Facebook Is a ‘Mobile Company,’ But Is That a Good Business?

Photograph by Noah Berger/Bloomberg

Facebook CEO Mark Zuckerberg expressed optimism about mobile, but the numbers aren’t there yet.

Mark Zuckerberg described Facebook today as a “mobile company,” but he has a long way to go to prove that mobile is a viable business.

Zuckerberg’s opening statements on Facebook’s earnings call lasted about seven and a half minutes, and the chief executive officer spent more than half of that time talking about mobile. He touted the effectiveness of advertisements on mobile phones, and how more users are checking the social network each day from their phones than from a computer.

“More people are starting to understand that mobile is a great opportunity for us,” Zuckerberg said. “Today, there is no argument. Facebook is a mobile company.”

Investors seem to be arguing about whether that is a good thing. The stock is down 3.5 percent in after-hours trading. Facebook executives had a lot of promising numbers to back up the bet on mobile, but the ones that matter — revenue and market share — aren’t there yet.

Mobile accounted for 23 percent of Facebook’s total ad revenue last quarter, the company said. Considering it was 14 percent in the third quarter, growth is going in the right direction. But mobile revenue still significantly lags actual usage as 680 million people, or 64.2 percent of Facebook users, are browsing the service on their phones.

Competition will also be tough. In the U.S. mobile ad market, Facebook is estimated to have a 12 percent share this year, which would be dwarfed by Google’s 57 percent, according to EMarketer.

None of these signs should cause investors to unfriend Facebook in droves, but the top executives shouldn’t necessarily be jumping up and down over the results.

“We were hoping for a little bit more,” Gene Munster, an analyst at Piper Jaffray, said in an interview on Bloomberg West. “The mobile business is in tact. So I think that that’s a good part.”

There is, of course, plenty of room for Facebook to grow. Zuckerberg expressed optimism about refining the mobile ads that appear in the News Feed and making those more personalized based on usage.

Sheryl Sandberg, Facebook’s chief operating officer, talked about measuring how the network’s ads convert into purchases in stores, which, if proven, could allow the company to charge more. She was unusually cagey about discussing a mobile version of Facebook Exchange, the ad-bidding tool that was successfully rolled out for the website last year. (One thing Facebook isn’t doing: “We’re not going to build a phone,” Zuckerberg said.)

The question about whether the great shift to mobile computing would unravel Facebook’s business has dogged the company ever since its initial public offering last year. Despite the intense optimism from its executives, who all mentioned the inroads being made in mobile advertising, Facebook’s performance last quarter doesn’t put those concerns to bed. Facebook acknowledged as much in today’s filing with the Securities and Exchange Commission, which lists the familiar risk factor: “our ability to monetize our mobile products.”

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