Facebook sees mobile riches in richer app ads

Facebook will look to capitalize on its new-found strength in mobile advertising by adding a sophisticated twist to an ad unit that has not only proved remarkably popularly with developers, but has also helped the company win over skeptics on Wall Street.

Tuesday, the social network is expanding the purpose of its mobile app ads, formerly known as mobile app install ads, so that developers can do more than just drive new downloads of their iOS or Android applications. The units will now enable app makers to separately target their existing users in Facebook's mobile News Feed and encourage them to take specific actions such a listen to a playlist, watch a video, or play a game.

"Businesses now have seven specific calls to action they can place within mobile app ads," Facebook explained in a blog post on the addition. "These include universal actions like 'Open Link' or 'Use App,' along with more specific calls to action: 'Shop Now,' 'Play Game,' Book Now,' 'Listen Now,' or 'Watch Video.' These calls to action can be deep-linked to specific areas within the app itself, such as content, or a sale or promotion."

Facebook is mirroring the original product with its custom audiences targeting tool so developers can reach out to a select group of people who have downloaded their apps, Deb Liu, Facebook's director of platform monetization, told CNET. The goal, she said, is to help app makers develop a long-term relationship with users so they can nudge audiences through Facebook, instead of, say, through an e-mail blast, when they have something interesting or critical to share.

"It's a need of us, as well as most app developers, to be able to reengage someone after the download," HotelTonight CEO Sam Shank told CNET.

Shank's startup, which has raised more than $80 million in funding, makes a popular mobile-only application for booking a discounted same-night stay at hotels in 150 cities around the world. The startup was an early Facebook partner on the mobile app install ads, which Shank said have worked extremely well in driving downloads.

Now, a person who has already installed the HotelTonight mobile application may see an advertisement in his or her mobile News Feed to book a last-minute stay at an inn within two hours driving distance. A click on the "Book Now" button in the Facebook ad will direct the person back to the specific place inside the app to check out the hotel in question.

The initial version of Facebook's mobile app ads have proved quite popular with developers wanting to expose their applications to the social network's mobile audience, which now totals more than 819 million people. Collectively, the units have driven more than 145 million installs from Apple's App Store and the Google Play store in 2013. And in the second quarter of this year, 8,400 advertisers used the ad unit, Facebook said. The spots, which complement Facebook's other mobile News Feed ads, helped the company make 41 percent of its second-quarter advertising revenue from mobile.

But exposure is only one variable in the formula that app makers must solve for to keep their products top-of-mind with mobile consumers. Sixty-six percent of app users only open apps between 1 and 10 times in about a six-month period, according to a study conducted earlier this year by Facebook partner Localytics.

With the added deep-link dimension, Facebook looks to help app makers solve for inactivity and promote content, say a freshly added Spotify playlist. The action-oriented opportunities could have dramatic implications for Facebook's blossoming mobile ads business.

"I think that it's going to be a windfall for Facebook and for Facebook investors," Shank said. "It is creating a whole new market."

Liu cautioned that it's still early in the product's life cycle. But in giving app makers a way to maintain an ongoing relationship with their users, Facebook will develop a lasting and lucrative relationship with its advertisers.