Facebook's Ongoing Quest To Make Money From Mobile

According to Justin Osofsky, an MBA with a law degree but no coding experience, 70% of mobile Facebook users return to the app daily versus only 40% on desktop. Now, how to cash in?

The next time you’re knee deep in Facebook, scrolling through the news feed and clicking on a catchy story, scooping up points on Bubble Island, or scanning your friends’ playlists on Spotify, know that there’s a guy out in Silicon Valley dedicated to making your experience as seamless as possible—and making Facebook cash in the process. And he’s not a developer.

He's Justin Osofsky, director of Platform Partnerships and Operations at Facebook who oversees Facebook's Open Graph partnerships and Platform operations globally. The Harvard alum who holds both an MBA and a law degree spends a lot of time thinking about turning those user experiences into Facebook revenue.

This is especially important as Facebook continues to amass even more users (1.06 billion worldwide at last count)—more than 680 million of whom are logging in from their smartphones and tablets. Osofsky asserts that 70% of mobile Facebook users return to the app daily versus only 40% on the desktop.

These numbers may be staggering but Osofsky admits, "A year ago, we were not proud of the experiences on our mobile apps, our platform was focused on the web, and we made no money on mobile." In the midst of tumbling stock prices, privacy changes, and a forgettable product launch (which meant the company didn’t make our Most Innovative list) nearly a year passed between Facebook’s launch of sponsored stories and its corresponding mobile-only product. A few months later, another mobile ad product launched to target third-party app developers.

So what changed? "If we had an ‘a ha’ moment, it was based on this insight: Facebook is actually a better experience on mobile," Osofsky says. From uploading photos at a wedding and tagging your friends to checking in at a concert, Osofsky believes, "Mobile is powerful as a social mechanism." Like when he updated his status during the blackout at the SuperBowl ("I'd post a picture but it's pretty dark in here," he wrote.) "Social experiences happen when you're on the go, and this is when you most want to use Facebook."

To maximize that user base, Osofsky says all teams across the company—not just his—were tasked to focus on becoming "mobile first" last year. Though he credits his time at Harvard’s business school for teaching him how to evaluate challenges and make informed decisions, his four-and-a-half-year tenure at Facebook has gone beyond the textbook to real-time team building. "The most important lessons I've learned at Facebook typically happen after you would 'crack the case' in business school," he explains, "The first lesson is how to execute and get stuff done."

Justin Osofsky

During the launch of mobile ads for third-party apps, Osofsky’s team had to work with everyone from product managers to marketing and finance staff. "Getting results depends on how well you can form cross-functional teams," he says.

That’s just the first part, though. "At Facebook, our product is our strategy and we are constantly evolving our product." In an office peppered with inspirational posters that mandate "Done is better than perfect" and "Move fast," Osofsky says it’s important to ship products quickly, then iterate based on feedback from users and partners.

The results so far have been encouraging. Last quarter, Facebook’s new mobile advertising products accounted for 23% of its overall ad revenue, up from 14%.

Osofsky says that while Facebook’s first decade has been about getting everyone in the world connected, the next will be about mapping relationships between people and the apps and experiences that build on those connections. That means collaboration and quick iteration is more important than ever, and even extends to a broad range of corporate partners and app developers.

To facilitate things, Osofsky says Facebook’s platform is such that "Any developer, whether it's two guys in a dorm to the largest media company, can access it." There’s a base of self-service tools that allow businesses to tailor the products they are using based on their marketing needs. "We also work with businesses to develop and support publishing strategies, build apps, support ongoing campaigns, and consult on media channels to help maximize their marketing strategies and dollars." From one line of code and a Like button to a more sophisticated application like Spotify, Osofsky says, "Our role is to make big companies social and social companies big."

Even if their app is a straightforward tool to enable hookups, Osofsky says Facebook’s open to all philosophy stands—as long as apps meet their policy. "We have both automated and manual tools to  ensure compliance with these policies, and to detect violations at scale," he says. A team will also review apps for risk and automated systems remove or sanction bad actors before they can gain access to data. "Ultimately, we're focused on providing a valuable user experience and one that supports people making informed decisions about the apps they choose to use." 

Osofsky’s particularly excited about the evolution and predicts 2013 will be the year that music, movies and TV, and fitness apps are going to take center stage. A dedicated user of Spotify (it’s how he first heard about Carly Rae Jepsen!) and Fab, Osofsky says there’s potential for fitness apps to have a meaningful impact. "Your friends are cheering you on." On the Endomondo app, over 12 million workouts have been shared to Facebook timelines, generating over 1.5 billion impressions. Almost 70% of all their referral traffic is from Facebook now. Osofsky also thinks that fantasy sports is the next frontier for developers because the competitions are inherently social.

He also maintains that the platform is going to serve developers with a better opportunity for users to discover their apps via mobile. "If you have 700,000 apps in the App Store and another 700K in the Android store the real question is which apps will you download. The way we do it in real life is ask our friends. That is what we are enabling through our news feed."

Wouldn’t it make sense then for Facebook to further enable discovery (and boost revenue) through a "friend tracking" app that is rumored to be in the works? Osofsky demurs. "I haven’t actually heard of it."

No matter. Osofsky contends that "honoring" the content produced by partners from news organizations to Nike is generating its share of revenue. "Just one example if you noticed is that in the news feed, the photos got bigger." Osofsky says the larger photos have contributed to a 15-40% click-through rate, driving traffic to its media partners in a way that enhances the user experience. Just don’t expect things to stagnate anytime soon. "We are still in the early days of creating and enabling these experiences," he underscores. "We now want to build on that progress to become mobile best in 2013."

[Ed note: We've updated the headline on this post to make it more accurate.]

[Blue Phone Image: Peshkova via Shutterstock]

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  • Leo MacLehose

    It makes so much sense! I can't wait for the App Center to be the go-to App store for everyones, iOS and Android alike. What does the Apple store actually know about us, our interests, and our networks? Very little is the answer, that will all change with the App Center. (disclaimer, unlike what my friends may think, I am not an App Center salesman).

  • Marc Posch

    I hate ads they put on mobile phones. And the facts that they are mostly irrelevant and you can't click them away. Reasons not to use FB on my mobile phone