by Tom Taulli | September 12, 2013 12:51 pm
Not long ago, Facebook (FB) looked hopeless. But in the crazy social media world, things can change pretty quickly.
Facebook is now suddenly back in gear and its stock has just hit an all-time high. But this is probably not a temporary move. If anything, the stock appears to have lots of momentum left.
Some of the move higher can be tracked back to the overall bullishness of social media stocks, including LinkedIn (LNKD) and Yelp (YELP) – both of which have performed much better than Facebook during 2013.
Then again, Facebook still has some nagging issues. Its Google (GOOG) Android app, called Home, has been a big-time disappointment. It seems that people really do not want to access Facebook every time they access their phone!
There is also the concern about finding new users. Let’s face it, it will be much harder getting the next billion since many of them are in countries that have meager Internet and mobile infrastructures. To solve this problem, Zuckerberg recently launched Internet.org, whose goal is to provide free Internet services. However, it will likely take years for it to get much traction.
Something else: It’s a long shot that Facebook will get any meaningful footprint in China because of the politics.
But all these factors are mostly about the long-term. Rather, when looking at the next year or so, the prospects for Facebook look encouraging.
It certainly helps that Mark Zuckerberg has had an obsession with mobile and monetization. He ditched ill-suited systems like HTML5 and has instead built apps using the much better “native” approach, which is faster and lighter (in terms of memory). At the same time, Zuckerberg has also worked hard to revamp the ad platform, such as by making the process much easier and allowing for better targeting.
The result is that he has created a mobile money machine. In the latest quarter, mobile revenues, as a percentage of overall ad revenues, reached 41%. This was up from 30% in the prior quarter. Keep in mind that – about a year ago – mobile ad revenues were nonexistent.
But Facebook still appears to be in the early stages. According to a report from eMarketer, mobile ad spending is forecasted to grow by 95% this year, reaching $8.51 billion. By 2017, the prediction is that the market will hit $13.09 billion.
No doubt, Facebook is in an ideal position. Because of its massive scale and extensive user data, the company is likely to get a big share of the spending, especially from major brands.
So, while Facebook has already had a nice run-up in its stock and the valuation is a bit pricey, this may not matter much. The company looks to be a growth story again – and this means the good times for investors should continue.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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