Facebook close to 'holy grail' of advertising

Facebook, owner of the world's largest social network, says it's working on a location-based mobile-advertising product that will allow companies to target users with real-time data showing their whereabouts.

"Phones can be location-specific so you can imagine what the product evolution might look like over time, particularly for retailers," said Carolyn Everson, Facebook's vice-president of global marketing solutions.

Facebook, whose shares fell 17 per cent from its initial public offering last month, is increasing mobile-ad efforts amid concern advertising revenue isn't keeping pace with users' migration to smartphones.

Mobile-ad spending in the United States is expected to grow 80 per cent to US$2.61 billion ($3.28 billion) this year from 2011, when Google received half of mobile-ad dollars, according to EMarketer. Only 1 per cent of all ad spending was on mobile ads last year.

"The holy grail of advertising is finding people when they are at their closest point to making a purchase," said Colin Sebastian, an analyst with Robert W. Baird in San Francisco.

"Having a location-based element to advertising can be very powerful, and combined with all the personal data Facebook has, the potential is huge."

Facebook has been testing new ad products and showed almost a dozen ideas in April to a client council of corporate marketing officers and agency executives, Everson said.

Mobile advertising currently appears in the form of stories in a news feed, where users also find updates from friends like new pictures or relationship status.

Facebook's offers are available on both mobile and desktop versions of the site, and Everson said there'd been "significant interest" in the mobile-only news-feed ads which started selling earlier this month.

Facebook hasn't said when it may roll out a location-based ad product, which could take advantage of information shared by almost 1 billion people that use the site.

Facebook, which already lets companies serve ads based on ZIP code, has come under scrutiny for how it uses data in advertising. The company also allows users to share a physical location when posting an update.

"It's more challenging to ... have [advertising] accurately targeted at the user, and in a way that doesn't make the consumer uncomfortable," said Noah Elkin of EMarketer.

- Bloomberg