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Facebook broadens advertising on mobile service

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Facebook has taken a step towards easing investor jitters about its future revenue potential by making it easier for advertisers to reach its mobile users.

The company, which is facing lawsuits from investors after its troubled initial public offering (IPO) last month, yesterday started letting marketers create ads specifically designed for its smartphone and tablet apps.

Facebook Mobile App redesign screenshots


It is also letting companies buy a type of adverts on mobile known as "sponsored stories", which are promoted status updates that appear direct in users' news feeds.

This represents a significant shift for the newly-listed company, which has faced pressure to lift its restrictions on where advertising can appear across its social network.

Facebook, founded by Mark Zuckerberg while at Harvard eight years ago, became the first American company ever to debut on the stock market at over $100bn (£66bn) on May 18.

But around $32bn has since been wiped off its value due to fears over its ability to truly transform into a mobile player.

Smaller investors are suing Zuckerberg, Facebook and the banks who led the IPO over reports alleging that analyst warnings over Facebook's reduced future revenue potential were kept from them.

A key issue has been whether Facebook would be able to capitalise on the increasing use of its social network by people on mobile devices.

Previously, the company only allowed advertisers to buy "sponsored stories" on its website, but that has now expanded to Facebook's mobile apps, potentially unlocking a major new revenue stream.

Facebook App Center screenshot

© Facebook

BBC News Facebook App screenshot














However, there have also been concerns over the effectiveness of Facebook advertising, particularly after car maker General Motors pulled its $10m Facebook advertising account last month.

A poll by Reuters/Ipsos Mori on Monday revealed that four out of five Facebook users have never bought a product or service as result of advertising on the site.

Facebook generated $3.7bn in revenue last year, mostly drawn from advertising, but a slowing of revenue growth in the first quarter of 2012 led to fresh fears among the markets.

But the company also faces a delicate balance in offering options to advertisers while not alienating its 900m worldwide users, effectively the lifeblood of the business.

A Facebook spokeswoman said that there would be a limit placed on how many mobile ads can appear in users' mobile feeds, although did not confirm what this was.

She said that the changes were intended to make Facebook's advertising system more accessible to companies.

"We want to make it easier for advertisers to get the distribution they want," she said.

Shares in Facebook yesterday closed down 3.8% at $25.87, after setting their all-time low of $25.75. The shares had hit a peak of $43 after debuting at the IPO price of $38, but have fallen steadily ever since.

Alongside bringing ads to its mobile platform, Facebook has also recently been making more in-roads into mobile services; including the acquisition of photo-sharing app Instagram for more than $1bn, the launch of an Instagram-style mobile service called Facebook Camera and a rumoured Facebook smartphone project, codenamded Buffy.

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