The delay doesn't mean Facebook won't go ahead with the third-party mobile advertising. It surely will, given the huge size of the market
Facebook Inc (NASDAQ:FB)’s mobile ad network that was launched for testing in September, has long been awaited by Wall Street analysts. Now it seems like they have to wait a little longer. The social networking site announced today that they are pausing the mobile ad network initiative. Facebook was also in deep talks with publishers about displaying Facebook ads on their mobile websites, but now that too has been back-burnered.
Facebook Inc (NASDAQ:FB) was planning to take on Google Inc (NASDAQ:GOOG)’s AdSense for the web and AdMob for mobile. The idea was that Facebook Inc (NASDAQ:FB) will use 1 billion users’ data to serve up customized ads across the web and mobile. The company spokesman Brandon McCormick said that despite getting positive feedback and results on the mobile ads tests, the company will put it on the back burner. The reason? The company has turned its focus on scaling ads in mobile news feed.
However, today’s announcement doesn’t mean that the Menlo Park, California-based company won’t go ahead with a third party ad network. It surely will – but a little later, because there is a big opportunity. Google AdSense generated more than $10 billion in revenues last year.
A major obstacle for Facebook Inc (NASDAQ:FB) is that the social networking site isn’t really prepared to deliver ads on third party websites that give significant value to Facebook or the website publishers. In fact, ads that Facebook displays on its own site still command hopelessly low rates.
Google Inc (NASDAQ:GOOG) too had faced the same problem in the beginning. But it assured publishers that they get significant value by guaranteeing them a fixed minimum revenue, irrespective of the ads’ performance. Facebook hasn’t done that yet. Instead, the social networking site wants to split revenue with publishers. That raises a concern for publishers: what if the ads don’t generate revenues?
Sterne Agee analysts, Arvind Bhatia and Brett Strauser believe that mobile ad network has massive long-term opportunities. But that is not reflected in Wall Street estimates because it is still in its infancy. Facebook Inc (NASDAQ:FB) hasn’t quantified the long-term opportunities from the mobile advertising network. Though the company has delayed the project, analysts expect Facebook Inc (NASDAQ:FB) to re-launch this initiative within 12 months, given the huge size of this market.
Sterne Agee holds a Buy rating on Facebook stock with $32 price target.