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Facebook Revisited – What Can We Learn

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Success and Failure Road Sign

On this date in 2012, Facebook became a public company with an Initial Public Offering (IPO) that raised $16 Billion.  Read about it here.   I was skeptical – read about my thoughts here.  One of the problems with Facebook at the time of the IPO was their inability to get traction in the mobile browsing area which was rapidly becoming the most common way people were using the internet.  They needed to get advertising revenue in this area or they were going to be left behind.  In short, they have figured it out.

A snap shot of Facebook’s first quarter results this year is as follows:

  • Revenues of $3.543 Billion
  • Net Income of $512 million
  • Earnings per Share of $.18

You might want to point out the stock price has been around $80 per share and that it is trading at about 80 times earnings for the trailing twelve months.   In contrast, the S & P 500 stocks traditionally trade, on average, at 15-17 times earnings.  Facebook has a lot of upside potential and that growth potential is part of why it trades at such a higher multiple.  The stock price is not Facebook’s “fault” the market determines the value so let’s move on.

What can we learn from this?  I can think of a couple of things; persistence and addressing weaknesses.  Facebook leadership knew they had to figure out the mobile advertising revenue problem and they didn’t stop until they got it right.  According to the management’s discussion and analysis section in the Q1 2015 SEC 10Q filing, they have 936 million daily active users worldwide and 798 million of those are on a mobile device.  Mobile growth is averaging about 44% per year since Q1 2012.  The number of daily active users from traditional personal computers have decreased on average by 19% during the same period.  It seems like they figured it out at the right time as mobile advertising is no longer the future of advertising growth it is the present.

Have a great week overcoming your challenges.


Written by pacelinebiz

May 18, 2015 at 8:02 am

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