Facebook Inc (FB): The Ongoing Push For Monetization


Facebook Inc (NASDAQ:FB) shares posted astronomical growth on Thursday after the company’s earnings report, gaining 30 percent in a single day. Everyone is talking about the rapid growth the company has shown in mobile advertising, but even management is cautioning about the company’s results going forward.

Facebook Inc (FB): The Ongoing Push For Monetization

Facebook breaks into mobile

A year ago, Facebook Inc (NASDAQ:FB) had no revenue from mobile advertising, so the impressive growth in a year’s time is unlikely to be repeated. Analysts and investors like to look at things from a year over year perspective, and year over year, the growth looked phenomenal. Mobile went from zero percent of the company’s ad revenue to 41 percent in less than a year.

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On the company’s investor’s call on Wednesday, Chief Financial Officer David Ebersman pointed out that newsfeed ads started to make their impact on Facebook’s revenue in the third and fourth quarters last year. As a result, year over year comparisons are difficult.

Analysts view the positives in Facebook

Nonetheless, analysts are starting to awaken to the thought that Facebook Inc (NASDAQ:FB) is a company with growth its the future. Analysts at several firms have issued positive reports in light of the company’s last quarterly results. Wedbush and JPMorgan in particular view the stock in a positive light.

Facebook user engagement increases

JPMorgan analysts Doug Anmuth, Kaizad Gotla, Bo Nam and Diana R Kluger issued a report focusing on user engagement on the social network. They compared Facebook Inc (NASDAQ:FB)’s results with the latest comScore mobile data, which support comments made by management regarding user engagement. Investors have been concerned that Facebook users are turning their time from Facebook itself to other services like Instagram—which it owns but has yet to monetize—or WhatsApp.

However, the analysts believe that these other services are having “only a modest imact on Facebook” and that “higher mobile usage is more than offsetting desktop declines.” JPMorgan analysts have an Overweight rating and $44 per share price target on Facebook.

Mobile growth on Facebook should continue

Wedbush analysts Michael Pachter, Nick McKay and Nick Citrin focused more directly on mobile growth, which they believe will continue “for the foreseeable future.” They point to the ongoing shift from desktop to mobile engagement as well as continued user growth.

In their view, Facebook Inc (NASDAQ:FB)’s high level operating expenditures guidance for the current fiscal year sets the company up to either meet or exceed Wall Street’s expectations for the rest of the year. “Although the company is still in its growth phase, by setting the spending bar so high for the year the company could have the ability to hold back on spending should it track below earnings expectations in a future quarter,” the analysts wrote.

They maintained their Outperform rating on Facebook and increased their price target from $35 per share to $39 per share. They also highlighted the fact that the social network has other opportunities for growth that it hasn’t even begun to capitalize on, like, for instance, Instagram. They see Instagram as providing an important supplement for mobile ad revenue.

The future of Instagram

One of the questions posed in the company’s investor meeting on Thursday focused on monetization of Instagram. Chief Executive Officer Mark Zuckerberg said that Instagram is “just growing so quickly.” It now has about 130 million active users each month.

He basically said that there are so many different ways they could go with the expansion of Instagram, that right now they have decided to focus on growing the user base. Then “when the right time comes,” they’ll just “think about doing advertising.”

Shares of Facebook Inc (NASDAQ:FB) slumped initially on Friday before recovering and rising as much as 1 percent.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at [email protected]
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