Facebook Working on Location-Based Mobile-Ad Product

Facebook Inc. (FB), owner 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 start to imagine what the product evolution might look like over time, particularly for retailers,” Carolyn Everson, Facebook’s vice president of global marketing solutions, said in a telephone interview. “We’ve had offers being tested over the last couple of months.”

Facebook, whose shares fell 17 percent from its initial public offering last month, is increasing mobile-ad efforts amid concern ad revenue isn’t keeping pace with users’ migration to smartphones. U.S. mobile-ad spending is expected to grow 80 percent to $2.61 billion this year from 2011, when Google Inc. (GOOG) received half of such ad dollars, according to EMarketer Inc.

“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 & Co. in San Francisco, who rates Facebook outperform.

“Having some location-based element to advertising can be very powerful, and if you combine that with all the personal data Facebook has, the potential is enormous.”

Mobile-Ad Testing

Facebook, based in Menlo Park, California, has been testing new ad products and showed almost a dozen ideas in April to a client council of corporate chief marketing officers and agency executives, Everson said. Currently, mobile advertising 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.

There’s been “really significant interest” in the mobile- only news-feed ads Facebook started selling earlier this month, Everson said.

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

Facebook, which already allows companies to serve ads based on ZIP code, has come under scrutiny from regulators in the past about how it uses data in advertising. A mobile product could use more specific, real-time data. The company also allows users to share a physical location when posting an update.

“It’s more challenging to get that advertising and have it be accurately targeted at the user, and to do so in a way that doesn’t make the consumer uncomfortable,” said Noah Elkin, a mobile-advertising analyst for EMarketer.

Mobile-ads accounted for 1 percent of all ad spending in 2011, according to EMarketer.

Facebook rose 4.7 percent to $31.41 at 4 p.m. in New York.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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