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Facebook's Three Hurdles in Mobile Advertising

Stocks in this article: FB GOOG

Updated from 2:25 p.m. EST to correct app download stats on 3rd page, 4th paragraph.

NEW YORK (TheStreet) -- Doubts over whether Facebook  (FB - Get Report) could effectively monetize its user base have mostly been soothed after the social network confirmed record mobile advertising revenue and growth at a rate far higher than even optimists expected.

The Menlo Park, Calif.-based business reported mobile advertising revenue of $1.66 billion, 62% of the company's total, and noted that of its 1.32 billion monthly active users, more than 81% had accessed Facebook on mobile.

As a whole, mobile advertising is expected to grow 75% globally to nearly $32 billion this year, according to eMarketer estimates, with Facebook and Google  (GOOGL) leading the race to seize the surge in new business.

Read More: How Facebook Is Eroding Google's Dominance in Online Advertising

Should Facebook fall behind, though, it has much more to lose than Google. While mobile is making up a larger chunk of the companies' total revenue, Facebook's dependency on the revenue stream is nearly double Google's. eMarketer forecasts mobile to account for 63.4% of Facebook's 2014 total revenue compared to Google's 33.8%.

Given mobile is such an interwoven arc of Facebook's long-term narrative, there are some pitfalls Facebook needs to overcome, including...

1. Slowing Growth

The first is that as more players enter the space, and Google continues to grow, the profits for the taking are less than they were before the initial buying spree.

"The space is becoming bigger so that growth becomes slower," noted eMarketer analyst Martin Utreras, speaking with TheStreet. Within four years, segment growth is expected to slow to 22.2%, though by then, total mobile advertising spending worldwide will have topped $94.9 billion.

Including both mobile and desktop advertising, the data research firm predicts 56.4% growth for Facebook compared to 63.3% in 2013. No small advance, but shrinking money-making potential nonetheless.

Read More: Twitter Advertising is Worse Than Spam

Jay Hallberg, industry specialist and co-founder and COO of IT social network SpiceWorks, told TheStreet, argues this is just the ebb and flow of a market in its infancy. "You have this disenchantment and then afterwards everything stabilizes a bit. We're probably a bit in the frothy early years," he said. "When you start getting into 20% growth rate environments (which you might see in 2017 and 2018) things have stabilized pretty well. As you head into 2015, it might be the year of reckoning and reality."

Facebook's current offering isn't without its own pitfalls, too. "While mobile usage is growing faster than desktop, Facebook is still evolving its mobile ad products," wrote Oppenheimer analysts Jason Helfstein and Jed Kelly, citing it as a potential risk to their "outperform" rating in a research report late-July.

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