Facebook to generate USD1bn from mobile ads next year - StrategyEye Digital Media

Facebook will generate almost USD1bn from mobile advertising in 2013, according to?JPMorgan, which is bullish on the social network?s mobile prospects as smartphone and tablet penetration increases. Analyst Doug Anmuth forecasts that?Facebook?will make USD228m from mobile this year, impressive growth given that the firm only launched mobile ads in April. He suggests that mobile revenues will then increase at a compound annual growth rate of 131% through 2015, to hit USD2.81bn. The forecast is a welcome respite for Facebook, which has come under intense scrutiny for its failure to successfully monetise its growing mobile audience. But Anmuth believes the social network needs to be given more time to develop its mobile ad strategy, and is actually raising his forecast as the social networks trials new formats and targeting methods.

Anmuth is also optimistic on Facebook?s chances in online advertising more generally, suggesting that revenues from the ?sponsored stories? online ad unit, which lets brands attach themselves to users? activity, such as status updates, place check-ins and page ?likes?, will hit USD349.2m this year. Facebook only launched these ads in January, but they appear to already be proving popular with brands, with Anmuth forecasting that their revenues will increase by 115% every year between 2012 and 2015 to be worth USD3.48bn in three years? time.

Increases in Facebook?s ad revenue clearly slowed at the beginning of this year, with the?firm?s first earnings?as a public company showing revenue growth of 32%, down from 45% in Q1. But Anmuth expects revenue growth will accelerate again in the second half of 2012 and into 2013 due to the increasing use of sponsored stories. He claims that this ad unit has a clickthrough rate ?many times higher? than standard display ads, with Facebook able to charge advertisers ?much higher? rates. This means that as the firm reduces its reliance on display ads over the coming 18 months, its revenues should go up. Anmuth estimates that display ads will make up more than 90% of Facebook?s total revenue this year, but that this figure will drop to 60% by 2015.

JP Morgan?s outlook for Facebook is much more upbeat than?recent forecasts from research firm eMarketer, which lowered its revenue guidance for the year by USD1bn due to the firm?s ?underperformance? so far in 2012. While Anmuth recognises that Facebook has faced challenges, he suggests the firm will be able to iron those out and successfully monetise the 543m people accessing its site on mobile devices. JP Morgan currently has an ?overweight? rating on Facebook?s shares, meaning that the firm thinks Facebook?s shares are worth more than the USD17.75 they are?currently trading at. Anmuth has a target of USD30.

?Facebook?s stock will go through some rough times in the next couple of months,? he says. ?But for those willing to look out a bit further we believe the risk/reward is attractive.?

Source: http://www.strategyeyedigitalmedia.com/article/2012/09/04/facebook_to_generate_usd1bn_from_mobile_ads_next_year/

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