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Facebook Audience Network – Mobile apps may end up bleeding

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Facebook is moving in (their) natural direction, evolving smartly, fast…. Standing ovation! But we, mobile app players, may not enjoy it or even suffer. We must watch our steps! 

Facebook define themselves as a mobile first company.. well, there is no doubt they read the map well. They see the trends, and are fast enough to move on lessons learned. Their install ads format is a top performer, and is responsible for a significant portion of Facebook’s revenues. Facebook are moving forward to create an app installs ecosystem (in other words, an ad network). They call it the Facebook Audience Network.

I am a bit concerned, and I am quite sure some big value chain players in the mobile app advertisement industry feel the same, though they probably won’t admit it.

A few days ago I attended a (relatively) big mobile summit, focusing on mobile app developers. Facebook took a major part in it, sponsoring the event and speaking as well. Facebook knows how to impress an audience. Their messages were smooth, their presentations coherent and clear. And they understand the power of paying compliments… You, app publishers, are the future… Great news, we are now even more focused on you… We have decided to create a wonderful, profitable, and advanced ecosystem to help you in promoting your apps, and monetize on ads… The first row in the conference hall was filled with Facebook employees, Facebook execs went on stage and honored us with their presence. It was nice and interesting. And I am not being cynical about it.

For those of you who are not familiar with this new Facebook Audience Network, Facebook now offers mobile app advertisers to buy install ads in multiple channels (e.g., other mobile apps) other than their own, and in parallel, they offer app publishers a new monetization channel, with the minimum effort of inserting 3 lines of code and 5 min implementation of their SDK. On first glance it looks like a winner.

Think about it, Facebook is already hooked to an enormous bulk of app publishers (through Facebook Login and Facebook Connect). Besides, using Facebook ads to advertise is as easy as breathing, and almost all mobile app pros, who deal with paid media user acquisition campaigns are buying Facebook install ads at scale, and the targeting… well, it’s above and beyond.

Now install ad buyers just need to check the “use audience network” box and their campaigns immediately get extended, outstanding reach of endless additional apps, WOW.  Of course you keep enjoying the same amazing targeting options that Facebook has to offer.

Now, those of you who are also in charge of ad monetization for your app (you know, ARPAU, ROI…), or your counterparts in your organization may be smiling right now. You can now get a monthly check from… well… Facebook. Ha, the joy of living to see money flowing the other way around. Only these smiles may not last, sorry to be the party pooper. And the music stops…

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Facebook Audience Network makes Facebook an ad network and a publisher in parallel. Happened before and nothing to write home about, that’s true, but may I just remind you that Facebook is the strongest app publisher on this planet (with 27% of all app usage time spent globally on the Facebook app!!!). Do you see where I am going? Are you familiar with what double dipping means? Having your (advertising) budget in their hands, Facebook now needs to decide how to split it through their own app and their audience inventory…. Hmmm. They should look at performance and optimize. But, wait, they earn more when placing the ad on their own app’s inventory, right?  Because there is no additional mouths to feed… And their inventory is endless… and in the case they get more demand than supply, they can always add more space, more ad formats, more everything… after all they are FACEBOOK!!!

Just saying… thinking aloud… is that healthy? (Rhetorical question)

What do you (buyer/advertiser) care? You are just after marketing your app, and it may work now even better than before. And when looking at things from your app’s ad monetization angle, you can always hook to another ad network that monetizes better… right?

That brings me to the ad networks that help us monetize our apps, the value chain players. They are facing a huge threat. Know what? They are likely to weaken as a result of this Facebook move. With so many advertisers already using Facebook install ads and now potentially, easily shifting their additional budget to the Facebook Audience Network, the demand these ad networks see may significantly drop. And that’s not even the worst part of it.

Mobile ad networks are constantly hunting for app publishers, offering strong publishers the moon. They know that the name of the game is inventory. The wider spread your inventory is, the more appealing you are to buyers and other value chain players.

But now, Facebook will always be there first. Why? Meet Parse (excuse me for not adding a link), a recent Facebook acquisition. A wonderful service that offers app developers a huge arsenal of tools, starting from the app building phase. Most of their catalogue is offered for free or almost free. It’s the honey that attracts the bees. So you see, Facebook starts the relationship with us, app publishers, at the stage of the initial design, not to say the idea stage… Parse also offers engagement tools, analytics and probably more interesting stuff. And they keep expanding their offering to app developers – their offering becoming richer than a Vegas buffet.

By the time ad networks start chasing apps that are already published and getting strong, Facebook is already there, integrated for quite a while, slouched peacefully on the couch, yawning. How can any ad network compete with that? Google… wake up guys.  Sure, ad networks can offer publishers with potentially more monetization channels. After all, why not hook with as many solutions as possible, to maximize ad revenues? The only turn off is the huge ad network selection to choose from, and the integration need with each. It takes time and development effort. And that’s a barrier. If Facebook ad network gets big enough – well, here’s one headache less…

As long as Facebook will acquire a significant market share, and it will, other value chain players may start bleeding. Their inventory could get lame and their sex appeal will be gone. If this happen, we can all end up losing.

Because this is a situation of unhealthy competition. Mobile app advertisers may end up not having quality alternatives at scale. You know what happens when there aren’t strong enough alternatives? Prices go up. So right back at us. Oops.

If ad networks will lose power, publishers (apps who sell ad requests) will get more and more dependent on Facebook. Bad here as well. You know what happens when you don’t have enough alternatives? You settle for less. What other choice do you have?

Maybe now is the time to invest in Facebook stocks?

Don’t get me wrong, I am not bitching about Facebook specifically. Facebook is not a mean beast, but a VERY SMART titan. I would do the same if I were them. So would you. And they are helping us, mobile app players, a lot. Still, before we stand in line to start monetizing through their network, maybe we should ask the hard questions. How, dear Facebook, are you planning to protect our interests? How will you make sure not to first fill your own inventory by optimizing for prices and quality, so advertisers will always prefer to use your own app first? How will you make sure not to destroy other value chain players (ad networks, ad exchanges, SSP, DSP, etc.)? How will you manage your contradicting interests as both an ad network and an ad publisher? Regulators should do this kind of work but can we really count on them?

In the long run, this kind of evolution can be disruptive push for innovation. Neglected, or even just threatened value chain players will think how to reconstruct their offerings, developing advanced formats, new business models, god knows what.

But in the short run, I am concerned about us, app publishers, app advertisers and value chain services. Winds of change are coming in our direction…

Elli
Elli is one of AppGo2Market.com Co-Founders, a mobile expert and a mentor. Having years of experience in the mobile and marketing industry promoting popular mobile apps and B2B related services. Presenting specific expertise on users' acquisition strategies, PR, social media, product marketing, BizDev integrations and more
Elli
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