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Will Facebook Ever Get Mobile Right?

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Every company has a weakest link. Unfortunately for Facebook (Nasdaq: FB  ) , its soft spot is enormous.

Having the mobile revolution in your list of "cons" is a pretty major downside for any major technology company looking to grab and maintain relevance. Particularly if said company is keenly aware of how significant the rise of smartphones and tablets will be in the coming years and is actively engaged in embracing that paradigm shift.

Show me the money
But, like any company, Facebook needs to figure out how to make money doing it. The freshly public social networker began including sponsored stories in users' mobile news feeds in March, but has yet to bring in many dollars from it. Increasing mobile usage is one reason why Facebook's largest revenue source is at risk.

Of its 901 million monthly active users, or MAUs, 488 million of them use Facebook's mobile products. That's over half of its MAU base, and the company estimates that 83 million MAUs use only mobile apps. The percentage of MAUs who use Facebook's mobile platform is steadily rising.

Source: Facebook prospectus.

Mobile MAU growth also continues to outpace overall MAU growth by a healthy margin.

Source: Facebook prospectus.

Clearly, Facebook needs to do something posthaste to try and milk more revenue out of all those mobile Facebookers.

Mobile ads for everyone!
The company has reinvigorated its mobile advertising push and is now offering a mobile-only option for advertisers. Previously, Facebook was bundling mobile ads in a pricey premium ad package, which was prohibitively expensive for smaller marketers and didn't appeal to advertisers who wanted to focus primarily on the mobile sector. Mobile ads were only available to brands that had garnered at least 500,000 fans and could easily cost more than $125,000 quarterly.

The new ad offering will allow smaller and mobile-centric advertisers something to chew on. Simon Mansell, CEO of TBG Digital, which specializes in social-media brand advertising and engagement on Facebook and Twitter, told Ad Age, "It's basically mobile ads for the masses. It now enables all the rest of the clients that maybe couldn't afford previous levels to access mobile-ad inventory."

Obviously some companies don't find Facebook's desktop advertising platform particularly effective, as General Motors (NYSE: GM  ) unfriended Facebook days ahead of the IPO. After all, who goes out and buys a Chevy Volt after seeing a display ad while browsing pictures of their friend's mom's new dog? Not me. Not anyone.

These "sponsored stories" will be displayed directly inside mobile users' news feeds, as opposed to being some type of display ad that users instinctively disregard. They'll be more likely to blend in with regular status updates from friends and family. That's somewhat less obnoxious than display ads, but could still prove detrimental to the overall experience.

One of these days?
Facebook needs to build out its mobile ad network if it hopes to justify its lofty valuation. Doing so will heighten its competition with primary ad rival Google (Nasdaq: GOOG  ) as well as smaller up-and-coming mobile-centric players like Millennial Media (NYSE: MM  ) , which went public earlier this year. Apple (Nasdaq: AAPL  ) has its own iAd platform for its iDevices and has similarly been lowering the entry-level minimum, and Facebook is now following suit.

Who knows, if Facebook continues to plunge as its monetization prospects improve, it might even be worth it one of these days. Although at this point, it seems like that day is far away.

Facebook's monetization strategy leaves a lot to be desired, but there's another social-media player that went public recently whose business model is on a solid growth trajectory. Here's the social-media tech IPO that you should be buying because it doesn't rely on the fickle advertising market to bring in dollars. Grab a free copy of this report for more info.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Facebook and Apple. The Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of General Motors, Google, and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 06, 2012, at 3:41 PM, jhf678 wrote:

    don`t worry they will certainly do it right. They are not just sitting on a pile of cash for doing nothing.

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