Facebook struggles for mobile revenues
Highlights uncertainty in the mobile market as a key risk in its IPO filing, even as it sees cellphone usage ballooning
Published: 2 February, 2012
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Facebook highlighted the challenge facing most web majors in its filing for a $5bn IPO (initial public offering) - more and more people want to use web services on mobile devices, but this may be hard to monetize. While the social networking firm said mobile platforms were "critical to maintaining user growth and engagement over the long term", it added: "We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven."
Despite that uncertainty, the company believes the rate of growth in mobile users will continue to exceed its overall user growth "for the foreseeable future, in part due to our focus on developing mobile products to encourage mobile use of Facebook".
The mobile conundrum was one of a range of risk factors which Facebook identified in the documents supporting its IPO application. Given how the company has spoken of mobile markets being its major growth driver for 2012 and beyond, there must be real concern over its uncertainty over a revenue model - though this is a dilemma that faces many web firms. Facebook has invested considerable efforts in broadening its social app to become a full platform supporting a developer ecosystem and multiple revenue streams, but these activities remain in their infancy.
As of December 2011, there were more than 425m active users of mobile Facebook products (in a total of 845m), but the company admits in its filing: "If we are unable to successfully implement monetization strategies for our mobile users, our revenue and financial results may be negatively affected." It does point to the growth of mobile advertising, citing one source which forecasts this to growth at a compound rate of 64% to reach $17.6bn in 2015. Most of Facebook's current revenue - about 85% in 2011 - comes from PC-based advertising and last year it made net profit of $668m on sales of $3.71bn.
However, there are many players adding location aware, payments and social features to mobile apps, and Facebook points out that, unlike Google or Apple, it does not control the operating systems with which it has to interoperate. It is expected that Google will integrate its own social networking app, Google+, more tightly into Android.
There have been persistent rumors that the social giant might develop its own OS, either by acquiring one (it was linked to webOS at one stage) or creating a new-style browser/OS on top of Linux or even Android. It has also been developing a range of functionality for featurephones, tapping into emerging economies.
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