• by Steve Smith , Staff Writer @popeyesm, May 11, 2012

From the time Facebook first filed its S-1 for the upcoming IPO, it had to come clean about the fact that mobile was a weak spot. As they said at the time, the company had no model in place to monetize the massive amount of user activity that is already occurring on devices. The company continued to hint at possible remedies, including the recently introduced sponsored stories idea. But generally, Facebook seemed to be hoping that no one would notice the elephant with the hoodie in the room: the company had no credible plan to follow the trajectory its own business was headed -- to devices.

But as the IPO approaches, the company has had to be more blunt and realistic about just how critical a problem mobile represents to them. In the sixth amendment to its S-1 filing so far, Facebook finally goes the next step in admitting that mobile is as much a problem as an opportunity for it right now. Some of the most substantial revision in the amended prospectus involve more specificity when it comes to how mobile affects their business.

Let’s go directly to the S-1:

“In March 2012, we began to include sponsored stories in users’ mobile News Feeds. However, we do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users (DAUs) increasing more rapidly than the increase in the number of ads delivered. If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.”

In other words, they seem to be warning investors that they may well see declining revenue per user metrics for the foreseeable future. Elsewhere in the S-1, the company admits that its new sponsored stories are not in place long enough and in enough numbers to stem the tide. In fact, it is interesting that Facebook does not even suggest that the sponsored stories model will have an effect.

“Based upon our experience in the second quarter of 2012 to date, the trend we saw in the first quarter of DAUs increasing more rapidly than the increase in number of ads delivered has continued. We believe this trend is driven in part by increased usage of Facebook on mobile devices where we have only recently begun showing an immaterial number of sponsored stories in News Feed, and in part due to certain pages having fewer ads per page as a result of product decisions.”

Facebook says that its Monthly Active Users using the service from devices reached 488 million in March 2012 -- now more than half of the 901 million MAUs overall. I know there are so many out there who are sure Facebook will “figure this out” at some point. But I still find it astonishing that one of the biggest IPOs in modern business history is coming to market when it hasn’t even made a compelling case for how it plans to monetize what clearly represents the future of their business. And potential investors are getting upset over the fact that Zuckerberg wore a hoodie to the pitch meetings?