This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

4 Major Facebook Growth Challenges

Keep Advertisers Happy

" Facebook must deliver high and measurable ROI return on investment to advertisers," explained Ken Sena, an analyst at Evercore Partners, noting that Google (GOOG) gained massive desktop success by ensuring that advertisers received a healthy ROI. "This needs to be the first step for Facebook."

"Facebook must also do a better job of identifying the demographics of its users in order to appeal to different advertisers," said Sica of Sica Wealth Management. "This could be accomplished by growing in applications associated with gaming and entertainment, which will also increase the amount of time users spend on the site."

Facebook's post-IPO cash haul could be used to fund acquisitions in this area, he added.

The fact that Facebook is dealing with slowing revenue growth makes the task of delivering advertiser ROI even more critical. The social networker saw its revenue slip 6% sequentially in the first three months of 2012, although sales were up 45% on the prior year's quarter.

Facebook's costs are also rising, according to a regulatory filing, increasing $110 million, or 66%, year over year.

Clearly, Facebook has its work cut out, according to Pund-IT's King.

"Facebook has obvious opportunities related to targeted advertising and mobile-enabled services but competition in those areas is fierce and the company's Byzantine user policies (which sometimes seem dedicated to stripping away what little privacy participants have left) have incited regulatory agency and user concerns," noted King, in an email. "Being an outlet for online services or retail sales seems to have potential, but that would probably have to be accomplished via partnerships with established players, as Facebook doesn't seem to have any ambitions to become a supplier."

King, however, notes that the Internet giant might decide to offer membership services and features which users would have to pay for. The analyst acknowledges, though, that changing customers from "freemium" into premium is easier said than done.

3 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
ZNGA $2.77 1.84%
FB $83.30 0.35%
GOOG $548.34 -1.23%
AAPL $123.25 -0.80%
TSLA $185.00 -2.84%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs