Amid the jaw-dropping financial figures Facebook revealed last week when it filed for a public offering was an interesting admission. Although more than half of its 845 million members log into Facebook on a mobile device, the company has not yet found a way to make real money from that.
“We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven,” the company said in its review of the risks it faces.
In a world that is rapidly moving toward an era of mobile computing, this is a troubling issue for Silicon Valley’s brightest star — particularly since much of Facebook’s growth now is in countries like Chile, Turkey, Venezuela and Brazil, where people largely have access to the Internet using cell phones.
The issue seems particularly urgent for Facebook, which is wildly popular and is seen as a company of the future, a hybrid of social hub and information conduit, platform and publisher. In other words, if Facebook cannot figure it out, who can?
“It’s a huge Achilles’ heel for them,” said Susan Etlinger, a consultant at the Altimeter Group who advises companies on how to use technology. “There’s clearly a movement toward more social media consumption on mobile devices, and Facebook doesn’t have a revenue strategy for that shift. They haven’t figured it out yet.”
Facebook declined to comment in advance of its offering, but the company outlined its concerns in the filing, stating that it expected its mobile users to “exceed the growth rate of our overall monthly active users for the foreseeable future.” And if executives are not able to chart a path to profitability on mobile platforms, the filing indicated, the company’s “revenue and financial results may be negatively affected.”
At stake, experts say, is a large chunk of advertising revenue. Facebook brings in most of its revenue by selling space on its website to advertisers who want to reach its users. Overall spending on mobile advertising in the United States is expected to reach $2.6 billion this year, up 80 percent from $1.45 billion in 2011, according to research by eMarketer. But that will still be just a sliver of what is likely to be a $39.5 billion online advertising market.
