2 Reasons to Keep Facebook on Your Watchlist

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Like its primary competitor Google (NASDAQ: GOOGL  ) , Facebook (NASDAQ: FB  ) generates the vast majority of its revenues from online advertising. A quick look at Facebook's 2013 Q3 says it all: 90% of its $2 billion in revenues for the quarter came from advertising, the remaining 10% from "payments and other fees."

Granted, Facebook is working to diversify its revenue sources, as any good company will, but growth in the foreseeable future will depend on increased ad sales, and making a dent in Google's overwhelming mobile advertising market share. Tall orders for sure, but there's some new data that suggests Facebook can accomplish both.

Ad response data
Working in Facebook's favor as it attempts to keep its string of solid quarterly performances intact, is the knowledge that advertisers are willing and able to pay exorbitant fees, assuming they get results. Why else would advertisers line up, with checkbooks open, to pay an estimated $4 million for a 30-second spot in the upcoming Super Bowl? Because it works, and so does advertising on Facebook.

A measure of online advertising success, or lack thereof, over the recently completed holiday shopping season was released by Experian, and should delight Facebook bulls everywhere. Ultimately, successful online advertising means getting users to an advertiser's website, and Facebook ads are really, really good at accomplishing this sometimes difficult task.

Of the online traffic driven by ads to retailer's websites over the holidays, a whopping 5.32% came from Facebook; that's over three times more than Google's YouTube, which accounted for 1.65% of retailer's online visits. No one else was even close. And Facebook's incredible 5.32% return isn't the only compelling argument for advertisers.

According to Experian, Facebook was responsible for over half of all social referrals to retailer's websites. Facebook gets results for advertisers, and that bodes well for fueling growth moving forward. It should be noted that search still dominates in getting consumers to retailer's websites, with over 40% market share, and Google reaps the rewards. However, consumer's reliance on search is diminishing, as demonstrated by its 13% decline compared to Dec. of 2012.

Mobile data
As the dominant player in the mobile OS market, Google's Android has helped make it the runaway leader in generating mobile ad revenues. Research firm eMarketer estimates Google will capture about $8.85 billion of 2013's total mobile ad spending of $15.82 billion, equal to nearly 56% of the entire market. The only alternative to Google that's anywhere close is, you guessed it, Facebook.

How does Google's mobile ad dominance translate to a positive for Facebook? A quick look at Facebook's efforts in the mobile space, and the outstanding results it's already achieved, tell the story. In 2012, Facebook generated all of $470 million in mobile ad revenue. 2013? eMarketer estimates Facebook generated slightly over $2 billion in mobile ad sales for the year.

Not only should Facebook bulls feel warm and fuzzy over its rapid gains in mobile ad market share -- its $2 billion in 2013 is nearly 13% of the overall advertising spend -- with its mobile initiative still relatively new, already 49% of all Facebook's advertising revenues are mobile-related. That's phenomenal growth in a short period of time, with plenty of upside remaining.

Final Foolish thoughts
The results are in, and Facebook has a compellingly simple story to share with prospective advertisers: It works. Facebook's emphasis on growing its mobile business is also a success, and that's not likely to change anytime soon. Don't be surprised on Facebook's Jan. 29 Q4 earnings call to learn that the majority of its earnings come from mobile ads. The growth opportunities are there, and Facebook's ready to seize them.

Another must-see investment alternative
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report, "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

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 January 17, 2014, at 3:39 PM, Rugrat54 wrote:

    I for one am a believer in Facebook. I see it as the stock that 5-10 years from now people will be saying, "I wish I would have..." You get the point. It's everywhere you look on ads today. In my humble opinion it very well could be another Google or Apple or Walmart. You can name any number of stocks that people wished they would have. Well I'm not going to be saying that in 10 years about FB!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2797767, ~/Articles/ArticleHandler.aspx, 8/31/2015 4:51:24 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Tim Brugger

Tim has been writing professionally for several years after spending 18 years (Whew! Was it that long?)in both the retail and institutional side of the financial services industry. Tim resides in Portland, Oregon with his three children and the family dog.

Today's Market

updated 2 days ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
FB $91.01 Up +1.28 +1.43%
Facebook CAPS Rating: ***
EXPGY $17.14 Up +0.23 +1.36%
GOOGL $659.69 Down -8.27 -1.24%
Google (A shares) CAPS Rating: ****