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Facebook Scores Twice

by Richard Guppy | Aug 02, 2013

A year ago I ended a positive blog on Facebook – when its share price had fallen to half the IPO price – with ‘This believer will be watching to see if his expectation is met..’

Now (first win) Facebook’s shares have finally recovered to their $38 IPO level.  Driving the recovery is performance in mobile ads: 41% of all ad revenue in 2Q13 came from mobile ads.   I’ve often found that figures are interesting, but graphs are really interesting.  The graph below brings out fully the dramatic rise in Facebook’s mobile ad monetization. It uses information from Facebook's 10Q reports.

The second win to report for Facebook is its enduring utility.  As advertised, Facebook does provide a social layer across all verticals in ICT.. at least, on the consumer side and the consumer-facing side of business.  Even while we users may find fault with Facebook, we cannot do without it.

Here is the original blog.  I think its message is still good, now alongside the frankly surprising performance in mobile ads.  The new Global Forces Dossier on Facebook takes a complete view of where Facebook may be heading:

 Facebook: Investors Flee But Long-Term Strategic Opportunity Remains (30 August 2012)

Facebook had a shaky IPO, leading to its $38 launch price in May halving to $19 in three months.  Investors are worried at several issues, notably the shift from Facebook Fixed to Facebook Mobile, coupled with Facebook’s admitted absence of Mobile monetization and the challenges of achieving it in future.  The more success Facebook has on Mobile at the expense of Fixed, the thinking goes, then the less money it may make. 

Personally, I’m a believer in Facebook.  My former scepticism has changed into respect for the way that Facebook is improving its products to the point where they are becoming seriously attractive.  For example, the combination of the new Timeline with ‘Home’ is a powerful mix of a personal story / history with prioritized ‘new stuff’.  The default for new posts to be ‘private’ rather than public is reassuring in terms of privacy concerns.  The Mobile experience is addictive.

Then there is the core ad proposition: that users will take more notice of ads linked to what they and their friends do and like and buy.  As Facebook rolls this model out across more and more partners, ‘social’ will become more and more a utility in our everyday lives, on top of keeping us in touch with friends.

Add in that 80% of Mobile users are also Fixed users of Facebook; that Facebook has yet to roll out ads to third party sites; that Mobile monetization will arrive in due course; that deep integration with iOS and Android will happen soon so that when you do anything on those OS you can record it on Facebook; that ‘social’ is still in its infancy; that Apps other than for gaming are now targeted by the new Facebook Apps Center; that emerging markets are under-monetized by Facebook today but have many users; that Facebook is the leader and has a very sticky brand with all those connections and stored content.. and in my opinion you have the conditions for significant long-term success, impact and disruption by Facebook.

The full story is in the new GFP Dossier on Facebook.  This believer will be watching to see if his expectation is met..

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