Facebook‘s stock has been hammered ever since it went public in what was probably the most popular IPO of the last decade. ItSs stock price is down nearly 40% from its all time high of $40, primarily on concerns that it may not be able to monetize its growing mobile audience going forward.
Facebook trying hard to crack mobile advertising
While its ad inventory keeps on growing due to an ever expanding mobile audience addicted to Facebook on their smartphones, it’s having a tough time finding takers as advertisers aren’t seeing much of a return on their mobile ad spending just yet as there’s hardly any space to display a lot of ad units on small mobile displays and the click through rates on mobile ads are also quite low.
We have seen it continue to work on its mobile advertising products and it rolled out yet another update this week, which could help it better monetize its mobile audience. It now enables marketers to buy sponsored stories in the News Feed on Mobile separately, without buying ads for News Feed on Desktop. It might help it attract advertisers looking to specifically target mobile users.
We expect Facebook to continue to roll out such updates going forward, and offer better targeting capabilities to advertisers. If it cracks the mobile advertising puzzle, its stock could easily bounce back and it could be worth much more than it is right now as the mobile advertising space is expected to explode in the coming years.
Facebook competes in the mobile advertising market primarily with Google (NASDAQ:GOOG). While the latter specializes in search ads, Facebook is the king of social advertising.
We currently have a $33 Trefis price estimate for Facebook, which stands nearly 30% above its market price.