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Facebook IPO's elephant in the room -- mobile

Facebook admits in SEC filing that making money off mobile is a problem

May 11, 2012 11:52 AM ET

Computerworld - While Facebook executives talk to the country's top investors about its 900 million users and its powerful global reach, analysts say they need to explain how they're going to fix one glaring problem -- mobile.

Facebook executives are in the midst of a roadshow pitching the company's initial public offering to potential investors around the country. The company, the world's largest social network, is eclipsing its competitors and whipping up a flurry of pre-IPO interest in its stock.

However, industry analysts and investors are asking questions about how Facebook will generate revenue from the growing number of members who are accessing the network via their mobile phones from restaurants, park benches and commuter trains.

"Facebook is really struggling with mobile," said Zeus Kerravala, an analyst with ZK Research. "They make almost no money on it. I think mobile makes people use Facebook more, but Facebook hasn't figured out how to monetize that."

Earlier this week, comScore reported that Facebook users are spending more time accessing the social network from their mobile devices" than they do from browsers.

Also this week, Facebook admitted in an amended filing with the U.S. Securities and Exchange Commission that this shift from traditional desktop or laptop computers to mobile devices was hurting the company's advertising plan. In the filing, the company also stated it has no way to monetize this growing mobile trend.

Facebook noted in the amendment that its "daily active users [are] increasing more rapidly than the increase in the number of ads delivered." Mobility was also listed among the company's "risk factors."

On Wednesday, in an attempt to address the burgeoning mobile issue, Facebook announced that it would launch an App Center designed to let users look for "high-quality" mobile apps that integrate with the network.

"Well, no one, not Google, Yahoo, LinkedIn, etc., makes money off mobile," Kerravala said. "It seems mobile has become a facilitator to greater usage, but the business model on how to charge for it is unclear ... But I do think mobile makes people use Facebook more, which is ultimately good for Facebook."

However, Patrick Moorhead, an analyst with Moor Insights & Strategy, said Facebook isn't struggling to figure out mobile any more than any other Internet company is. The issue for Facebook is that it has such a growing mobile base and that with an IPO approaching, all eyes are on the social network and how it will resolve this issue.

"Very few social media companies have been able to monetize mobile, particularly those companies wedded to display advertising, like Facebook," Moorhead said. "To achieve their optimal company value, Facebook will need to figure this out."



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