the market. The dominant narrative is that Facebook is finding its mobile groove, while Google has yet to make the pieces fit together on mobile.

Marin Software manages $6 billion in online ad spend for its clients globally. PandoDaily spoke to CMO Matt Ackley to chew over the developments of the past couple of weeks and the continuing battle for supremacy between Facebook and Google in the increasingly mobile advertising world.

The amount of money Google has seen from each ad click has been trending downwards for a couple of years now. Has it just not put the pieces together on mobile yet, or are there bigger market forces holding them back?

The first thing that jumps out at me here is the new app versus web dynamic. Google does not see into apps. I go into Google and I can get linked into a specific page on a website. But in the mobile world, if I want to search for a product, I might open up the eBay or Amazon app. If I’m looking for a restaurant, I open up Yelp or Open Table. I’m not doing that search on Google. At F8, Facebook announced linking between apps. I wouldn’t be surprised if we hear something from Google at its developer conference on this.

The other thing is, think about why search took off. It was very easy to tie the search click, to a conversion event. Someone searched, they clicked on [an] ad and they converted. The biggest lag for advertisers on mobile search is that you still see lower conversion rates. That’s a turn off. The app environment drives a lot of mobile conversions.

Measured against the first quarter of 2013, Facebook has tripled its net income in 12 months. Its new Audience Network exchange is getting a lot of hype. Is it going to hit a growth wall?

Facebook’s earning will level off. The [Audience Network] is where they’re going now to drive growth. They’re taking a page out of Google’s playbook, accepting that they’ve nailed the owned and operated space and now introducing their own network. Now you’ll have another publisher, another ad network, another platform. The people that win here are the ones supplying the space. Will Facebook supported ad space outperform space that Google can put on their sites? It’s going to be a really interesting publisher battle.

As Facebook’s Audience Network and Google’s AdMob come up against each other, do they each have strengths that the other doesn’t, or could one end up being seen as effectively better? Who wins this battle?

If you look at it as a venn diagram, I think over time you’re going to see a decent sized overlap. Google is trying to position what they’re doing from an audience standpoint. They have a trove of intent data from search that Facebook doesn’t, that they’re trying to cordon off more tightly. But Facebook’s audience data is self-reported, so it is probably slightly stronger than what Google is inferring about its audience. You’re going to see a classic case, where Facebook has a strong play in the reach of the brand, but Google has the upper hand in speaking to the context of what someone is looking for in the moment.

There’s a lot of excitement around one day being able to include information about physical location when targeting ads and tracking consumers across different devices. Does this have the potential to make mobile ad impressions more valuable than they ever were on desktop?

Obviously all that stuff is of great promise. What has really made these advertising platforms take off so far was the whole concept of the native ad. AdWords was one of the first examples of the this, where what you saw was part of the user experience. It wasn’t a pop under banner ad. When Facebook started it was more like a conversation with friends and people wondered how you would insert an ad into that, but they made it part of the experience. With something like geo-location, how do you make that part of the experience? If I get ice cream with my kids after a soccer game, I don’t need to go to the Home Depot next door to buy a saw. I’m a great believer that the more data and signals, the better. But solving the format issue is one of the most important things people tend to forget. How do you introduce an ad to that user in the right context?

Could search become less relevant on mobile? We’re spending so much time inside apps now and so much of our browsing now comes directly from things people post on Facebook and Twitter.  

Search is still powerful on mobile and as long as Google can keep that experience it will be fine. But I think losing it is a legitimate risk. Look at Yahoo’s clear attempt to come back in mobile search and pitch to Apple to be the default engine on iOS. Google became powerful by becoming the front door to the Internet. But what is the front door to mobile? That is a risk for them and it why they’re investing so much of their resources in Android, making sure they still have their platform.

Is Google behind? How would you estimate the threat level there at the moment?

Google is behind in some areas, it is playing catch up with app install on AdWords. It’s a minor threat. But they’re not an ostrich putting their head in the sand, riding out the AdWords thing until it dies. As the mobile thing is playing out, it’s more competitive than desktop. Google is clearly a force in mobile, they just don’t enjoy the same hegemony they once did.

[Illustration by Brad Jonas for Pando]