Facebook’s Feast Can’t Last Forever; Social-Media Company Still Remains a One-Trick Advertising Pony

Facebook’s Feast Can’t Last Forever

Social-Media Company Still Remains a One-Trick Advertising Pony

MIRIAM GOTTFRIED

Oct. 30, 2013 6:31 p.m. ET

What’s not to like?

Facebook FB -0.78% reported third-quarter earnings Wednesday that beat expectations. But all eyes were on its revenue, particularly the portion that came from mobile. Overall revenue rose 60% to $2.02 billion, with ad sales rising 66% to $1.8 billion. Mobile ads represented 49% of that, up from 41% in the second quarter. Facebook’s ability to manage the shift to mobile is crucial. And its ability to do so while also rapidly expanding overall revenue means it isn’t simply moving sales around.Still, Facebook admitted teen usage may be slipping, raising alarm about how fickle this key group can be. The results also underscored Facebook’s reliance on a single stream of revenue: advertising.

That isn’t a problem until mobile-ad spending catches up with the amount of time people spend on mobile. After that, Facebook will be vying for a piece of a pie that increases in size at roughly the pace of the economy.

Moreover, Facebook’s user growth is coming mainly from markets outside the U.S. where it may not be able to monetize the growth as successfully. Facebook had the same number of advertisers in Europe, the Middle East and Africa as in the U.S. But average revenue per user in the U.S. and Canada is four times than the average for other regions.

For now, Facebook’s average revenue per user is still increasing. It is difficult to think of famine in a time of plenty. But marketers feasting on mobile ads will eventually be sated.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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