Elephant in the room

There is an elephant in the room. That of falling eCPM's within social media applications. I am going to discuss facebook applications as this is the most relevant in terms of volume, growth, and overall revenues in the market. Many facebook apps built revenue projections based on eCPM's they were seeing several months ago, now have to revamp their thinking, as they are now earning a half, or even a quarter, of what they were previously seeing! This is not the case for all apps, but overall the general trend seems to be downwards. First let me apologize to those blog readers who care more about the advertising side than the publishers angle. Now, let me try and explain why this is happening?

1. Mobile Advertising Regulations - Recurring billing from mobile services were one of the driving forces behind strong eCPM's. Users - whether they were aware or not - completed these offers in droves, driving revenues to the ad networks and back to the publishers. Recent media coverage required facebook to take certain actions to modify the wording, presentation, and billing of these offers.

2. User Information - A few ad networks decided to take advantage of information in an inappropriate manner. Creating deceptive ads and storing user information. This caused a major backlash from facebook users, causing facebook to impose strict guidelines. Applications can no longer pass ANY user information to ad networks. This means even the ad networks that were using this information to legitimately target advertisements, are now unable to do so.

3. Ad Fatigue - The same ads that were working/converting just a few months back now have a significantly lower CTR and a significantly lower conversion rate. Users are becoming 'bored' of clicking through on ads within social media applications and are rather sticking to the main attraction.


Is this the end of making money on social media applications? No - Definately Not! Several reasons:

1. Despite dropping eCPM's in the past 6 months, there has been a recent rebound in the past few weeks. Ad networks have been diversifying their ads, improving their technology, and optimizing galore.
   
   
2. Despite dropping eCPM's, applications are growing bigger and the overall facebook user base keeps growing - generating more impressions overall.
   
   
3. Whereas previously only impressions from certain countries were monetizable, global impressions are actually starting to see an increase in eCPM's!
   
   
4. There is a still a massive and growing revenue opportunity in the virtual currency space and more and more application developers are beginning to take advantage of this.
   
   

Looking forward to your comments on the above - and any other thoughts.