“Facebook be nimble; Facebook be quick.
Facebook not (necessarily) growing like a hockey stick.”
Bet you haven’t read a social media column that starts with a nursery rhyme lately, have you?
But don’t take that cute distillation of Facebook’s fourth-quarter and year-end 2012 earnings, announced Wednesday, quite the way it may sound. Actually, what Facebook made public then was impressive, since in the space of a few quarters, it took a nascent ad platform – mobile -- and moved it from a negligible part of ad revenue to 13% in the third quarter and 24% in the fourth quarter.
And not a moment too soon. While earlier earnings reports have begun to shed light on what can only be called the mobile phenomenon, the slides that accompanied the earnings call are the most dramatic evidence of mobile’s increasing dominance. In the past year, monthly users who access Facebook from a mobile device, at least some of the time, surged from 432 million to 680 million. Those figures do not include Instagram usage that does not link back to Facebook.
Meanwhile, the number of people who only access Facebook from a mobile device has grown from 126 million to 157 million in the last year. That’s a substantial, but lower, growth rate, true, but consider this: If Facebook had failed in creating a viable mobile ad strategy, it would automatically be unable to serve ads to 15% of its audience.
So, to my mind, that after-hours stock drop was just another instance of investors not necessarily understanding what this company is about, or what it just accomplished.
Facebook has been nimble and quick, even if its ad revenue growth isn’t precisely like a hockey stick. And that’s fine. It beat estimates; ad revenue grew a none-too-shabby 41% to over $1.3 billion for the quarter. And it did all this while going public, and adapting to the fact, that, in Mark Zuckerberg’s words on the earnings call: “Today there is no argument. Facebook is a mobile company.”
Trust me. Most companies, confronted with a massive, rapid shift in how consumers are using their product, couldn’t pull that off, especially not so fast. As Pivotal Research’s Brian Weiser put it in a report out this week: “It is now clear that growth in mobile occurred primarily as the company ‘flipped the switch’ and began to effectively bundle sales of mobile and desktop advertising.” Pivotal just switched its rating of FB stock from “hold” to “buy.”
But, as an investor, you’d also be missing the point if you focused solely on mobile. The overarching theme you should be noticing is how many paths to revenue Facebook has, as Weiser’s report also noted. These sources include the Facebook exchange (FBX), the use of Promoted Posts by small businesses -- and other features, like Facebook Graph Search, that don’t even have an ad model yet.
Facebook’s ad story has just begun. And, in case you were wondering, I guess I should note that my boosterism has no ulterior motive: I don’t own the stock.