In the video below senior technology analyst Eric Bleeker explains why he's still not sold on Facebook's (Nasdaq: FB ) mobile success story. Last quarter, Facebook shocked investors when it announced mobile advertising had increased from a negligible amount to being 14% of all advertising sales, or $153 million in the quarter.
That's a fantastic amount of growth, and an easy number for media and Wall Street to stand in awe of. However, Eric notes that growth in mobile masks other problems in Facebook's business. For one, Facebook only beat sales estimates by $30 million last quarter. When you consider analysts had much less mobile growth built in than Facebook showed, that signals its display advertising business was weaker than expected. Desktop display ads still contribute the vast majority of Facebook's sales.
Display ads could have come down because advertisers were shifting their Facebook ad spend to mobile, but that would show that mobile is less of an "incremental" opportunity, and instead, more advertisers are balancing their total spend in the direction of mobile. That is, mobile spending is giving with one hand and taking with the other. If mobile spending is just a shift from existing desktop spend, its total opportunity to move companywide results isn't as high.
Eric doesn't question that Facebook's mobile success is beyond expectations. However, he also thinks some of the initial optimism over their mobile ads is missing its net impact on Facebook's overall business. To see his full thoughts and another company that might benefit more from mobile advertising than Facebook itself, watch the video below.
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