Most Recent Articles In Digital
Latest Digital Articles
- Hearst Reorganizes Digital Roles
- Yahoo CEO Marissa Mayer Talks Strategy, Katie Couric Hire
- Mona Kim Debuts Moowon Site to Draw Attention to Dying Craftsmanship
More Articles By
Facebook wants more of mobile advertising’s future.
While many observers were left scratching their heads when the social media giant agreed to buy mobile-messaging firm WhatsApp for $19 billion, the deal has pushed mobile even more to the fore and could help accelerate the pace of change in how fashion brands and retailers reach out to consumers.
Experts see the buyout as a data play, with Facebook aiming to gather as much information on users as possible in order to better tailor services to them — and enable brands to better target their ads at consumers. It’s a high-stakes game and competition is only growing sharper as expectations have risen and users no longer respond to the in-your-face promoted content clogging social media news feeds.
The deal could mean brands will soon be able to target users on Facebook and its Instagram platform based on their WhatsApp text messages — and, most importantly, their contacts in their address books on their smartphones.
“It’s where consumers spend time. Mobile keeps getting relegated to ‘second-screen status,’ except mobile isn’t second screen — it’s the first screen,” said Rebecca Lieb, a media and advertising industry analyst at the Altimeter Group. “WhatsApp has had very rapid adoption but the clear assumption is that the majority of their users are already going to be Facebook users.”
Facebook has more than 1.2 billion monthly active users and WhatsApp has 450 million monthly active users, with one million more being added each month.
“What this is going to do is secure audiences for Facebook with younger demographics, who are completely immersed and saturated in mobile channels and the mobile lifestyle,” Lieb said. “It also provides Facebook with a new dimension to the social network. It’s effectively a social messaging network. You use it to talk to people in that network and Facebook will have access to that data.”
Although WhatsApp was founded with users in mind and has so far refused to carry advertising, the valuable data it might provide to its parent company — from user habits, friends contacted most frequently and even buzz words that pop up — could help Facebook fine tune its mobile advertising muscle. Facebook declined to comment on the WhatsApp acquisition.
Fifty-three percent of Facebook’s fourth-quarter advertising revenue came from mobile ads — $1.37 billion of its total ad revenue of $2.59 billion. That’s up from less than a third of advertising revenues in the first quarter.
That trend is expected to continue. EMarketer projected that 65 percent of Facebook’s ad revenue would come from mobile this year, and this would jump to more than 75 percent in 2016.
Those statistics are already having a major impact on fashion and retail and, as mobile gains an even larger percentage of e-commerce sales, brands need to be where the consumer is — in terms of both social and commerce.
Twitter, for instance, pointed out the importance of retail advertising on its first quarterly conference call with Wall Street last month.
“Large brand advertisers drove a significant portion of our growth with particularly strong spend around Black Friday and Cyber Monday,” said Mike Gupta, the company’s chief financial officer. “Advertisers are increasingly recognizing that conversations on Twitter provide valuable opportunities to connect with consumers in real time. And in [the fourth-quarter], we saw a record number of retailers flock to Twitter to do just that.”
The platform’s fourth-quarter advertising revenues shot up 121 million to $220 million — with mobile accounting for more than three-quarters of the total.
“The entire retail world needs to be awake to the changes happening in mobile today,” said Sucharita Mulpuru, vice president and principal analyst at Forrester Research. “Some companies are already seeing more than half of their Web traffic coming through mobile devices, which includes phones and tablets, and ensuring that their data is being portrayed effectively is essential.”
She described WhatsApp as “less critical” to retailers at the moment. However, even though she noted that most WhatsApp users aren’t the core customers of retailers right now, this can change, just as Facebook has changed from a college social network to marketing mammoth.
The WhatsApp deal is also another shot in the war between Facebook and Google, which are both trying to get as much data on the user as possible.
Like Facebook, Google’s social network, Google+, is very much aimed at targeting ads to users. Greg Sterling, a senior analyst at San Francisco based firm Opus Research, called Google+ an “explicitly data-mining play” for the tech giant — and a vehicle to combat Facebook from a consumer perspective.
The two have been going toe-to-toe for some time. Sterling cited Google’s acquisition of social mapping app Waze in June — amid rumors that Facebook was working on a deal with the app itself. Google was also said to be eyeing WhatsApp.
“I think that Google bought Waze, in part, to take it away from Facebook, but also there are benefits to Google,” Sterling said. “Clearly, part of what they’re doing is not giving Facebook an asset to go out and build these compelling social maps that might be competitive with Google maps. That’s in the mix for Facebook. There is some part of that [in the WhatsApp] deal that is about keeping it out of Google’s hands. It’s not the primary reason, but it’s in the cluster of reasons that the company bought it.”
The acquisition also highlights the intersection of privacy and personalization on the Web, where users want to keep their information private, but also want a personalized experience online — which requires data that allows brands to target customers effectively.
Sterling believes the only way to reconcile WhatsApp’s current opposition to advertising is to let consumers have control. He speculated that a loyalty, opt-in marketing platform on WhatsApp will exist at some point, but it’s still too early to know when.
“There is a range of possibilities for Facebook, but what will be interesting to see is how quickly WhatsApp starts to figure into any marketing or advertising because of the well-publicized opposition of the [WhatsApp] founders to advertising,” Sterling said. He called this an “interesting tension,” noting that as long as the WhatsApp founders are around, there will be a resistance to incorporating conventional ads within the service. “Ultimately [though], Facebook will have to exploit it because that’s what investors will expect. And it will be too big not to do some form of [advertising].”