Is it all downhill for Facebook Advertising?
When Facebook shares went public back in May 2012 they started out on a wing and a prayer, now the wing is on fire and the prayer has been answered.. by Satan.
It was one of the grandest IPO’s (Initial Public Offering) in history, selling more than 400 million shares at over $38 a pop valuing the company on the market at an impressive 100 billion dollars
Fast forward 4 months and the company has halved in value. The world's largest online social network has lost more than 50 billion dollars in share value, hitting a new low on Tuesday 4th Sept of $17.73 per share
The Facebook community however still continues to grow, it now boasts a whopping 955 Million Active monthly Users, 54 Million more than the 901 million users it had in April 2012. This figure is expected to exceed 1 billion by the end of year all without tapping into the Chinese online market which has the biggest online population of 538 million users.
So just why has Facebook’s value halved in 4 months?
One of main reasons could be mobile advertising. It simply hasn’t kept up with more than half its 955 million users who have made the switch from desktop to mobile. Here they are exposed to fewer ads with Facebook’s desktop site showing around 30 times more ads per user each day than its mobile counterpart.
Facebook has been slow to take to the mobile market and is now trying to reinvent itself as a mobile first company. “Had Facebook been built today, it would be mobile” James Pearce, head of mobile developer relations for Facebook stated. It’s taking steps to improve its mobile interface and has recently rebuilt its mobile application from the ground up which promises to be twice as fast as the previous version. The app no longer suffers from endless loading and refresh problems thanks to iOS5.
The bulk of revenue still comes from ads on the right hand side of the desktop page, they still haven’t figured out how to best show ads on mobile devices which it first started doing back in February 2012 and can’t effectively engage these ads with users on the move.
In February EMarketer estimated Facebook’s advertising to make 5 billion in 2012, this has now been dropped to £4.12 billion after poor performance in the 1st half of the year along with questions about the effectiveness of its advertising. This was highlighted back in May when General Motors pulled their $10 Million budget from Facebook Ad’s deeming it “ineffective” with “little impact on consumers”. Many of its investors are now questioning its long term money making potential which has had a direct impact on its market value.
EMarketer estimates that Facebook will generate about $73 million in revenue from mobile device ads this year, Twitter $129.7 million and Google 1.42 billion. However in 2013 Facebook mobile advertising is expected to quadruple overtaking Twitter.
Read the full article from EMarketer here
In reality it’s not downhill for Facebook, they’re just getting slower at going uphill, the rate at which their revenue is growing is simply slowing down. Advertising revenues are still projected to grow year on year just at a lower percentage compared to previous years. Facebook are far behind on the mobile market but they understand that it’s a marathon not a sprint and they are just getting started.