Yesterday, Facebook announced it was testing a new mobile ad network in which Facebook users will be shown ads on their mobile devices even when the user is not on Facebook.
The obvious question is, why would Facebook build this network when its current mobile offering — Sponsored Stories — is running on an app that the company knows is less than impressive and needs more attention? Especially considering that Facebook probably gets more money for its in-Facebook ads than off-site ads?
Facebook declined to respond to a request for comment, so we asked Krishna Subramanian, CMO at Velti, one of the larger mobile ad players. He declined to say whether his company would be working with Facebook on the new ad exchange. (Which makes us think that, indeed, he was hoping to do so).
He did say, however, that "I think it's going to be pretty awesome."
That's because it's going to solve the most fundamental dilemma that vexes Facebook CEO Mark Zuckerberg: That the user experience on Facebook must come first because, as he wrote during the IPO, "we don't build services to make money; we make money to build better services."
A majority of Facebook users now access their accounts on their mobile devices, but everyone knows that the Facebook mobile app is clunky and slow. Adding mobile ads to it would only make it an even worse experience.
But Facebook can't afford to not run mobile ads precisely because that's where its audience is and because this year, Facebook is booking $500,000 in mobile ad revenue per day.
The mobile ad network will use Facebook's data to target users when they're using non-Facebook apps. In other words, Facebook gets its mobile ad revenue without cluttering up its own app with more mobile ads. "They don't want to ruin the experience of Facebook but they want to leverage the scale Facebook has," Subramanian says. A third-party mobile ad exchange offers the "perfect balance" for doing that, he says.
Problem solved!
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