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Facebook, Inc. Stock Turns 3: The Epic Rise Continues

By Daniel Sparks – May 18, 2015 at 8:41AM

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Looking back at yet another year as a public company, Facebook continues to impress.

Three years ago today, Facebook (META 1.24%) began trading on the Nasdaq under stock symbol FB. Zuckerberg and his team raised equity to help the social network in its efforts to effectively monetize its growing mobile usage and to help Facebook further its bold mission to connect the world. As one of the first social networks to go public, and as the first social network to attempt to monetize its mobile browsing experience, Facebook would soon set an example for others to follow.

Three years later and 114% higher, the story behind Facebook stock's market-crushing returns remains as intriguing as ever.

Mobile domination persists
One of the biggest concerns when Facebook went public was whether or not growing mobile usage on the platform could be monetized effectively. After all, not a single social company had meaningfully monetized a mobile user feed at that point.

But that concern didn't last very long. By the third quarter of 2012, Facebook's freshly launched mobile ad products were already accounting for 14% of ad revenue. By the fourth quarter of 2013, mobile advertising revenue accounted for more than half of the social network's total advertising revenue. Now, Facebook's mobile advertising revenue makes up a whopping 73% of total advertising revenue.

Today, Facebook is a mobile company, with the majority of business taking place on smartphones and tablets. Of Facebook's daily active users, or DAUs, 85% are mobile DAUs. Eighty-seven percent of Facebook's monthly active users, or MAUs, are mobile MAUs.

Users continue to grow rapidly
In October 2012, Facebook's MAUs hit 1 billion. Would Facebook's user growth soon stagnate? Far from it.

Facebook's MAUs continue to climb at considerable rates today. In the company's most recent quarterly report, the social network said it had 1.44 billion monthly active users, up 13% from the year-ago quarter. The growth of Facebook's most valuable users, its mobile DAUs, has been even more astounding. Mobile DAUs hit 798 million in Q1, up 31% from the year-ago quarter.

The continued growth in Facebook's MAUs highlights the social network's success at appealing to markets beyond the U.S., Canada, and Europe. Facebook's fastest growing geographic segments when measured by users are its Asia-Pacific and Rest of World segments, hitting 471 million and 453 million monthly active users, respectively, in Q1.

Chart source: Facebook Q1 earnings slides.

Facebook's user figures do not include its Instagram and WhatsApp users. These social apps are smaller than the company's core Facebook platform, but growing rapidly.

WhatsApp MAUs are fast approaching Facebook MAUs, recently hitting 800 million. Instagram is further behind, though still a substantial platform. The photo-sharing app boasts 300 million MAUs. These figures are up significantly from WhatsApp and Instagram's reported 500 million and 200 million monthly active users in the year-ago quarter.

Will pricey acquisitions pay off?
Going forward, investors will look for Facebook to prove that the pricey acquisitions it has made in recent years actually made sense. Specifically, investors will be looking for evidence that Facebook can monetize its WhatsApp, Oculus VR, and Instagram acquisitions, which cost the company $19 billion, $2 billion, and $1 billion, respectively.

While the social network's $1 billion Instagram acquisition looks poised to pay off in the near future, with the company finally rolling out advertisements on the platform and management saying the engagement of these ads is high, the outcome for WhatsApp and Oculus is less certain.

WhatsApp, a multi-platform Internet-based messaging service, which Zuckerberg said he does not plan to integrate with Facebook, only charges users $1 per year after the first year, which is free. Whatsapp has a strict "no ads" policy.

Virtual-reality company Oculus is still in the developmental stages, planning to ship its Rift goggles in the first quarter of next year. 

Image source: Oculus.

Of course, investors weren't supposed to see any big payoffs from these acquisitions yet. Zuckerberg has emphasized from the start that these acquisitions, particularly WhatsApp and Oculus, were long-term bets. But investors should at least look for the markets for these products to begin to develop during the next year, offering glimpses into how Facebook will get its money's worth out of these businesses.

It's undoubtedly been a great year for Facebook. In the trailing 12 months, the social network's revenue and EPS jumped 58% and 83%, respectively, compared to the prior 12 months. During the last 12 months, Facebook stock has soared 42%.

Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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