This Day On The Street
Continue to site
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

Facebook's Three Hurdles in Mobile Advertising

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.

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.

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.

1 of 3

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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FB $117.58 0.00%
GOOG $693.01 0.00%
AAPL $93.74 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs