Like David Caruso On CSI Miami, Facebook Rips Off The Sunglasses and Looks Into The Future to See That It Is Mobile While The Who Plays Into The Opening Credits

Issuer:     
RE: Is Facebook Going Mobile?
Conclusion: Seeing the Writing On The Wall, Facebook Gives a Glimpse Into Its Mobile Strategy

Out in the woods
Or in the city
It’s all the same to me
When I’m driving free
The world’s my home
When I’m Mobile.
-The Who, “Going Mobile”

In the wake of a huge but disastrous IPO, much has been made of role of Facebook’s mobile strategy for its post-IPO stock price woes.  Search “Facebook mobile strategy” in any search engine, and you will find reams of pontificators pontificating on how Facebook will or won’t successfully execute a mobile strategy.

Does Facebook/Zuckerberg care?

A quick look at Facebook’s recent Form 10-Q shows that Facebook is well-aware of the need for a mobile strategy and is working to develop and execute on, well, something.

In its earnings release for the 2012 third quarter, Facebook made much of the fact that it had reached 1.01 billion monthly active users (“MAUs”).  This was a 26% increase from the prior year.  As they put it, Facebook “[C]onnected 1 billion people since founding the company eight years ago.  [Ed: As someone with about 100 FB friends, I personally do not feel connected to the other 9,999,999,900 MAUs through Facebook, many of which I would like to take proactive steps to disconnect from.]

In the 10-Q, Facebook stated that daily active users (“DAUs”) increased to 584 million, or 28% from the prior year.  Like the June 30 Form 10-Q, Facebook stated that this growth was driven largely by increased mobile usage.  However, in the September 30 10-Q, they expanded on this to say that:

the number of DAUs using personal computers increased modestly compared to the second quarter of 2012, butin certain key markets such as the United States and Europe the number of DAUs using personal computers was essentially flat quarter-over-quarter after having decreased modestly during the second quarter of 2012.

Translation:  User growth is coming from mobile.

It doesn’t stop there.  Mobile MAUs increased 61%, including key markets such as India, Brazil and the U.S.  Facebook went on to describe the situation as follows:

While most of our mobile users also access Facebook through personal computers, we anticipate that the rate of growth in mobile usage will exceed the growth in usage through personal computers for the foreseeable future and that the usage through personal computers may be flat or continue to decline in certain markets, including key developed markets such as the United States, in part due to our focus on developing mobile products to encourage mobile usage of Facebook.

“. . . in part due to our focus on developing mobile products to encourage mobile usage of Facebook”?  Seriously.  People are not accessing Facebook through mobile apps because Facebook is developing mobile apps.  Facebook is NOT the driver.  Mobile is the driver and Facebook is trying desperately to keep up.  How do we know?  Look at the next sentence:

The number of MAUs, DAUs and mobile MAUs discussed above do not include Instagram users unless such users would otherwise qualify as MAUs, DAUs and mobile MAUs, respectively, based on activity that is shared back to Facebook.

There were those who believed this acquisition was a sign of social networking consolidation. However, in context, Instagram is looking less like a mere social network consolidation than a push into a mobile strategy, a noted Facebook weakness, even before the IPO.  Here is a snippet of the IPO disclosure surrounding Facebook’s mobile capabilities:

Advertisers will not continue to do business with us, or they will reduce the prices they are willing to pay to advertise with us, if we do not deliver ads and other commercial content in an effective manner, or if they do not believe that their investment in advertising with us will generate a competitive return relative to other alternatives. Our advertising revenue could be adversely affected by a number of other factors, including . . . increased user access to and engagement with Facebook through our mobile products, where we do not currently directly generate meaningful revenue, particularly to the extent that mobile engagement is substituted for engagement with Facebook on personal computers where we monetize usage by displaying ads and other commercial content . . .”

Facebook included similar caveats in the 10-Q, where it outlined the risks related to its lack of mbile history as it began to include “Sponsored Stories” in its mobile news feeds to generate mobile revenue.  It continues:

Accordingly, in the first nine months of 2012, we generated only a small portion of our revenue from the use of Facebook mobile products, and our ability to continue [Ed:  “continue” is new disclosure.] to increase mobile revenues is unproven. If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to continue to grow or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.

Translation:  Previously, Facebook did not include ads or “Sponsored Stories” in mobile news feeds.  Facebook sees the future and has now started to try to make money from mobile, but it isn’t there yet.

Links:
Facebook 3Q 2012 Earnings Release
Facebook 3Q 2012 Form 10-Q
Facebook IPO Prospectus
Forbes Article re: Facebook Acquisition of Instagram and Social Networking

 

 

 

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7 Responses to Like David Caruso On CSI Miami, Facebook Rips Off The Sunglasses and Looks Into The Future to See That It Is Mobile While The Who Plays Into The Opening Credits

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