Facebook gives Wall Street what it wants with mobile. Doesn't make Facebook ads any less crappy

By Erin Griffith , written on May 1, 2013

From The News Desk

Facebook has now been public for almost a year. In that time, the company has learned a few important lessons. Zuckerberg learned to sell himself, his vision, and his company. Gone are the days of "Our mission is not to become a public company," or the days of it not mattering that the company's CEO was awkward and a little antisocial.

Likewise, the company's execs have learned to avoid phenomenally stupid mistakes like telling Wall Street investors one thing, while telling retail investors another. They have also learned, through last year's Instagram terms of service misstep, that it can't use Facebook's usual "move fast, break things, and clean up the mess later" method with Instagram.

As a public company, these mistakes have consequences tied directly to dollars and cents. Zuckerberg's "learning to sell" interview sent Facebook's stock price up, and its terms of service mishap sent it down.

With its first quarter earnings report today, Facebook has proven it learned another lesson: Give Wall Street exactly what it wants. Mobile, or Facebook's failure to monetize mobile, was a top concern among analysts and commentators when the company went public. It's the top talking point in the company's earnings reports now. But perhaps more importantly, it is now the fastest growing contributor to Facebook's revenue, representing 30 percent of the company' $1.25 billion in quarterly income.

This is impressive not just because of how quickly it happened -- Facebook only started monetizing mobile a year ago -- but because of how disproportionate it is to the rest of the mobile advertising industry. Publishers like Facebook, Twitter, and Pandora are quickly taking mobile ad spend market share from the ad networks. A typical advertising budget allocates at most 10 percent of its spend to mobile; as a category, mobile only represented 7 percent of all digital spend last year. As that share of spend grows to meet the shift in eyeballs from Web to mobile, Facebook wants to ensure it grabs as much as it can.

The bigger problem, I think, is the unfortunate truth that Facebook's ads, be they on mobile or desktop, are not the revolution we had been promised. They are really just more of the same loosely targeted display ads, despite Facebook's vehement dismissals of that characterization. Today Sandberg railed against the dreaded clickthrough rate, a legacy metric that's kept display advertising rates in the gutter since the beginning of the Web. She suggested that, through Facebook's acquisition of Atlas, it will be able to trace a Facebook ad impression to a purchase sans click, noting that 99 percent of people who saw a Facebook ad and bought a product never clicked.

As a user, I've yet to see an ad that's relevant to me. I'm even beginning to get "feed blindness" to the top post each time I open Facebook, because I know that first item is going to be irrelevant. Facebook warned that Sponsored Posts will come from brands users haven't invited into their streams via the all-important "Like." The problem is for all its Like data, Facebook doesn't seem to know what I actually like (lowercase "l"). I don't think I'm unique in this situation -- most people are Like-whores, clicking the Thumbs-up for for a myriad of reasons. I Liked Birchbox to enter a contest; I don't give a crap about whatever beauty product has sponsored its way into my feed as a result. I also care that my friend with a child has Liked Zulilly.

If I've signed over my privacy to Facebook, shouldn't it know I'm not a mom? Shouldn't it somehow know I don't enjoy packaged foods like Lay's potato chips? The issue with wedging an ad into my so-called emotional connections is that, when they fail, the damage done is worse than an irrelevant banner ad.

This is not remarkable on its own. Badly targeted ads are the hallmark of advertising, not just online, but always. We all know the famous Jan Wanamaker quote, "Half the money I spend on advertising is wasted; the trouble is I don't know which half."

No, this is a remarkable because Facebook has promised Madison Avenue that its ad offering is different from everything that's come before it, because of the special relationship it has with its users. Facebook is home to every important life event. It knows us. (Oh, it's also like a chair, or something.) As I've heard Sheryl Sandberg pitch to advertisers over and over, Facebook ads are special because they live right where people are making emotional connections. I guess Facebook thinks that if my heart is swelling over friends' beautiful wedding pics, I might redirect those warm feelings to my new friend, Lay's potato chips. Facebook would be incorrect.

My experience is anecdotal, of course, but it speaks to the massive challenge Facebook has laid out for itself. If you promise advertisers you'll deliver the most relevant, welcome, effective ads on the Web, you've got a lot to deliver. It's yet another lesson Facebook might wind up learning the hard way.

[Illustration by Hallie Bateman]