Until now, Facebook has integrated its advertisements into its own environment. At its developer conference F8 at the end of April, the leading social network presented a new advertising network under the name Audience Network, with which Facebook advertising can also be placed in third-party mobile applications. This expansion is characteristic of a strategic realignment: instead of bundling everything under its own website, personal profile data is collected as widely as possible and ads are sold wherever possible. In this way, Facebook is overtaking itself: when Mark Zuckerberg moved his project to Silicon Valley near San Francisco ten years ago after initial successes among students at the elite universities on the East Coast, there was no viable business model anywhere in sight. The Facebook founders and the first investors were satisfied with the assumption that it would sooner or later pay off to draw the attention of hundreds of millions of people to a site. When Google manager Sheryl Sandberg came on board as COO in 2008, her first priority was to make Facebook profitable and she found the right solution: advertising. The recipe was simple and obvious: get as many people as possible to a website (facebook.com), collect user profile data and use it to sell ads. All on one website. It worked like a charm. Although the Facebook ads performed below average, they were also cheap to book. And so Facebook made a lot of money, went public in 2012 and made even more money. In the first quarter of the current year, turnover rose by 72% to 2.5 billion dollars compared to the same quarter of the previous year, while net profit tripled to 642 million dollars.
But appearances are deceptive. There are worrying developments in Facebookland: Firstly, for many Facebook users, especially younger ones, it is no longer attractive to communicate with their friends, families and work colleagues on a single site where everyone can see everything. According to an American study from January, Facebook has lost around 11 million young users in the USA alone since 2011. Instead, small applications that can be used to communicate with specific groups of friends are becoming increasingly popular. This was and is the hour of Snapchat, Instagram, WhatsApp and the like. On the other hand, more and more users left their desktops behind and preferred mobile devices - the only place where it was difficult to earn money with advertising. Only Google was already making good money with mobile advertising back then. And it did so by collecting profile data not just on one site, but on as many as possible. The basis for this reorientation of Internet advertising was a uniform privacy policy and terms of use for all Google services, which came into force on March 1, 2012. This made it possible to display targeted advertising based on user data, for example from Google searches on YouTube - and also on mobile.
The main aim is to collect signals from users
This put Facebook, but also competitors such as Twitter and the like, in a tight spot: in the fall of 2012, Mark Zuckerberg bought the free photo and video sharing app Instagram for the sensational sum of one billion dollars. A year later, he tried to snatch up Snapchat, an instant messaging application for smartphones and tablets that allows users to send photos to friends that are only visible for a few seconds. However, Snapchat CEO Evan Spiegel left Zuckerberg out in the cold with his 3 billion offer (in cash) last November. A year earlier, Facebook had already tried to enter the race with Poke, a Snapchat imitation - a flop. Now Facebook wants to steal Snapchat's thunder again and announced an update for the Messenger app at the end of April, which makes it easy to share snaps and videos. The latest takeover coup in this series is the acquisition of the instant messaging app WhatsApp for a total of 19 billion (in cash and shares). When making such acquisitions, Facebook has repeatedly affirmed that it will continue to operate the application unchanged and will not integrate it into Facebook itself. Although this is often questioned, it makes sense in the light of the new strategy: with these apps, complemented by its own products such as Facebook Messenger and Facebook Camera, the main aim is to collect signals from users. What preferences they have, where they hang out and who they know. Facebook's latest moves fit in with this: The purchase of the fitness tracking app Moves, which continuously records users' physical activities and locations.
And with FB Newswire, the news offering is being expanded - both excellent opportunities to harvest signals about user behavior.
And so Facebook's announcements at the developer conference fit in perfectly with this strategy. On the one hand, there is the newly announced advertising network. On the other hand, there is a series of innovations that have made the Facebook platform appealing to app developers. The Parse development environment, which can be used to develop apps for all common platforms, is important here - this opens up numerous new opportunities for Facebook to collect user data in the background. And, of course, this increases the reach of Facebook's own advertising, which further boosts its own advertising revenue. Mobile already accounts for 59% (Q1/2014) of Facebook's advertising revenue.
YouTube is playing an increasingly lucrative role in the mobile sector
Facebook's rapid growth in the mobile advertising market can hardly leave market leader Google cold. And so it comes as no surprise that Vic Gundotra announced his resignation a few days before the Facebook developer conference. He is regarded as the father of Google+, the initiative not only for a social network, but also for the integration of many Google services. It is noteworthy that, according to unconfirmed employee reports, the majority of the Google+ development team - over a thousand employees - will be moved to other areas of the company, primarily to the Android mobile operating system. Just three years ago, Google CEO Larry Page made the bonuses of all employees dependent on the success of the company's own social media strategy. Google now has to accept that Google+ cannot compete with Facebook in the social sector, and so a rethink has taken place here too: Away from the strategy of bringing everything under one roof, back to diverse ubiquity. YouTube in particular is playing an increasingly lucrative role in the mobile sector. There are also signs of a similar strategic rethink at Twitter - currently at a stock market low. In October 2012, the video sub-app Vine was purchased and has so far continued to operate independently. And with MoPub, an advertising network for mobile and with Trendrr and Gnip, specialists for social media data were acquired. Given the dominance of Google and Facebook, other competitors such as Apple, Yahoo and Microsoft are far behind and have to fight to stay in the mobile race.
It is becoming clear that only those who have outstanding user profile data and can use it on automated trading platforms, where it is purchased via programmatic buying, can be successful in digital advertising. Internationally oriented technology heavyweights are enjoying themselves on this playground - making it increasingly tight for domestic publishers on the mobile advertising market. The keyword RTB (real time buying/ bidding), the automation of trading processes, is already being approached with marked restraint in Switzerland. Now another acronym with ambiguous potential is coming into play: DMP - Data Management Platform. This enables publishers to merge user data from different sites or agencies to merge profile data from different campaigns. And above all, it can be used to exchange such data with third parties. This is exactly the game that the big players play in their own realm. So far, there is no such thing in this country, or at best only on a small scale. First of all, the question of who owns such data (e.g. from a campaign) and who is allowed to do what with it needs to be clarified. There is a need for industry-wide clarification here. But as long as the motto "everyone does what they think is right" applies, everyone on the Swiss market is using far too little data to be able to make a dent against the international high-tech companies, even in their own country.
Christoph J. Walther
Google and Facebook dominate mobile
Last year, spending on mobile advertising rose by 105 percent globally, reaching 17.96 billion dollars. According to a report published by market research company eMarketer in March, mobile advertising is set to grow by a further 75.1 percent this year, reaching 31.45 billion dollars. This corresponds to almost a quarter of all spending on digital advertising worldwide. Two thirds of this revenue went to Google and Facebook, which accounted for three quarters of growth in the mobile sector in 2013 (USD 6.92 billion out of a total of USD 9.2 billion). Facebook in particular was able to increase its market share significantly. In 2012, the social network only accounted for 5.4% of the global market. In 2013, this share rose to 17.5% and is expected to grow further to 21.7% in the current year. The lion's share of the mobile advertising market belongs to Google with almost 50 percent. However, eMarketer estimates that this share will fall to 46.8 percent in the current year due to the rapid advance of Facebook. As recently as 2012, mobile advertising accounted for just 11 percent of Facebook's own global advertising revenue. Last year, this figure jumped to 45.1 percent and stood at 59 percent in the first quarter of 2014. According to eMarketer, this share is expected to reach 63.4 percent by the end of the year. Mobile accounted for 23.1 percent of Google's global advertising revenue last year and this figure is expected to rise to 33.8 percent this year. Meanwhile, Twitter reported that mobile advertising accounted for 80% of total revenue in the first quarter of 2014. In the previous quarter, this figure was 75 percent. Twitter generated the majority of this revenue in its American home market.
Away from the hoodie culture
Just as Google CEO Larry Page had already done, Facebook boss Mark Zuckerberg appeared on stage again at the end of the keynote speech and preached to the choir or to his own employees. Earlier in his presentation, he reminisced about Facebook's tenth anniversary in February and spoke about the tenth anniversary of meeting his wife, Priscilla Chan, and looked ahead to his 30th birthday on May 14 - which puts him above the average age in his own company and in Silicon Valley. He announced that the Facebook motto "Move Fast and Break Things" would be replaced by the less pithy "Move Fast with Stable Infra". And on the threshold of a new phase in his life, he announced a new vision for his company and attempted to realign the corporate culture: The goal, he said, was to "build a culture of love for the people we serve that is strong if not stronger than software hacking". These words are likely to be remembered as the turning point for Zuckerberg and for Facebook as the day he came of age.
What does the industry think?
Catrin Rubenson, CEO of Admazing
"The opportunities that arise from the comprehensive use of profile data are exciting for the industry and for us as an online media service provider. For example, we have good experience with video ads on YouTube, where we use video categories together with Google profile data as targeting. We are already using this development profitably for our customers. In Switzerland, there are various companies and publishers that collect data together or release anonymized data for extended use. We are also happy to use these offers - after examining the cost, benefit and data protection aspects. However, data protection and data sovereignty are not always fully clarified. This is one reason why less data is available to Swiss users than in other countries. For example, we do not use our own data across all customers. In principle, however, we would of course like to see more correct profile data and offers that can be used for campaigns."
Christoph Zimmer, Head of Corporate Communications Tamedia
"We see the development of Facebook's advertising network primarily as competition for Google. Of course, such offerings are also competition for Swiss providers; the large international companies benefit from economies of scale in terms of technology and mass due to their size. However, the strong focus on video also has positive effects; the market is developing as a result and our high-reach Swiss offerings with their high-quality positioning are benefiting from this."
Alexander Horrolt, Managing Director of Goldbach Audience (Switzerland) AG
"To counter the dominance of global corporations, we need data-sharing alliances or jointly managed marketplaces for automated trading of premium inventory. Such cooperation models are essential to compensate for a lack of data depth as well as a lack of economic and personnel capacities. Spain is leading the way with 'Aunia', a closed ecosystem for video publishers. Such a model is particularly suitable in Switzerland, where even large video players are reaching their limits as demand increases. In our small, relatively poorly monetized digital market, standardized processes would take the pressure off national players and at the same time make them competitive with global brands. We are taking this approach with the Swiss Audience Network: data is aggregated for campaigns managed jointly across all publishers and used in the interests of the campaign, but remains with the publisher or neutral technology enabler - the optimal balance between cooperation and competition."
Branko Radosevic Russo, Head of Sales Digital Media Ringier
"The topic of big data and the marketing of this data has also been an important topic in the Swiss market for some time, and Ringier is also dealing with it intensively. The quantity of data does not mean that it also meets the quality requirements. Efficient use is much more important. A lot of user data does not automatically mean more revenue. The US market relies on volume and a low CPM strategy. True to the motto: The user costs almost nothing, so it doesn't matter if my message doesn't reach the right user. The scatter loss hurts less because the costs are not high. Ringier is closely monitoring the further development of the issue in Switzerland and is working on a solution adapted to the Swiss market. However, we are not allowing ourselves to be blinded by the sales and forecasts of the US market."