Facebook earnings preview: changes to ads, payments, gifts and other revenue streams in Q1

facebook logoFacebook plans to announce its 2013 first quarter earnings tomorrow after the stock market closes.

Analysts expect earnings of 13 cents per share on revenue of $1.44 billion during the period of Jan. 1 to March 31. In Q4 2012, which included the holiday season, Facebook had earnings of 17 cents per share on revenue of $1.585 billion.

Here we’ll review the changes Facebook made in the first quarter across each of its areas of monetization.

ads logoAds

Last year advertising made up 84 percent of Facebook’s overall revenue. In the first quarter of this year, the social network introduced new targeting capabilities and made a number of adjustments to the look and performance of its ads. The company also continued to ramp up the amount of ads in News Feed and on mobile, adding a three-in-one “Pages You May Like” unit and a new type of Page-Like ads to the mobile feed.

Partnerships with data vendors Datalogix, Epsilon, Acxiom and BlueKai opened up the opportunities for advertisers to reach new audiences based on third-party data, such as offline purchase behavior. This feature was in limited beta during Q1, but rolled out more widely as “partner categories” earlier this month.

Lookalike Audiences, which help advertisers target users similar to those in their Custom Audience databases, was another exciting new beta feature for advertisers last quarter. Facebook launched it globally in March.

A tool that was available for most advertisers throughout the quarter was conversion tracking. This allows advertisers to measure and optimize their ads leading off-Facebook. It’s particularly important to direct response advertisers and app developers.
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Three things to keep an eye on in Facebook’s games ecosystem

gamesFacebook today shared a recap and several videos from its event at the Game Developers Conference last month. The key takeaways from the presentations were Facebook’s commitment to the desktop gaming platform, its emerging focus on core and mid-core games, and its support for cross-platform games.

These are the three main areas to look at over the course of the year to understand the company’s progress as a gaming platform — something many are beginning to doubt or write off completely.

Desktop

Facebook says desktop gaming is “healthy and growing,” despite the attention on mobile, tablets and other new platforms. The company pointed to research suggesting the desktop games business is expected to grow to $15 billion, not including China. Last year desktop games generated more than $2.8 billion, accounting for nearly 20 percent of the overall industry.

“We care about desktop because it’s big, and it’s growing and we can make it grow faster,” Director of Games Partnerships Sean Ryan said at the GDC event last month. “It’s a big business in total around the world and for Facebook.”

The social network says more than 250 million people play games on Facebook each month, which is a 15 percent increase over last year. Many think Facebook games are past their heyday, but Facebook says there are now more users playing games on the site than ever before.
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Developers can now easily add ‘go to app’ or ‘play game’ buttons to Facebook pages

Facebook has given developers a self-serve option to add a ”go to app” or “play game” button to their app’s Facebook page, according to a recent developer blog post.

Developers can do this by linking their Facebook pages with app detail pages in the App Center. This will put a button on their fan page to drive users directly to the app. It will also put a ”visit app page” link on their App Center details page, which could help developers build their fan base in addition to getting more installs.

Some developers already had ”go to app” or “play game” buttons on their pages, but they had to submit a request to Facebook to do so. This type of process doesn’t work at scale so having a self-serve tool will enable more developers to take advantage of the feature. Developers can access this option from the “App Details” section of their app settings.

Facebook search takes users to specific sections of App Center

Facebook users can now search for app categories from Facebook’s main search bar and be led directly to those sections of App Center.

Facebook representatives did not tell us when exactly the social network added app categories to search, but the function doesn’t seem to have been around since the App Center launch in June. Facebook product manager Matt Wyndowe told us in September that the company was looking into ways to make App Center more navigable and integrated into other areas of Facebook.

Facebook introduced a new search within App Center last month, allowing users to not only find apps by name but also by keyword such as “cars” or “fitness.” It wasn’t until recently that we discovered a way to use the main Facebook search function as a shortcut to specific sections of App Center. Categories include action games, board games, card games, puzzle games, strategy games, lifestyle apps, photo apps and more. Users can also jump to the “mobile apps” or “games” sections through search.

People typically use Facebook search to find friends, apps and pages, but it can also be used to get around the site, for instance, jumping to their photos section, notes, friend lists, the ads manager, Help Center and more. It’s useful to now have App Center indexed as well. Search is an area where Facebook has always been lacking but has a major opportunity. We’ve seen the social network making a number of changes that show its interest in improving this area.

The addition of App Center categories to search could also lead more users to the dashboard. In early October, Facebook said 220 million people visit App Center each month. Users have been prompted to visit with links on the login page and above News Feed, as well as in the bookmarks bar on the left-hand side of the homepage.

SongPop is Facebook’s top rated social game of the year

Facebook today announced that according its users’ ratings and engagement levels SongPop is the top rated social game of the year. Facebook made the announcement during Le Web technology conference in Paris, France, where SongPop co-founders Romain and Mathieu Nouzareth started their careers.

The music trivia game was built to integrate the social network across Facebook, iPhone and Android. You can read our review of the game here.

Spanish developer Social Point’s social mobile game Dragon City was No. 2 and Top Free Games’ Bike Race (another social mobile title) was No. 3.

It was a big year for social mobile games in general, with only 56 percent of the games available on Facebook, while the remaining 44 percent are social mobile games available on iOS and Android.
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Facebook brings keyword search to App Center

Facebook is rolling out search for App Center, allowing users to not only find apps by name but also by keyword such as “cars” or “fitness.”

This change will help users better navigate App Center, which previously offered filters by category but no direct search. The main search bar in the Facebook header wasn’t always helpful, either, since it searches people, pages, places, groups and everything else on Facebook. Plus, it does not yet offer keyword search. If users don’t know the title of what they are looking for, it isn’t very helpful.

App Center is more focused on discovery and surfacing web, mobile and canvas apps that users are likely to be interested in based on other apps they’ve tried and what their friends use. App Center allows users to see photos and read details about an app before adding it. These details are now indexed in App Center search, and Facebook says there are no changes or additional requirements for developers. The company did not offer details about the search ranking system, but it is likely a combination of keyword relevance, MAU, star ratings, friend connections and more.

In a blog post Wednesday night, Facebook announced that it would allow developers to create Sponsored Results ads for their canvas apps through the App Dashboard in four steps. Developers can create more targeted search ads through the Power Editor or the API, as was available previously. Sponsored Results appear in the main search typeahead, and for now there are no ads in the App Center search module.

In early October, Facebook said 220 million people visit the App Center each month, and compared to users of the previous Apps and Games dashboard, users who discover apps through App Center are 40 percent more likely to return to the app the next day.

Facebook tests new design for mobile app install ads

Facebook appears to be testing a new design for its ad unit that developers use to promote their iOS and Android apps within Facebook’s mobile News Feed, according to a screenshot by ESPN’s SVP of Product Development Ryan Spoon.

The latest iteration of the ad unit is larger and includes the “Install Now” call to action. Rather than using the app’s logo, the unit uses an app’s header image from App Center. The ad now also includes an app’s star rating.

Facebook introduced ads for mobile developers to drive traffic to a download page in the Apple App Store or Google Play in early August. The ads leverage the extensive targeting options of the Facebook platform, giving developers a way to reach a more specific audience than they could through other mobile ad networks. Another benefit is the placement directly within in News Feed.

These mobile ads are only available to a limited number of beta partners for now, but mobile developers can sign up to be part of the beta here. The ads are sold on a cost per click basis through a bid model, similar to Facebook’s other ads.

Previously, this ad unit was part of a “Try these apps” module, sometimes among organic recommendations. The ad featured an icon to indicate that tapping the link would lead users to their device’s native app store, but it’s likely that few users recognized this meaning. With the new “Install Now” language, users might be less surprised when they’re sent outside of Facebook.

Top image from Ryan Spoon.

App Center recommendation engine drives more repeat app users than previous Facebook games dashboard

Facebook today revealed that users who discover apps through App Center are 40 percent more likely to return to the app the next day compared to users of the previous Apps and Games dashboard.

Facebook App Center, which launched in June and became available worldwide on Aug. 1, is a personalized section of the desktop and mobile site to help users discover new apps on Facebook, mobile and the web. It focuses on surfacing high quality apps that users are likely to be interested in based on other apps they’ve tried and what their friends use.

In a note, Facebook engineers involved with App Center explained the technical challenges of building such a recommendation engine. They said App Center is similar to News Feed in that it learns users’ preferences to serve recommendations that are “timely, socially relevant and unique to them.” Demographic information, friend activity and a user’s history with apps all factor into Facebook’s app recommendation algorithm.

As for determining quality, Facebook uses a combination of star ratings and daily active user totals. Facebook conducts random sampling to collect star ratings shortly after someone has used an app. Facebook takes an app’s average rating and then includes a confidence adjustment based on the total number of ratings the app has. The company also considers an app’s average daily active users rather than monthly active since MAU can be skewed by spikes in activity throughout the month.

This recommendation engine — along with longer app descriptions, more images and additional information about which friends use an app or what in-game purchase is most popular — make App Center a better way for users to learn about apps than the previous apps and games dashboard.

Facebook says 220 million people visit the App Center each month. Users have been prompted to visit with links on the login page and above News Feed. In today’s blog post Facebook officially announced the My Apps section of App Center where users can manage the apps they’ve added and control their permissions settings — something reader Ryan Plant first pointed out to us in August.

Image credit: Ryan Plant

Facebook roundup: Blackberry update, patent suit, App Center, studies and more

New Facebook for Blackberry app available – RIM released a new version of Facebook for Blackberry this week, including improvement for event management, birthdays and navigation. The new app includes event information and RSVP functionality. Users can integrate birthdays into their phone’s calendar and receive reminders to write on friends’ walls. There are also updated icons on the navigation grid.

University of California sues Facebook and others for patent infringement - University of California patent licensee Eolas Technologies Inc and the Regents of the University of California filed lawsuits against Facebook, Wal-Mart and Disney on Wednesday over four interactive technology patents they believe the companies are infringing. Two of the patents cited in the lawsuits were declared invalid in February when they were used in a separate lawsuit against Amazon, Google Yahoo and others. Facebook claims the suit is without merit.

Facebook friends influence voter turnout, study finds – Facebook researchers and scientists at the University of California, San Diego found that people who saw messages on Facebook that their friends had voted were more likely to go to the polls than those who didn’t see a similar message. A study conducted they during the mid-term congressional election found that that 80 percent of those who voted were influenced to do so by someone they knew online.

Study suggests small websites benefit most from social sharing – Smaller news sites tend to see a greater percentage of their traffic come from sites like Facebook and Twitter, according to a study conducted by Northwestern professor Rich Gordon and Syndio Social CEO Zachary Johnson and paid for by The Chicago Community Trust. Small websites got more than half their referrals from social media, while the large sites got only about 19 percent from social.

Facebook promotes App Center above News Feed - Some Facebook users saw a large message about the new App Center above their News Feed this week. The social network launched App Center in June as a new means of game and app discovery. The App Center includes more visuals and an improved permissions authorization flow compared to the previous Apps and Games Dashboard. Facebook says 225 million users visit App Center each month, though that number is likely driven significantly by prompts and promotions like the one below.

Facebook looks to drive app installs with ‘send to mobile’ button in News Feed

Facebook is testing a “send to mobile” button in the hover card that appears when users mouse over app stories in News Feed.

The feature, which initially launched as part of App Center, helps users discover mobile apps while browsing Facebook on desktop. If an app has a mobile component, users will see a “send to mobile” button when they hover over the name of the app within the feed. Clicking the button will send a notification to the user’s phone and link to the app’s mobile site or native app download page in the Apple App Store or Google Play.

“Send to mobile” is one of the stand-out features of Facebook’s App Center, however, users are more likely to learn about new apps from their friends through News Feed so it’s useful to have the button available here as well. Developers might also benefit from having a “send to mobile” option on their app’s Facebook fan page, and we’ve wondered if the social network would create a plugin that allows developers to put a “send to mobile” button on their websites.

Facebook has taken a number of steps to position itself as a “growth engine” for apps on the web and native mobile operating systems. In the past 30 days, Facebook sent users to the Apple App Store and Google Play 146 million times, via clicks from News Feed, Timeline, bookmarks and App Center. The company also announced this week a new mobile ad unit, which will link directly to an app’s download page.

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