Facebook surprises on mobile

Facebook. The stock that folks loved to bash after their IPO, and perhaps for all the right reasons, the pricing was just downright wrong. What the IPO did coincide with however was a massive jump in mobile user patterns and hence lower mobile revenue streams for everyone in the industry. Facebook is not alone here, Google is also having the same problems, but they will adapt, as they have been.


The September quarter however revealed something very interesting. Having been negligible in the quarters past, mobile advertising revenue grew to 14 percent of total advertising sales. BUT, more importantly, mobile revenue has grown by a factor of six since the beginning of the last quarter. And they, Facebook, put a number to it, 3 million Dollars a day. The actually quote from the CFO, David Ebersman, who said that 4 million Dollars a day is coming from News Feed, three quarters from mobile. Which then translates to 270 million Dollars for the present quarter, that is if the growth rate tails off immediately. Which I suspect that it won't. So, having been basically nothing, expect mobile revenue to be nearly one third of total revenue by the end of the first quarter next year, those are my quick back of the matchbox calculations. The Zuck also weighed in and said that six months ago they were not trying to make money off of mobile revenue, now they are trying. So he wanted to dispel this myth, that is what he said!


And the good news for their customers is that Facebook suggest that in your mobile stream, the advert power to users are 10 times more than on a desktop. Because of course it (the advert) appears in your stream, you have to scroll through it. What is also interesting was what Sheryl Sandberg, the COO, said on the conference call when comparing Facebook to the Super Bowl. She said that Facebook has three times as many users as the Super Bowl, and that is daily. But Sheryl, for your daily Facebook browse you don't bust out the popcorn, crisps and beers. And when you check your Facebook page, you don't talk about it with your friends for days, buy memorabilia and the like. But I get your point Sheryl, you have many users who many advertisers can reach for a lower cost each and every day.

The stock soared in afterhours trade, up nearly 13 percent in afterhours trade to over 22 Dollars. BUT, check back and see that 38 was the IPO price. Check out the full numbers via their investor relations page: Facebook Reports Third Quarter 2012 Results. What struck me was that the market cap last evening, before the stock ran away in the aftermarket, was 41.78 billion Dollars. Cash and marketable securities were a whopping 10.5 billion Dollars, meaning that one quarter of the share price is cash alone. This is a phenomenon not uncommon for many tech stocks, but in Facebook's case you can't say that the rest is still cheap. That is the problem you see, the price of the stock is less predictable. Less predictable than friendships for instance, which are supposed to be enduring and everlasting. I said supposed to be! You would still say that with 60 cents of earnings pencilled in by the analyst community for next years earnings that a 36 times forward earnings multiple is VERY expensive. This stock is definitely not for everyone. But as I say often enough, I believe that they will change the world.