Now that the IPO struggles are becoming a memory, I expect Facebook (FB) to start gaining ground. It has been focused on creating avenues to generate revenue, which is what investors are looking for in a company. It has a good vision as it moves into mobile advertising.
The big move to "everything mobile" is also what is transforming the Facebook revenue base. This relatively new advertising will target apps that consumers use, pinpointing in great detail how people use their phones. There is a "Facebook Connective" feature that does this. It tracks apps but also websites. A user could log into Amazon.com, Inc. (AMZN) or another personal site and these things will be tracked, while companies target ads for these consumers based upon this data.
Could there be privacy issues here? Both Apple Inc. (AAPL) and Google Inc. (GOOG) presently track app usage. But Apple discloses that targeted ads based upon usage and downloads can take place, and Google has yet to target advertising this way. Neither Google nor Apple track what people do in their apps to target ads. Tracking how the apps are used goes a step further for Facebook. Privacy advocates said Facebook should provide ways for users to opt out of the mobile ad targeting.
But the need for new forms of revenue is now in high demand, since the company went public. Its mobile ads for apps are potentially highly lucrative. First of all, it can charge more for an app installed on a phone than for the traditional 1000 views. Advertisers will be charged by app installation and ads will appear on the Facebook "News Feed."
Partners with Yahoo
Facebook and Yahoo! Inc. (YHOO) have agreed to work together on a joint internet advertising and licensing venture. Facebook and Yahoo's strategic deal will involve Facebook users to share Yahoo content. These will involve (cross-license) patents, as well as working together on advertising special events such as the Olympics. I am not sure if this will help Yahoo more or Facebook, but considering digital dominance has been forged by the likes of Apple, Google, and Facebook, it might be the former.
Expect the company to continue to roll out new services, especially ones that attempt to increase and monetize its mobile user base. And since the IPO fiasco has settled down, a good bullish income play may be in order for this company.
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The Options Play
- Buy an October 2012 call with a strike of '32' (priced at $3.10)
- Sell an October 2012 call with a strike of '33' (priced at $2.50)
- Net Debit to Start: $0.60
- Maximum Profit: $0.40
- Maximum Risk: net debit
- Maximum Length of Trade: 4 months
Reasoning Behind the Trade
- The initial IPO fiasco is dying down and the stock will grow.
- All these new additions will lead to more revenue which is what it needs.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.