Did Facebook Just Solve Its Mobile Problem?

From sponsored stories to free texts, Facebook (Nasdaq: FB  ) is experimenting with anything and everything that might boost profits. And yet no initiative has met with nearly so much enthusiasm and skepticism as Facebook Gifts.

What is Gifts? Simply, an interface add-on whereby Facebook will remind you when a friend you're connected to is enjoying a special occasion. You'll then be offered the opportunity to give a gift. Facebook does the packaging, payments processing, and so on:

There's plenty of reason to like this idea just on the merits, as my Motley Fool Rule Breakers teammate Rick Munarriz points out here. What's interesting for investors is that Facebook is moving fast to capture the opportunity before giftier -- I know, may not be a word -- peers Amazon.com (Nasdaq: AMZN  ) and eBay (Nasdaq: EBAY  ) find a way to respond.

This week, the social network's Android app began showing gifts as an option for handset browsers. CNET has since confirmed that the iOS app will get similar functionality in the coming weeks. Smart. Genius, even.

Facebook has long been criticized for failing to transform hundreds of millions of mobile users into ad consumers. That's still true to a large degree, but I'm not sure it matters anymore. With Gifts on the go, Facebook has established a simple, attractive, and personally targeted mobile commerce platform, all without investing a dime in a so-called Facebook Phone. Amazon and eBay should be so lucky.

Source: Forbes.com.

So far, investors are waiting for proof that Gifts can deliver in the way that Rick and I expect. Perhaps that's fair. Facebook is, after all, the architect of one of the most disappointing IPOs of all time, and its strategy for world dominance has, at times, come across as absurd. Cough -- Beacon -- cough.

Yet the past doesn't necessarily diminish what's happening now. With Gifts, Facebook is making a mobile bet that appears to have surprised would-be rivals. Will this and initiatives like it have a major impact on the social network's long-term profit picture? Are investors undervaluing the opportunity?

To answer this question, one of our own star analysts has developed a premium report on whether Facebook is a buy right now -- and why. Click here to get your copy instantly.

 

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home, portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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  • Report this Comment On October 13, 2012, at 6:18 PM, hilsonvalli wrote:

    - Multiple is ridiculous and will compress

    - Billion+ shares coming off lock-up

    -Millions of unhappy shareholders creating selling pressure every time FB tries to climb

    - Google and others create much more revenue per user than FB

    - Percentage of fake FB accounts much higher than they admit

    - New FB growth is predominantly in geographies with little disposable income. These new users add cost, but limited revenue.

    FB was a good deal years ago when it was being sold in the secondary markets. IPO was two-three years too late for investors and way overpriced.

    Tell me how you address all of the above and I'll listen to your FB hype. Otherwise, you're just whistling past the graveyard.

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