The recently-signed strategic deal between
Mondelez International (
reflects the growing importance of the social networks as
advertising partners. The deal encompasses 52 countries and
Facebook's enhanced reach is expected to boost Mondelez's
footprint in the long run.
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Per eMarketer, Facebook is set to benefit significantly from a
shift in marketer spending from traditional to digital
advertisement. The growth will be particularly driven by higher
mobile ad spending.
In the recently concluded fourth quarter, Facebook's mobile ad
revenues were $1.25 billion, which comprised 53.0% of ad
revenues, up from 49.0% in the previous quarter. Advertising
revenues were driven by increasing mobile engagement, higher
number of marketers, continuing investment in new products and
robust performance of its newsfeed ads.
We believe that Facebook has gained significant traction in its
mobile ad business within a very short span of time. This
combined with the massive user base and its ability to track
personal details over time makes it a formidable force in the
online ad market.
Initiative such as Internet.org is expected to boost Facebook's
attraction for marketers, going forward. As part of the
initiative, Facebook is seeking partnership with three to five
wireless carriers which will roll out telecom networks and offer
data services at affordable prices particularly in developing
Facebook is already partnering on a regional basis (in Paraguay
and Philippines). Moreover, Facebook's recently acquired
short-message service provider WhatsApp has significant
international presence, particularly in Asia and Europe, which
will expand its footprint, going forward.
If this initiative succeeds, it will connect billions of people
who will be able to access basic data services such as search and
Facebook. This opens up a totally new set of Facebook users, who
marketers can target, and for a consumer-oriented company such as
Mondelez, this presents a huge growth opportunity.
We believe Facebook will continue to gain traction in the digital
advertising market in 2014. Instagram's growing popularity and
new products will help the company to face intensifying
competition from the likes of
, Snapchat, Tumblr and Pinterest, going forward.
Currently, Facebook has a Zacks Rank #2 (Buy).