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Digital Firm Concludes Facebook's Problem Is Mobile

Facebook disappoints investors, stock slides 14% in pre-market trading.
Jul 27, 2012 8:51 AM   By Jeff Miller
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RAPAPORT... Facebook disappointed investors Thursday evening when it reported a second-quarter loss of $157 million compared with what the company stated had been a $240 million profit one year ago, before it went public. The social media portal's revenue, however, rose 32 percent year on year to $1.2 billion. Shares in Facebook were 14 percent lower in pre-market trading at $23.07 in New York on July 27, a new low for the company's stock.

"Our goal is to help every person stay connected and every product they use be a great social experience," said Mark Zuckerberg, Facebook's founder, yesterday. "That's why we're so focused on investing in our priorities of mobile, platform, and social ads to help people have these experiences with their friends."facebook

Despite Zuckerberg's focus on mobile, the challenge of how Facebook monetizes people’s usage of its network over mobile phones continues to be a primary concern for investors, according to digital marketing firm Greenlight. Since a phone is not part of Facebook's plans, it has a revenue-generating problem, the group concluded.

“If a Facebook phone is now not on the cards, Facebook remains without a solid answer to its mobile problem,'' stated Andreas Pouros of Greenlight. “Yes, new ad formats have been and will continue to be launched by the company for mobile users, but there is a serious question over whether Facebook can integrate a compelling advertising offering on the smallest of screens, which users will be comfortable with and that does not interfere with their Facebook user experience.

''Suffice to say, yesterday’s earnings call shows Facebook to be a great company that can make lots of money, but in the mobile battle, Google and Apple remain far ahead of the pack,'' Pouros concluded.

Greenlight's research found that roughly half of Facebook's active monthly users accessed the website using a mobile device and this number is increasing, which means that the majority of its users would interact on devices that Facebook can't really control.  This presents less of an  opportunity to make money from advertising, mainly because these mobile devices have less visual space, are influenced by third parties such as Apple, Android, etc., and Facebook delivered via apps, such as Flipboard, are much harder to infiltrate with advertising, Greenlight stated.

But those issues are not the case for Google and its advertising mechanisms fit much more comfortably on a mobile platform, Greenlight stated.

“The earnings call provided little confidence that Facebook has made any significant inroads into this problem, and many investors commented that they would have liked a more elaborate plan and forecast to alleviate their concerns over future profit growth,” said Pouros.

Greenlight also conducted a poll before the ''Facebook phone'' rumor was squashed and found that if Facebook launched its own device; 50 percent of users would never switch from their current device, while 8 percent would buy a Facebook phone and 44 percent would consider that purchase. 

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Tags: facebook, Jeff Miller, mobile
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