With Facebook's IPO just days away, many investors and experts are questioning how Facebook is going to make money off of their mobile product. Because of the recent increase in Facebook mobile users, the daily active users for Facebook (on the Facebook app?) has increased more rapidly than the advertisements delivered; a problem thrust into the spotlight because of the company's recent financial scrutiny. This poses a serious problem because Facebook has no way of surfacing ads through their mobile product. As many are getting ready to open their wallets, Facebook is telling investors that the switch to mobile will hurt revenue more than originally projected.
Recently, the time spent on Facebook's mobile site and app a month, 441 minutes, has surpassed time spent on the website from a browser, 391 minutes. What does this mean? The advertisements running down the right side of Facebook on a browser don't get to the eyes of the site's most engaged users, and the company doesn't make as much money. This puts the company in a very awkward position: fill its mobile app with ads and potentially lose the faith and business of its users, or figure out another way to make money from mobile?
Facebook's CEO Mark Zuckerberg has made it clear that his main concern this year will be improving the mobile experience, advertising and apps, but he hasn't addressed how those aspects will interact with one another. The company's Q1 earnings are 6% less than the previous quarter and many are doubting the Facebook hype.
Just today GM stopped advertising on Facebook, claiming the effectiveness of Facebook ads was questionable. While the company's concerns lie strictly in the browser site (the mobile experience doesn't deliver ads at all) their unease seems only to add to the mounting speculation surrounding Facebook in general.
Still, there are definitely experts who still believe in the company's worth.
The co-founder of Apple Steve Wozniak said in an interview with Bloomberg television, "I would invest in Facebook, I don't care what the opening price is." He added, "I would just for good reasons, especially if I was an investor looking to make money."
In April, Facebook acquired Instagram, a mobile photo-sharing app, for an eye-popping $1 billion. Many speculate why Facebook would buy a company that doesn't bring in revenue. But in light of the recent move towards Facebook Mobile, some speculate the company may have been beefing up their mobile product with an app already successful in both media sharing and social integration. Just recently the Facebook mobile app updated to include larger pictures that span the entire display of a smartphone and are organized in interesting ways down the newsfeed. These new changes may just be Facebook's way of securing their mobile audience before they think about how best to extract capital.
As the day of Facebook's IPO approaches, and probably for some time after that, we will see Facebook change as a company, as it sits under the heat lamp of investor scrutiny and revenue pressure.
This is a post from Daniel Levine at Grovo.com, a field guide to the Internet where users can learn about how to use everything from Facebook Timeline to Pinterest.
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