Facebook to Sell Ads for Third-Party Apps

Source: Courtesy Facebook Inc.

Facebook Inc. (NASDAQ: FB) plans to extend the reach of its ad sales operations by “showing Facebook ads in third-party mobile apps.” The social network’s management wrote in a blog post:

Monetization is a difficult problem for mobile app developers, particularly as people move toward downloading more free apps and advertising dollars lag behind time spent on mobile. We faced some unique challenges when we first integrated ads into the Facebook mobile experience, and we believe we’re now well positioned to help other mobile apps.

We are running a small test to explore showing Facebook ads in third-party mobile apps. In this test, we’ll be extending Facebook’s rich targeting to improve the relevancy of the ads people see, provide even greater reach for Facebook advertisers, and help developers better monetize their apps.

While we have run similar tests in the past, this current test is more like a mobile ad network in that we are working directly with a small number of advertisers and publishers, rather than an outside ad-serving platform.

This test is currently limited to a few advertisers and partners. We are not currently accepting additional participants, but if you are interested in receiving future updates on the status of this test, please let us know.

Facebook is not only solving a problem for tens of thousands of developers who create free apps and face trouble making money on them. The move is another way for Facebook to accelerate its own ad growth, which is essential to maintain its mammoth $142 billion valuation. While Facebook’s top line growth is strong, it is no longer astonishingly so.

In the most recent quarter, Facebook reported:

Revenue for the third quarter of 2013 totaled $2.02 billion, an increase of 60%, compared with $1.26 billion in the third quarter of 2012. Revenue from advertising was $1.80 billion, a 66% increase from the same quarter last year. Mobile advertising revenue represented approximately 49% of advertising revenue for the third quarter of 2013. Payments and other fees revenue was $218 million for the third quarter of 2013.

With an annual revenue run rate of $8 billion, Facebook remains a relatively small company compared to tech giants Google Inc. (NASDAQ: GOOG) and Amazon.com Inc. (NASDAQ: AMZN) — even if it grows at 50% a year for the next year or two. Amazon’s annual sales run rate is close to $80 billion. Google’s is $60 billion. For the time being, e-commerce and search continue to trump social media, at least as measured by sales. The third-party app program may be one modest way for Facebook to close those gaps.

Facebook, still searching for inroads to the advertising revenue business, may have found one more path.