Market Insight

Facebook extends mobile ad tech and Messenger platform

March 26, 2015

Jack Kent Jack Kent Director, Media and Advertising

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Facebook launched a new platform for developers to create apps that integrate with the Messenger app at its annual F8 conference. 40 apps are available at launch enabling users to share GIFS, photo, video and audio clips.

The new platform also provides an in-app discovery tool that enables app users to find compatible apps within Messenger and allows users to share app install links without leaving their conversations.

Facebook introduced an enterprise focussed messaging solution with a preview of Businesses on Messenger which enables companies to communicate with customers using Messenger.

The social media company also announced the extension of its advertising technology offering. Liverail, the video supply side platform Facebook acquired in August 2014, will now power mobile app publishers in addition its current desktop capabilities.

Other announcements at F8 included its new tools and features for: sharing between third-party apps and Facebook; app analytics; creating internet of things apps; social plug-ins; embedding spherical 360 video in the Facebook newsfeed.


Our Analysis:

Content, commerce and communications integration is central to mobile ecosystems

Until recently, Messenger, like Facebook’s other communications app WhatsApp – acquired in 2014, has been largely focussed on providing pure communications experience. The launch of a payments feature in Messenger earlier in March 2015 – which enabled friends to make free peer-to-peer transfers within the app – was a sign that Facebook was looking for ways to expand Messenger’s role.

The integration of mobile communications, content and commerce services is driving the growth of new mobile ecosystems. Asia-Pacific based apps including Tencent’s WeChat, Line, and KakaoTalk have led the way so far.  Now other apps are also looking to grow their role including: SnapChat which offers content and payment services; Tango which provides a content platform; Viber which since being acquired by Japan’s Rakuten will integrate commerce and content.

Facebook’s plans focus on engagement and advertising

Compared with its competitors, Facebook’s Messenger platform is at launch fairly limited in scope, but Facebook is right to be cautious. Growing core advertising revenues remains central to all Facebook’s plans, so unlike many of its competitors it is not focussed on using Messenger as a platform to drive in-app transactions from which it can take a revenue share. Instead, the new Messenger platform is designed to increase engagement and further tie users into its ecosystem and boost in-app advertising revenues through new app discovery tools. App advertising accounts for more than half of Facebook’s mobile advertising revenues. Until now – mobile advertising has only been implemented on the core Facebook mobile app and web experiences – adding discovery features inside Messenger could be a way to drive monetisation as well as engagement across more Facebook apps.

This is particularly important as Facebook tries to increase its ARPU in developing markets, where it is not yet dominant. Messaging apps are the main destination of mobile social media interaction in countries like India, China and South Africa. To expand its advertising share in these markets, Facebook must focus its strategy on the Messenger rather the core app. Facebook’s ARPU in developing markets is currently $3.2, compared to a global $8.6.

Competitors such as Line, WeChat and KakaoTalk offer more advanced services that integrate with commerce and content, but they do not yet match Facebook’s mobile ARPU. IHS will further analyse communications app ecosystems in a forthcoming report.

Messenger for Business strengthens Facebook’s enterprise focus

The introduction of Messenger for Business follows the early 2015 launch of Facebook at Work, a service aimed at providing familiar Facebook services such as groups, newsfeed, and messaging for internal corporate communications and collaboration. Messenger for Business fits more closely with Facebook’s core strategy as it is more focussed on enabling brands and companies to communicate with consumers via their traditional Facebook / Messenger accounts.

Extension of ad tech capabilities further increase Facebook’s advertising ‘super stack’

The extension of the Liverail technology to mobile apps will reinforce Facebook’s dominance in the mobile advertising ecosystem as mobile publishers will now have programmatic facilities beyond the desktop. Previously, Facebook partnered with other supply-side platforms and ad exchanges to provide these capabilities. Bringing these capabilities in-house will give Facebook access to more publishers and the ability to optimise ad serving using its own data. Facebook already accounts for 46.8% of mobile display advertising revenue in the US and IHS expects the company to grow its share to 60.2% by the end of 2015.

However, this announcement is important to the advertising market beyond mobile. The pluralisation of media consumption has challenged traditional attribution systems, which are not easily transferrable to online media. Companies like Nielsen in the US and Broadcaster’s Audience Research Board (BARB) in the UK have struggled to accurately convey the impact of digital campaigns, to the frustration of advertisers and publishers alike. Facebook’s revamp of Atlas (a tracking and measurement company acquired from Microsoft), Audience Network (using Facebook targeting capabilities beyond Facebook) and now Liverail is aimed at providing an advertising ‘super stack’: a holistic cross-device and cross-platform advertising solution. As we move to a cookieless digital advertising world due to both regulatory and technical obstacles, such a ‘super stack’ will place Facebook in an advantageous position to dominate online display, video and native advertising, but also to attract the highly-sought after TV advertising budgets.

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