Given that the Facebook IPO is happening today, a lot has been written in the past few months (more so in the last couple of days) about Facebook and what it is really worth. I have seen various blogs talk about possible future products (credits, sponsored newsfeed stories, etc) that will generate enough revenue to justify the huge multiple that the stock is expected to command. On the other hand, I have also seen blogs and analyst opinions that say that there is no way Facebook will be able to justify the hype and maintain such a high multiple over the long run (recent pullout by GM along with low CTR’s (click through rate) for their display ads, and increased mobile usage). While both lines of thought are valid, what I want to talk about in this post is something that I think will have a huge impact on Facebook’s bottom line and will end up solving the whole ARPU (Average Revenue Per User) decrease associated with mobile users.
One of the big issues I see today with the entire mobile ecosystem is that the ARPU for a mobile user is far lesser than that of a PC user. This in-turn makes it hard for mobile app developers to give away their apps for free, and instead go with a fremium model where users get charged for additional features. Another major issue that mobile developers face is that they need to use multiple ad platforms and have to rotate through them to ensure optimal revenue. Being able to generate higher ad CPM’s (cost per thousand views) and bridge the gap between Mobile and PC ad CPM’s is going to be a key factor. One of the major reasons for lower ad CPM’s for mobile ad platforms is due to the lack of the ability to precisely target users (like it’s done on PC’s), but what if there was an ad platform that is able to not only precisely target users based on their activity on their mobile device but also include activity on the PC? I believe this will completely change the dynamics of the entire ecosystem and provide a unified & seamless experience for users and advertisers across both Mobile and PC platforms.
What if Facebook were to introduce an platform that had the following components:
 an ad platform
 a personalization platform
To do this, Facebook will have to either provide a UDID solution for mobile devices or partner with the open source one that many developers are gravitating towards. Given that Apple has deprecated the API that let developers access UDID’s, there is currently a major scramble to implement an alternate solution. Given the enormous user base (901 million and counting), I think Facebook is uniquely poised to provide a solution. If you are wondering how this will help Facebook, here is what I am suggesting: a UDID when associated with a Facebook ID (majority of the users will have a 1:1 mapping between a mobile device: facebook ID) will completely alter the landscape. Not only will it help eliminate the crappy ad platforms that developers are forced to use today, it will also make the ads a lot more relevant for users. The basic idea is that Facebook can establish itself as an ad platform that works both on the PC and Mobile space in a ubiquitous way. This will be the only ad network that will be able to provide the most relevant experience based on user activity both on their PC and Mobile device!
On top of this, trusted developers can enable instant personalization within their apps both on mobile and PC and be able to maintain state across devices. This is a huge win for developers (due to increased engagement and stickiness) and users (instant personalization).
Yes, it’s a bit of a scary thought to have a mobile ad shown to you based on what you looked for on your PC (and viceversa), but I strongly believe that this is the direction we are headed towards eventually.
Please feel free to let me know what you folks think about this? Is this something that Facebook will do or will it want to avoid getting into another potentially major controversy related to privacy issues, etc?