Can Mobile Really Drive a Facebook Stock Rally?

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One of the reasons Facebook stock (Nasdaq: FB) hasn't fared better since it started trading – it's off 25% from its $38 IPO price – is the company's failure to profit from increased mobile activity among users.

But now, less than a year after Facebook's acknowledgement that it needed to monetize its growing mobile member usage, the company bills itself as a truly mobile company.

"After initially struggling, Facebook has now mastered mobile, and I think the company has a bright future," CNBC's Jim Cramer said.

The company has made headway in the arena. Mobile monthly active users increased to 680 million in January, up 57% from a year earlier.

And mobile ad revenue tripled from the third to fourth quarter and now comprises 23% of total ad revenue.

"Over the last six months, while the public has pondered its mobile strategy, Facebook has quietly emerged as the superpower of application discovery, and is progressively playing a powerful role in reshaping e-commerce, media and advertising on mobile platforms," wrote
All Things D. "Facebook's new products – ranging from open graph and timeline to mobile installs – are reshaping how brands, companies and app developers can connect with their audiences and facilitate discovery in a crowded app world."

More than half of Facebook users now access the site via mobile devices even though the on-the-go site lacks many features included in the PC version.

Nonetheless, the shift has been dynamic and is chipping away at FB's desktop income stream, which generates greater, but now waning, revenue.

All Things D says that as Facebook's mobile infrastructure develops, the social media behemoth is poised to transform mobile's future much like Google's (Nasdaq: GOOG) Adwords changed the face of search.

So does this mean the Facebook stock price will start to reward investors?

Facebook Stock and Company's Challenges

It could – but as cautious investors realize, the transformation at Facebook is slow going and full of obstacles.

Facebook dragged its feet getting into mobile and is now playing catch-up, trying to move quickly. The company is also attempting to find a balance in its mobile ads.

Not only is it challenging to size ads to a small mobile screen, Facebook also risks irritating mobile members with a plethora of commercial offerings.

"The issue is, mobile is a lot more personal and intimate. The danger of someone being angry over invasion of privacy is at the top of the mind," Marco Veremis, president of mobile advertising firm Upstreamn Systems, explained to Bloomberg News.

While analysts acknowledge Facebook has made some notable progress in the mobile arena, they say the social network leader's work is far from over.

That explains the handful of Facebook stock downgrades that followed Q4 earnings despite revenue and profits that came in ahead of Wall Street estimates.

There have also been mounting concerns about costs since Facebook noted it plans to boost spending this year on a number of new initiatives aimed at improving the mobile experience for users.

As FB tries to shift more of the focus to mobile, it also needs to try to restore its fading cool factor among young members.

The younger crowd is spending less screen time on Facebook and more time on other sites. That's partly a result of younger members' attempts to outsmart parents who visit Facebook to try to trace their children's online (and offline) activities.

The Menlo Park, CA-based company disclosed in its annual 10-K filing with the Securities and Exchange Commission that its 1 billion-plus global users are spending more time on competing services such as Instagram (which Facebook acquired in April 2012), Tumblr, Snapchat and other upstarts.

Therein lies a big challenge for Facebook. It's not an easy feat to monetize user activity through ads while restoring the social network's place as a hip attraction to its young members.

Facebook's News Feed Makeover

Drawing attention to Facebook and its stock this week was a New York Times article on Facebook's paid content in users' news feed. The piece suggests Facebook manipulates what content users see by regularly altering privacy settings, algorithms and paid posts.

That's partly why Thursday's launch of Facebook's redesigned news feed garnered so much attention. The changes include a minimal design, larger images and new type of sub-feed. The revamp, available on desktop and mobile devices, aims to keep users on the site longer.

The changes come as FB faces increased competition on mobile from apps that attempt to tempt users away from the site, another mounting problem for the social networking giant.

Facebook hopes the makeover will make the feature more transparent as well as more mobile-friendly.

But for now, don't expect a big boost for Facebook stock, which closed Thursday at $28.57.

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