Facebook reports its fourth quarter earnings after the closing bell today, so let me offer a Cliffs Notes version of the company’s recent timeline. Facebook went public in May 2012 with a stock price of $38, but by early September, it had dropped by half. Now the stock’s back around $30 a share and analysts are actually feeling optimistic about today’s earnings. So what’s behind Facebook’s comeback story?
If I open the up the Facebook app on my phone right now, I can see new photos from a friend’s trip to Senegal and just below it, an ad from Virgin Mobile, right there in my newsfeed. Facebook calls these Sponsored Stories or Promoted Posts, and analysts think they’ll play a big part in Facebook’s mobile strategy.
“In the fourth quarter, we’re expecting mobile to represent 25 percent of advertising revenues,” says Aaron Kessler, an analyst with the investment bank Raymond James. That 25 percent is up from, well, basically no advertising revenue from mobile -– nada — just six months ago.
That was a big problem, considering the growing number of people checking Facebook on their phones. This earnings report is a way for investors to check the social network’s ability to make money frome advertising to mobile users.
“It’ll give us an indication of how much this strategy is working,” says Tim Bajarin, the president of Creative Strategies in San Jose, “and then how much more they need to adjust to make it even more profitable going forward.”
But bottom line, Bajarin says, is that Facebook seems to be on the rebound from its rocky IPO.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.