During the first quarter, two high-profile announcements about new developments and product offerings were a clear and unsurprising indication of the company’s intensifying focus on finding a growth formula for its mobile business, and investors were looking for any signs of how these new strategies are working out.
The number of mobile app users around the world is predicted to increase from 1 billion active users in 2012 to over 2 billion in by 2016. With the rapidly expanding dominance of phones and tablets as the preferred gateway to the internet, tech companies as well as others are reorienting their strategies to capture a larger share of the lucrative mobile advertising market.
With a nearly 180 percent increase in spending on mobile advertising in the U.S in 2012, for a staggering total of $4.1 billion dollars, and a 78 percent increase expected in 2013, Facebook has a bigger stake in this game than most. The company is expected to make 30 percent of all U.S. mobile advertising dollars in 2013, according to eMarketer.
Facebook announced in early March that it would be implementing a gradual overhaul to the user experience, one that featured larger images as well as a breakup of the newsfeed into several different categories, such as music, news, and friends. Last month, the company announced a new android-based platform for smartphones, Facebook Home, that would integrate the user’s homepage into the home-screen of the phone, as well the company’s first foray into smartphones with an HTC model product that comes with the Home software pre-loaded.
Both moves are best understood by the sense of urgency with which the company is developing its mobile strategy; trying to improve the quality, visibility, and targeting of advertisements on the one hand, and making sure that those ads are seen more often on the other.
But to what extent the first quarter’s earnings report shows how well the strategy is working is another question altogether.
The company claimed last week that 189 million of its 655 million daily active users access the social networking site through mobile devices. Facebook reported a year-over-year increase in mobile ad revenue of 43 percent, a figure that now makes for 30 percent of the company’s gross advertising income, $375 million during for Q1.
While the numbers are impressive, and show that the company is indeed gaining on the dominant force in mobile advertising. Google is still expected to make over half of all the money spent on mobile ads in 2013, but is losing some ground to competition.
Still, it is difficult to imagine that changes implemented and new products introduced so near the end of the quarter could have contributed to the substantial increase in Facebook’s mobile advertising cash.
Analysts and commentators have taken all sides of the spectrum. Jim Cramer, for instance, proclaimed last Thursday that Facebook’s earnings report was evidence that the company had mobile advertising “figured out.” The same day, Jeff Macke of Yahoo! Finance, was of the diametrically opposite opinion with his piece titled “Facebook’s Imaginary Mobile Ad Strategy.”
Both pieces emphasize different but relevant aspects of the company’s strategy for mobile advertising. While Cramer found positive signs in the company’s willingness to reinvest to figure out mobile, Macke was quick to point out data indicating Facebook’s declining popularity, and was critical of the apparent willingness of executives to attempt to redefine or circumvent industry standards for measuring the actual effectiveness of advertising.
The reaction from investors, on the other hand, was indifferent at best. Facebook’s shares did not rally with the rest of Wall Street on Friday and were actually down 2.25 percent at $28.31 by closing.
With such a fluid environment in mobile and mobile advertising, in terms of both technology and competition, as well as how recently Facebook embarked on its latest attempts to maximize its position in that market (to say nothing of what the company might have planned next), it will not be easy to predict the outcome. Investors will likely have to wait until the second quarter’s results for any real results from recent developments to start showing up.
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