My Facebook Mea Culpa: Cracking The Monetization Conundrum

| About: Facebook (FB)


Mobile monetization remains a challenge but looks rosy.

After being 'meh' about Facebook, its time to admit mea culpa.

Facebook could perhaps be one of the best GARP stocks out there.

One of the most debated topics on Seeking Alpha's contributor forums is about getting paid for mobile page views. Some say they are getting twice the page views from mobile devices when compared to desktops. Some contributors aren't happy about it, while some believe the existing structure is efficient. To be fair to Seeking Alpha, the management has always been very open about the fact that they are still working on how best to monetize the mobile platform.

Here is the reality. It is not just this site that is figuring this out. Even the most popular social networking site hasn't cracked this yet. And therein lies the massive opportunity for Facebook (NASDAQ:FB), Seeking Alpha, and all the platforms that are transitioning into the mobile platform.

Facebook reported pretty impressive quarterly numbers and this sent the stock soaring. As good as the numbers were, what caught our attention is the fact that while 90% of the active (millions and millions of) users are on mobile devices, the company and the industry in general haven't even started monetizing many aspects of advertising, including video contents. The search and messenger platforms are in their infancy as well when it comes to monetization.

When Facebook began trading as a public company back in 2012, we were very skeptical about the returns to shareholders because of its over-dependence on ad revenues from primarily desktop contents. Don't mistake, Facebook is still largely about ad revenues but the number of platforms it has to bring in the ad revenues is what matters now. The surge in mobile users, the addition of WhatsApp, and the increasing popularity of Instagram are some of the most positive developments for the company.

Now, how quickly and by how much will Facebook and others be able to monetize the increasing mobile users? Hard to say but below is the trend according to this report. Mobile in-app advertising revenue is set to grow threefold by 2018. This means in-app advertising will overtake traditional desktop ads and mobile web advertising easily. The sketch below compares the revenue figures for 2013 and 2014. Notice how the web ads revenue stagnated, while the mobile web ads and mobile in-app revenues grew 50% and 70% respectively. The numbers aren't yet available for 2015 and it will be interesting to see that once it's published.

The larger point is that Facebook and the industry in general are still looking at exploiting their biggest catalyst. This isn't to say that Facebook will not grow until this happens as the latest quarter proved. The same way that Seeking Alpha continues to reward contributors well enough until mobile ads are better monetized. The key? Patience.

With the stock trading at 25 times 2017's projected earnings (the estimates are being revised up as we speak), Facebook definitely looks like the best of the so called 'FANG' stocks. This is not a recommendation to buy the stock right here, right now. But if you are looking for growth at a reasonable price [GARP], Facebook has all the tailwinds: good numbers to show, a great management team, and more importantly the support from Wall Street's big boys. We aren't buying yet but if we were to initiate a position in the 'FANG' stocks, Facebook would the frontrunner.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.