By SHAYNDI RAICE
Facebook Inc. plans to launch a new type of mobile advertising that will target ads based on the apps that consumers use, in an effort to boost mobile revenue and find a way to make money off the millions of websites that connect to the social network.
The Menlo Park, Calif., social network plans to later this month offer developers and advertisers the ability to place ads for apps directly in a users' News Feed on their mobile devices, whether the consumer has noted an interest in that company or not, said people familiar with the company's plans.
Facebook engineers have built technology that lets the company track what apps people have on their phones and target ads based on that information, these people said. Facebook would charge companies every time an app is installed on users' smartphones, one of the people said. Facebook can charge significantly more for an app installation than it can for the traditional cost of every one thousand people who have viewed an ad.
In what would be a typical scenario under the new ad product, if a user is a frequent player of social game maker Zynga Inc.'s Words with Friends, ads for other Zynga games will show up in that user's News Feed on their mobile device, said the people.
The new mobile-ad product is a departure for Facebook because in the past, the social network has only targeted ads based on whether a person has "liked" a brand or company on its social network.
Facebook is now able to target mobile ads based on app usage because of its widely popular Facebook Connect feature, which lets people log into millions of websites and apps as varied as Amazon.com and Yelp across the Web with their Facebook identity. The move marks one of the first times that Facebook is moving to make money off its Connect feature.
Facebook is considering launching the new mobile ad product on July 16, before it reports its first earnings as a public company on July 26, said one of the people.
But some Facebook executives are concerned about a potential backlash over the new mobile ads from privacy advocates, since the product allows Facebook to know which apps users have downloaded on their phones and then target ads based on that information. Facebook is also figuring out ways to track what people do when inside the apps, and target ads based on that behavior.
About half of all ads on Facebook are for apps, said one of the people familiar with the company's plans. Apps are also created by big brands as a method of advertising on Facebook. Ford Motor Co., for example, has an app on the social network that lets users create their own Ford Mustang.
Given the concern over privacy issues, there is a possibility Chief Operating Officer Sheryl Sandberg may mention the new ad product in Facebook's earnings call with analysts and then launch the product on July 30, one of the people said.
Facebook is under pressure to increase the amount of money it makes off its mobile users. The company has 900 million users globally and more than half of them access Facebook on a mobile phone. But to date, Facebook has offered advertisers only limited ways to pay to reach those users.
In recent months, Facebook has become more aggressive about attracting mobile users and finding ways for advertisers to reach them. In early June, the company announced it was expanding how marketers can pay for "sponsored stories," the company's only mobile-ad product.
Write to Shayndi Raice at shayndi.raice@wsj.com
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