It's no secret that
had a rough 2012.
Though insiders benefitted from Facebook's IPO, most investors
did not. In fact, the shares lost half their value when they
reached $17.55 several months ago. Even now, the stock trades
roughly 20% below its $38 IPO price.
Many investors have been screaming manipulation because of the
botched IPO. An overabundance of stock orders caused computer
systems to freeze, making many investors uneasy about owning the
stock. However, many people ignored the possibility that Facebook
was simply overvalued because manipulation was a much juicier
It's likely the company was grossly overvalued at its IPO. In the
past, Facebook relied heavily on PC advertising. But PC ad
revenue slowed. Facebook needed to compensate for that decline by
increasing its mobile business.
And this is a big challenge for many businesses - Facebook among
them. Mobile is a huge opportunity. Though it may take years for
mobile to outnumber PCs in terms of units, usage trends clearly
favor mobile going forward.
Analyst Joe Bonner of Argus Research, who rates FB shares, noted,
"Monetizing mobile has been an issue. If you can't sell ads to
those people, you've got a problem."
Facebook has a big problem. And they'll need to fix it soon,
because mega bucks are at stake ahead of this week's earnings
Mobile advertising is a huge market. However, Facebook has
struggled to connect with the rapidly growing base of mobile
users. Facebook claims that 600 million of its users check their
accounts on a mobile device - that's up from 376 million a year
More people are shifting from the PC to their smart phone,
creating a giant problem for advertisers. For example, Google
noted during its recent earnings conference call that the price
advertisers pay per click decreased 6% from a year ago. That's
because more advertisers are using mobile, which typically costs
less. Also, advertisements that are popular on the PC haven't
performed as well on mobile devices because the screen is
Though Facebook has been the face of this mobile advertising
challenge, it isn't alone. Mobile users are too large an audience
for marketing departments to ignore. Data from eMarketer shows
that mobile ad spending is poised to increase substantially over
the next four years.
Data from eMarketer
Facebook CEO Mark Zuckerberg understands better than anyone how
important mobile is to his business. Though mobile represented
only 6% of Facebook's $3.5 billion in revenue (nine months ended
September 30), Zuckerberg believes it will overtake desktop ads
in the future. This prophecy could happen quicker than many
people believe. eMarketer expects Facebook to report $851 million
in mobile ad revenue - an estimated 150% annual increase - in
Mobile ads will be an integral part of Facebook's future success.
In fact, strong mobile revenue guidance could bring FB back above
$100 billion market capitalization. I'm a big believer in FB,
which is why I advised readers to
buy the stock
at $19 last year. I
my shares and may add more after this week's earnings