Social Networks Pursue Mobile Ad Dollars, E-Commerce

The fledgling mobile transactions market, which some experts expect to reach $1 trillion globally by 2015, is about to get a hyper-boost from Facebook, Twitter, Square and other social media players that consider e-sales the new end game.

Despite discrepancies among forecasters, mobile transactions are clearly morphing into a critical revenue stream for retailers and products and service providers. The 15% leap in online holiday spending to more than $35 billion, and the overall retail e-commerce grew 13% to $161.5 billion in 2011, according to comScore, were driven by consumers’ accelerated use of mobile price comparison and payment apps.

This activity has been fueled by Square, which progressively facilitates mobile consumer transactions by acting as a medium between merchants and payment networks (credit-card companies and banks) across all smartphones, tablets and other mobile devices.

In addition to securing consumers’ personal information and providing effective user discount incentives, Square creatively uses hyper-local and social media app components--all of which are driving a flood of competing mobile payment solutions.

The mobile transaction opportunity is huge, according to Wedbush Securities, which estimates the transaction volume across Square’s four payment networks (Visa, MasterCard, American Express and Discover) was more than $6 trillion in 2010.

Little wonder that Facebook and Twitter are positioned for a bigger piece of the action by way of an aggressive mobile ad grab, which the social networks consider a means to a transactional end.

Facebook is leveraging off of its “like” and “own” buttons and new Timelines by inserting featured stories (or relevant marketing-inspired posts) into mobile feeds that are squarely aimed at its 425 million active mobile users. Facebook recently announced a partnership with UK mobile billing and analytics provider Bango, considered a step toward monetizing expanding browser-based mobile platform beyond its Facebook credits program.

While the domestic mobile ad market is an estimated $2 billion, it is a sure stepping stone to the larger mobile transaction market, which can be incrementally shared by all players. Facebook is playing off its competitive share of online display ad revenues in the U.S. and the UK and reliance on small businesses. It must make a major play for mobile transactions to justify its proposed $100 billion public valuation.

Competition for the mobile transaction market is coming from many corners, including Twitter, which announced an expansion of its self-serve advertising program with American Express as a partner. The goal is to attract the small-to-medium local businesses where mobile transactions and marketing can be a big win-win for all concerned. The program opens up to anyone with a credit card later this year.

Location-based interactivity will transform advertising and marketing into precursors to secured, single-click sales.

Social networks are serious contenders for mobile advertising and commerce dollars; they account for one in every five minutes online globally and reaching 82% of the world’s Internet users (or 1.2 billion users), according to comScore. With transactions being the ultimate objective for all marketers, it is likely that by decade’s end, Facebook and Twitter will be vying for more of the television’s $9 billion upfront ad pie alongside Google and Hulu, which are aggressively positioning themselves this spring with the Big Four TV networks.

The direct line to consumers adeptly secured and mined by Facebook will give it an edge as marketers increasingly realize transactional revenues as a measured ROI.

A recent Yankee Group survey revealed that consumers value banking and transaction apps second only to social networking apps as the most important on their smartphones, a simple but impressive indication of just how comfortable they have become with using mobile devices for secured personal transactions.

It is a sure sign of the next phase of connected growth. What we’ve seen so far has been all about consumers learning to “navigate their lives,” according to LinkedIn co-founder Reid Hoffman. What we’re about to see unfold is how consumers use connectivity to monetize their lives. The race is on for a piece of that new economy.

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