Facebook's mobile migraine - Mobile World Live

Facebook’s mobile migraine

30 JUL 2012

If you accept that we are in the midst of another tech bubble, then that bubble was seriously deflated last week. 

The doyen of this latest bunch is, of course, the mighty Facebook, which followed up its botched IPO with its maiden set of public earnings last Thursday. The lowlights included a net loss, rapidly decelerating revenue growth, rising costs and no signal that things were going to get better. Its closely-watched share price sunk below US$25 for the first time, a far cry from the debut US$38 starting price two months ago.

Others in ‘Bubble 2.0’ are struggling too. Zynga, the maker of Facebook games such as FarmVille (a key source of revenue for Facebook), saw its market value drop to a fraction of its March IPO last week after delivering a dramatically lowered outlook for the rest of the year. A tempering of enthusiasm for social gaming was blamed.

And the less said about Groupon, the better. Touted last September as the largest tech IPO since Google, shares in the online couponing giant have slumped more than 50 percent since the stock-market debut.

No-one is jettisoning their Facebook shares just yet, but the hype that accompanied the IPO has now been replaced with the realisation that its business model is not yet fully understood or developed. And Zuckerberg and co. appear still to have a lot to learn about dealing with Wall Street. 

Facebook’s mobile strategy is a case in point. Back in February in its pre-IPO filing, Facebook outlined the problem in black and white:

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… if we are unable to successfully implement monetisation strategies for our mobile users, our revenue and financial results may be negatively affected.

Fair warning to those investors preparing to buy stock; but also fair to assume that by highlighting the problem, Facebook was also addressing it. Not so. Or at least not yet.

While Facebook has made some tentative first steps into mobile advertising in the intervening period, the Q2 earnings provided no update on efforts to monetise its sizable mobile presence. Facebook’s latest numbers show that about 57 percent (543 million) of its regular users now use mobile devices to access the service, up about seven percentage points from the end of last year. Mobile may boost user engagement, but this counts for little at investors, who are worried that the ongoing shift from the desktop will hit the bottom line.

Mobile is one of the very few areas where Facebook trails its major social-networking rivals, Google and Twitter. Google’s transition from desktop to mobile has been seamless thanks in large part to its Android ecosystem; while the simplicity of Twitter means it works on pretty much any platform.

By contrast, Facebook’s mobile apps can be a morale-sapping experience and the firm is notoriously late to provide fixes and updates. It took the firm almost 18 months to develop an app optimised to work with the iPad, either a deliberate delay or a reflection of Facebook’s dismissive approach to non-desktop platforms.

While the mobile business model is still a work-in-progress, Facebook at least appears to be working on improving the small-screen user experience. As the firm noted last week, recent new mobile developments include a new iPhone camera app, an improved version of the mobile messenger app, the global launch of Facebook’s App Centre and – most significant of all – the promise of deeper integration with the next version of Apple’s iOS6. 

And there was the US$1 billion acquisition of photo-sharing app service Instagram in April, a signal that Facebook was prepared to spend big to plug gaps in its mobile offering.

This renewed focus on mobile can also be detected in reports that Facebook has hired several former Apple engineers, ostensibly to polish-up the mobile apps – but inevitably reigniting speculation that Facebook is planning to build its own phone.

While Facebook is unlikely to get involved on the hardware side (for a whole host of reasons), those predicting a ‘Facebook Phone’ also misunderstand the firm’s new direction: its future isn’t about making phones, but making money from phones.

Matt Ablott

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members

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Justin Springham

Justin manages the editorial content for the Mobile World Live portal and award-winning Mobile World Live TV service. In the last few years Justin has launched and grown a portfolio of premier media products, which include the Mobile World Congress...

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