Facebook's Future Lies in Mobile Advertising
According to Yahoo! Finance, after Cowen & Co. upgraded Facebook (NASDAQ: FB) from “market perform” to “outperform” September 20, raising its PT from $29 to $53, the company moved past its awkward phase into corporate adulthood.
On Tuesday, Citigroup's Mark May upgraded the stock from "neutral" to "buy" citing conversations with advertisers and agencies and a belief that factors driving Q2 growth were sustainable.
Part of the reason is reflected in the way society has changed. Todd Schoenberger of LandColt Capital said, "Facebook hasn’t begun to realize the potential of mobile advertising.” Schoenberger added, "People are watching Yahoo Finance on their iPads on their iPhones then looking at their Facebook. The days of sitting on the couch watching TV are no longer there."
According to Hollywood Life, Neil Patrick Harris, host of Sunday’s Emmy Awards, explained that the Emmys honor television achievement saying, “For the younger audience that’s the thing you watch on your phones.”
None of this has been lost on Facebook, which generated more than 41 percent of its advertising revenue from mobile last quarter, according to Yahoo! Finance. The question is how much and how fast will this revenue stream grow?
According to eMarketer, Facebook will grow 10 percent year-over-year in global ad revenue. Google will grow just one percent. As eMarketer pointed out, the thing that terrifies Google is the fact that Facebook just began offering mobile ads last year.
To add even more fuel to the fire, Google’s mobile ad revenue grew by 14 percent between 2011 and 2012. A 13 percent drop in growth is startling to say the least.
Now Facebook wants to add a new wrinkle – Autofill. TechCrunch reported that the company plans to collaborate with PayPal, Stripe, and Braintree to allow Facebook members to make in-app purchases using credit card information stored in their Facebook account. The process avoids the need to type in numbers and data on a tiny smartphone or device screen.
Facebook won’t get the processing fee. What it will get is information. It will know which e-commerce companies its members buy from, what they buy, and how much they spend. This would give Facebook tremendous leverage when selling mobile advertising since it can tell potential advertisers how much its members are willing to spend on their products, according to TechCrunch.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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