Mark Zuckerberg, CEO of Facebook Inc (NASDAQ:FB) had a lengthy chat with TechCrunch last night. Sell-side analysts and investors seem to be excited about the stock as a result of the interview. We are still unclear of what Mark Zuckerberg said that makes the intrinsic value of Facebook Inc worth 7% more (shares are up close to 7% in pre-market trading), but here are some highlights from Topeka Capital Markets.
Topeka came away from Mark Zuckerberg’s first public presentation since the IPO incrementally more positive on his ability to manage Facebook Inc (NASDAQ:FB)’s mobile transition and to bring to fruition the optionality we see embedded in the platform. Speaking at the TechCrunch Disrupt conference yesterday, Mark Zuckerberg sounded confident that Facebook Inc (NASDAQ:FB) can monetize mobile and extend the platform to online search. Importantly, Mark Zuckerberg stated that while Facebook Inc (NASDAQ:FB) is a mission driven company (building great services to make the world more connected and open) they are also business driven (making money) and the two concepts are interrelated into the company’s philosophy. Topeka thinks (for still unknown reasons that) this ‘should assuage fears that a focus on their mission trumps monetization efforts at the firm.’
“Really Optimistic” on Mobile Monetization.
Mark Zuckerberg stated that he was really optimistic on mobile monetization and sees mobile as a huge opportunity. The recently launched mobile ad units are performing better than the ads on the right hand column on desktop, and per the amount of time users spend on mobile, he thinks they will make more money than on desktop. His comments taken together gives us confidence that FB should monetize mobile in a big way in 2013/2014. He provided several stats on mobile, including: 1) mobile users spend more time on FB and are more engaging than desktop users; 2) mobile users are more than 2x more likely to use FB six out of seven days a week; and 3) since the launch of the new FB app on iOS the number of news stories users consume have doubled. He once again stated that FB is not building its own phone and is focusing on more
deeply integrating FB into existing devices on the market. He stated that the company’s biggest mistake was to focus for too long on HTML5 where they should have focused on native. An updated Android app is due out soon. On Instagram, FB’s plan is help them grow to hundreds of millions of users. However, he did not indicate how FB plans to monetize the site.
“Big Opportunity” in Search.
Mark Zuckerberg stated that users generate 1B searches on FB per day and while the vast majority are users searching for other users, a meaningful portion are commercial in nature such as searches for business pages, brand pages, and apps. He views search as a big opportunity and sees search engines evolving towards providing answers rather than relevant links. To that end, he believes FB is uniquely position to answer queries that are socially based. There is a team currently working on search and at some point they will launch a full service. Note that FB is currently testing Sponsored Results in the search box. Recall that a key part of our thesis on FB is the option to launch a social based search engine, which we believe FB can do cost effectively given that the URLs are provided by users. Topeka had previously estimated that a fully loaded social search engine would be worth approximately $7 per share to Facebook Inc (NASDAQ:FB). At 1B searches per day today, that value looks conservative relative to the 250K per day assumption in our hypothetical search model.
Gaming Remains Active on FB.
Mark Zuckerberg stated that 235mm people are playing games monthly on FB and that number is up from previous periods.
(Disclosure: No position in any securities mentioned)