This week brought what might be termed “sorta good news”: GDP grew faster than expected in the second quarter, albeit at a still fairly pathetic pace, and Facebook’s stock price has finally returned to around $38 ($37.43 at the time of writing) -- right back where it started with the social network’s IPO in May 2012. Yay?
Shareholders are surely cheering, especially the unfortunate retail investors, who didn’t have access to the same information as banks and other institutional players, and who also got screwed to varying degrees by all those regrettable NASDAQ glitches. Now they can cash out and almost break even, or stick around to see if the stock ever reaches those rarefied heights once forecast with such confidence. The question for them is whether Facebook’s recovery is based on anything concrete, and therefore sustainable.
The prospects actually look pretty good: the stock price jumped to near its IPO level following surprisingly strong second quarter results from the social titan, which saw total sales jump to $1.81 billion, up 53% from $1.18 billion in the second quarter of 2013.
The sales figure included advertising revenues of $1.6 billion, making up 88% of total revenues, suggesting Facebook has lessened its reliance on other, more volatile sources of revenue, like sales of virtual goods through casual games. Even better, mobile advertising revenue made up 41% of total advertising revenues in the second quarter, showing that Facebook’s mobile advertising strategy is paying off (a key point, as the original post-IPO debacle resulted largely from investor fears that Facebook had no plan to monetize its mobile traffic). At the same time expenditures on R&D and marketing and sales fell appreciably.
Meanwhile Facebook continues rolling out new advertising products to keep the momentum going. With online video looming ever larger in the media landscape, the social network is planning to introduce “TV-style” commercials for prices as high as $2.5 million per day, according to a report in Ad Age today. On that note recent data from Nielsen shows that Facebook has a larger audience of 18-24-year-olds than any of the big four TV networks during primetime hours -- a remarkable accomplishment for a media company founded just a decade ago.