Facebook ad boost drives stock surge
The shares set a six-month high on Friday, advancing 1.3 per cent to $US31.72 ($A30.11) in New York. As concerns ease over the social network's ability to boost revenue, the stock has rebounded 79 per cent from a record low in September.
Facebook was still in the early stages of developing ads for users who access the social network via mobile devices instead of desktops, Doug Anmuth, an analyst at JPMorgan Chase & Co, wrote in a research report on Friday. Features such as Facebook Exchange, which helps companies target ads based on users' past web activities, would help boost sales this year, he said.
"We expect continued ad growth acceleration," Mr Anmuth said. "We do not believe Facebook shares are well-owned."
Shares may also be gaining from speculation that Facebook could use an event scheduled for Tuesday to assuage user concerns about ad policy changes for its Instagram photo-sharing service, according to Michael Pachter, an analyst at Wedbush Securities.
A proposal letting advertisers display user names and images in marketing materials was scrapped last month. Many people threatened to leave Instagram before the plans were to take effect on Wednesday.
"Because of the timing, I think there's going to be some kind of Facebook-Instagram integration," Mr Pachter said. "The announcement will clear up the confusion about the terms of use."
Some investors are also anticipating that the event may relate to a new web search or advertising platform, said John Blackledge, an analyst at Cowen & Co.
Before rebounding, Facebook had lost more than half of its value since selling shares at $US38 apiece in an initial public offering in May. Investors fretted about the prospects for growth with an untested mobile advertising service that had only been started in March.
About 60 per cent of the more than 1 billion Facebook members accessed the social network via mobile devices at the end of the third quarter, compared with about 47 per cent a year earlier.
Investors were reassured in October when Facebook said about 14 per cent of advertising sales were already coming from smartphones and tablets.
Spending on mobile now makes up a fifth of total advertising on Facebook, according to Kenshoo, a provider of technology that helps companies buy online advertising.
Facebook gets 70 per cent more for mobile ads than it does with its counterparts on desktops, helped by fewer ad spots being available on the smaller mobile devices.
Companies were ramping up spending as they see an impact from advertising on Facebook, said Aaron Goldman, chief marketing officer for Kenshoo. Big brands were spending more consistently on the service instead of one-time campaigns, he said.
Facebook will post third-quarter results on January 30.
The company should report that sales rose 34 per cent to $US1.51 billion in the fourth quarter from the year-ago period, faster than the growth rate of 32 per cent in the two previous quarters, according to estimates compiled by Bloomberg.
Frequently Asked Questions about this Article…
Facebook shares rose on signs that ad revenue growth is recovering and on analyst optimism and event-driven speculation. The stock hit a six-month high after advancing 1.3% to US$31.72, and had already rebounded about 79% from a September record low as investors grew more confident in mobile ad progress.
Mobile advertising is becoming a major revenue driver: about 60% of Facebook’s more than 1 billion users accessed the site via mobile at the end of the third quarter, roughly 14% of ad sales were coming from smartphones and tablets in October, and Kenshoo estimates mobile now makes up about one‑fifth of total Facebook advertising. Facebook also earns roughly 70% more for mobile ads than for comparable desktop ad placements.
Facebook Exchange is a targeting feature that helps advertisers retarget users based on their past web activity. Analysts say tools like Facebook Exchange can improve ad relevance and performance, which should help accelerate ad sales as advertisers see better results from campaigns.
Investors speculated the event could clarify Instagram ad policy changes, signal closer Facebook–Instagram integration, or even introduce a new web search or advertising platform. Analysts said a clear announcement could ease user concerns and reduce uncertainty about ad terms of use.
A proposal that would have allowed advertisers to display user names and images in marketing materials was scrapped the prior month after many users threatened to leave Instagram. The reversal reduced immediate backlash and calmed some investor concerns about user reaction to ad policy shifts.
After selling shares at US$38 each in the May IPO, Facebook’s stock fell more than half of its value before beginning to recover. By the time of the article it had rebounded roughly 79% from its September low.
Facebook was scheduled to post third‑quarter results on January 30. Bloomberg‑compiled estimates expected fourth‑quarter sales to rise about 34% to US$1.51 billion year‑on‑year, slightly faster than the 32% growth seen in the previous two quarters.
Yes. Advertisers — including big brands — were ramping up spending and using Facebook more consistently, not just for one‑off campaigns. Analysts and ad‑tech firms say higher, steadier advertiser spend signals improving monetization and supports future revenue growth, which is a key consideration for everyday investors.
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