When Facebook Inc (NASDAQ:FB) started transitioning much of its business to mobile, investors were understandably skeptical. But that’s all starting to change, thanks to the company’s last earnings report. Analysts at William Blair & Company say their recent conversations with advertisers about their experiences with Facebook have been extremely positive.
Facebook’s mobile ads are the highest rated
Analysts Ralph Schackart and Ryan Domyancic issued a report to investors with their findings regarding their conversations with Facebook advertisers. They found that the social network’s advertising platform is actually preferred by many advertisers because of the platform’s targeting capabilities and price efficiency.
In fact, they found that some advertisers would be willing to pay triple the cost per mille rate they bought an ad for if there had been another bidder for the spot. The analysts believe this shows that there is “significant upside” for the rates Facebook Inc (NASDAQ:FB) could charge in both mobile and desktop.
Other indications of Facebook’s revenue
The analysts note that one industry participant noticed that the social network only allocated about 30 to 50 of its more than 1,000 engineers. They believe that Facebook Inc (NASDAQ:FB) has allocated a fairly small amount of engineers to its ad platform and that if it assigns more of them to monetization in the future, it will be able to grow revenue.
They also note that a number of ad buyers saw the Facebook Exchange newsfeed impressions grow “substantially” during the second quarter, although they noted only “moderate” growth in July and August. As a result, the analysts believe that the social network’s desktop newsfeed impressions added to its second quarter outperformance and that third-quarter upside could be softened by a slowing of inventory—especially if growth does not accelerate this month.
Even though Facebook Inc (NASDAQ:FB) shares have risen 66 percent so far this year, the William Blair analysts believe they will go even higher, possibly hitting $52 in the next 12 months. Their model assumes the company’s cost per mille hits 30 cents next year from its current level of 24 cents. It also assumes that the social network holds its 19 times 2014 EBITDA multiple, which is about in-line with its comparable group.
