2013 was certainly the year Facebook Inc. (FB) finally turned things around. Well, turning around gives the company short shrift. Beginning with its big second quarter 2013 earnings beat, the world's most popular social media site officially doubled in value for the year.
Facebook hasn’t backed off, though, notching an additional 32 percent in gains in 2014 alone. As reported by Bloomberg, analysts are scrambling to adjust price targets and ratings, worrying that such a run-up that has already exceeded their already bullish predictions is wholly unsustainable.
While Facebook might be due for a correction, however, their rise makes sense. Facebook is doing everything a social media company is supposed to do to ratchet up those coveted ad dollars. A quick recap of the recent developments concerning the largest social media play on the planet illustrates a company running according to plan:
They’re Acquiring the Next Big Things
Buying WhatsApp for $19 billion in cash and stock might seem excessive, especially for a messaging service only generating a few hundred million a year in revenue. But the emerging market customer base the acquisition brings on board is more than worth it.
Facebook has had trouble breaking into the far reaches of the globe, especially countries with already entrenched local social media companies. The WhatsApp acquisition addresses this.
They’re Embracing Mobile
The future of social media is on mobile, and as Snapchat has proved, a company can in fact be perfectly viable without any kind of desktop presence. Facebook has steadily increased the percentage of revenue generated via mobile, from 41 percent in Q2 2013 to 53 percent in Q4.
They’re Targeting Ads Better than Ever
People often forget that from a revenue perspective, Facebook is an advertising-delivery service. The beauty of their product is that it simultaneously delivers ads while collecting (voluntarily supplied) demographics.
Those demographics can, in turn, be used to better target ads. And the better targeted the ad, the higher the chance the ad has a positive effect, the more Facebook can charge.
In January Facebook announced they improved targeting based on education, workplace, and relationship status, and their algorithm was even learning to adapt to a user’s “particular actions, past purchase behavior, or purchase propensity.”
Facebook is targeting ads more effectively than just about anyone. And so far, the market is responding positively.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer