Everything seems to be going in the right direction for social media giant, Facebook. They released a fourth quarter performance report Wednesday touting they had, all together, earned more than $5 billion in one year for the first time ever. Their quarterly earnings in December topped $1.5 billion, a 40% increase from their previous December earnings in 2011, and their mobile advertising increased by 14% in the the past year.
In addition, Facebook executive’s predictions and plans that mobile device usage would replace desktop came true, as cited in their report, and Facebook’s stock had risen from a dismal $17.55 a share to over $31 as of their earnings announcement on Wednesday.
But, as of 11:00 A.M. EST. on Thursday, Facebook’s stock is down almost 3.5%. Which raises the question as to why are investors still timid of the social media site?
Well, for starters, it has a lot to do with their mobile services. Although Facebook’s ad revenue from mobile devices grew 14% in the past year, their total percentage of revenue earned from mobile devices was at 23%. Facebook executives had projected, at least, 25% of revenue stemming from mobile devices, leading investors to worry that as mobile usage continues to rise that Facebook may not be able to generate as much as profit from this platform as they had originally planned.
It’s a solid argument from investors, financially speaking. Mobile devices are becoming the primary form of connecting to the social media site, and the numbers have shown that generating profits from mobile devices is more difficult than from computers. Added to the fact that 84% of Facebook’s profits come from advertisements, and you can see why investors are timid.
In addition, the gigantic numbers Facebook touted in their performance reports only tell half the story. Yes, Facebook earned over $1.5 billion in the fourth quarter, but it’s net income was only $65 million, compared to $300 million in the same quarter in 2011. In all, Facebook’s net income was $53 million on $5 billion dollars revenue, compared to $1.2 billion net income on $3.7 billion total revenue in 2011.
Moving forward, it appears the two biggest challenges Facebook will face with potential investors are its ability to become profitable with growth and their ability to better monetize the transition to mobile usage. But CEO Mark Zuckerberg appears well aware of the challenges ahead.
“Today, there’s no argument, Facebook is a mobile company,” Zuckerberg said during a conference call with financial analysts. “The next thing we’re going to do is get really good at building new mobile-first experiences.”
In all, it appears as if 2013 is going to be an interesting year for the social media giant.