Facebook Eases Investor Concerns
Despite concerns over the company’s ability to sell adverts on mobile devices, Facebook has reported an increase in mobile advertising revenues this past quarter. These revenues have eased investor concerns that initially contributed to hurting the company’s share price since its high profile initial public offering last year. As reported by the BBC, for this year’s first quarter, Facebook reported a net profit of $219 million.
During the last 12 months, a lot has changed for Facebook. One year ago, the social network giant barely had a mobile business. According to the Wall Street Journal, now nearly one out of every three dollars it produces comes from advertising on smartphones and tablets. By the end of last year, Facebook had become the number 2 mobile ad publisher by revenue in the US by capturing 9.5% of the $4.1 billion market. Reported in USA Today, forecasts for this year predict its share to grow to 13.2% of an estimated $7.3 billion market.
Although Facebook is enjoying its rewards from its mobile advertising efforts, some analysts are still skeptical this trend will continue for the company. Since smartphones have limited screen real estate, many believe that can test a user’s patience with mobile ads. To further concerns, according to a study done by Kleiner Perkins Caufield & Byers, mobile ads can fetch rates as low as one-fifth the value of desktop ads. Lastly, although the company has seen increased mobile revenues this past quarter, it has also been weighed down by the company's spending on new employees and infrastructure. Costs and expenses in the first quarter rose 60% from a year earlier.
Regardless of what the skeptics are saying, I do believe that this increase in mobile advertising revenues is a trend that Facebook will enjoy for a while. According to the BBC, the social network reported an increase in the number users who access Facebook every day to 655 million in March. This coupled with the increase of smartphone users should surely help the company keep momentum. How do you think the social network will perform over the next few quarters?
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