News Column

Facebook Shares Soar as Mobile Bet Pays Off

July 26, 2013

Andy Goldberg, dpa

Facebook is finally a hit with investors, more than a year after the fiasco of its insanely over-hyped initial public offering.

Shares in the social-networking giant soared more than 25 per cent Thursday, a day after a positive quarterly earnings report.

The company's legions of 20-something workers had finally used their brainpower to solve the biggest and most elusive conundrum of modern business - how to make and sell effective mobile advertising.

Facebook blew past expectations with revenue that came in at 1.81 billion dollars for the second quarter, against expectations on Wall Street of 1.62 billion dollars. Even more significant was that mobile ads made up 41 per cent of total ad revenue, up from 30 per cent in the prior quarter.

That drove Facebook shares to 34 dollars on Thursday, their highest point in a year and almost double the nadir of 17.55 dollars reached in September.

Now it only looks like a small matter of time until the company gets back to the 38-dollar price it opened at in a record-breaking 104 billion dollar IPO that was almost immediately savaged by investors.

Even before it went public, Facebook had admitted that its main business challenge was monetizing its billions of page views at a time when an increasing number of its members were accessing the site on mobile devices, whose limited screen space made serving up ads all the more challenging.

"Mobiles are a huge opportunity for Facebook," Facebook chief executive and founder Mark Zuckerberg said in his first public earnings call a year ago. "That's why we're so focused on investing in our priorities of mobile, platform and social ads."

One year later, and a Mission Accomplished sign should be hanging outside the company's sprawling Silicon Valley headquarters.

"The work we've done to make mobile the best Facebook experience is showing good results and provides us with a solid foundation for the future," Zuckerberg said Wednesday. "When it comes to mobile, I'm very pleased with the results. We have more active users on mobile than on the desktop, and soon we'll have more revenue on mobile than on the desktop."

The key for Facebook has been integrating relevant and high quality ads into people's news feeds.

As CNET.com noted: "Surprise! Advertisers, particularly those that want eyeballs on mobile, don't just like Facebook, they love it. And, as it turns out, you're totally cool with more ads in your stream."

As it turns out, Facebook now has more than 1 million regular advertisers, who are able to tap into the massive amount of information Facebook holds on its users to deliver highly targeted messages to receptive audiences.

Comments from financial analysts indicated that the company has indeed found the Holy Grail of mobile ad success - seizing the lead over rival Google in what is likely to emerge as a key battle for advertising dollars. Time.com called it "the most important consumer internet metric to watch."

"Facebook is proving it is a must-spend area for advertisers," said TheStreet.com, noting that the financial success came even without monetization of Facebook-owned Instagram, which is growing at a staggering rate. The company has yet to unleash the video ads weapon, which could add billions of dollars more to its bottom line.

Facebook's Graph Search, which allows users - and advertisers - to identify Facebook members with individual traits is likely to give revenues a major boost.

"If Facebook were a car," The New York Times concluded, "it just went from zero to 60 miles per hour in six seconds."


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Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH. Distributed by MCT Information Services


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