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Wednesday, October 31, 2012

Facebook Profits from Mobile Adverts

Wall Street was shocked when Facebook made an outstanding amount of money from its mobile advertising. The social network confirmed that its mobile advertising revenue increased several times within the 3rd quarter. Facebook share values grew 13% following the news.

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According to the statistics, Facebook has 14% of its advertising revenue coming from mobile advertisement. Hopefully, these figures will be able to reassure the potential and current investors that Facebook is starting to realize how to make money off smartphone and tablet users.

Nevertheless, the actual cash still remains quite small. As for the mobile advertisement revenues, they totaled to around $150 million, up from an estimated $40 million to $50 million in the 2nd quarter and almost nothing in the first. In other words, it is quite good, but nothing outstanding.

Media reports claim that the statistics disproves the most bearish opinion that the social network wasn’t able to profit from smartphones or tablets. However, it is still unclear if this is really the case. Despite the fact that Facebook already managed to generate impressive profit from their mobile apps, it will still take a lot of time to have mobile advertisement command the same rates as the traditional one.

Many financial experts still argue that Facebook isn’t worth anything when it comes to marketing. However, mobile ads have always been among the key investor concerns about the social networking giant which led to losing over $40 billion off its market value since its IPO 6 months ago. It adds to the fact that Facebook was hugely over valued – even taking the recent gains into account, you could still pick up a Facebook share for less than $22.

Still, the company’s other figures also look promising. For example, advertising revenue grew 36% to $1.09 billion, which is 8% more than in the 2nd quarter. However, the proceeds from Facebook payments and other businesses gained only 13% to reach $176 million.

In other words, the statistics are already better than the experts predicted, but the social network’s share price is still hugely overvalued. This is why it could fall further when shareholders get the permission to sell their shares one day later this year. The most popular estimation of a share price remains $13 to $14 a share.

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