Tech folks are buzzing over Facebook's (FB) new mobile app. By all accounts, it's extremely fast and an enormous step forward from its previous app, which I must say was atrocious. Given the buzz, with the app being extensively highlighted by news outlets like The New York Times, Washington Post and The Wall Street Journal, one might be tempted into thinking it might be a good time to buy. After all, it looks like Facebook is going all-in with mobile, and if it succeeds, there's certainly a lot of money to be made. But hold on. I'm checking the features of this new app, and… nope, no new feature that fixes the monetization problem. Even though Facebook's stock is quite low right now and the new mobile app seems to be pretty good, I would still not advise any significant investments into the social networking company.
Unless you've been hanging out on MySpace for the last few months, you've undoubtedly heard about Facebook's tumultuous IPO. Tumultuous might be putting it kindly. In less than three short months, Facebook's stock has lost a whopping 50 percent of its IPO value. While it gains new users everyday and will likely see another uptick in users thanks to the improved mobile app, this is all for naught if the company isn't making money off of them. There had been rumors of a more successful advertising strategy that caused a small recovery of the stock near mid-June, but since July it's been nothing but downhill.
With the stock continuing to plummet, CEO Mark Zuckerberg is starting to take some heat. Jeffrey Sonnenfeld, a corporate governance expert at the Yale School of Management, was critical of Zuckerberg in an interview with CNBC:
"He needs to learn a little more about being a CEO from some of the folks on his board," Sonnenfeld said. "Now is the time when he has to show he can meet expectations."
If I were Zuckerberg, I would heed Sonnenfeld's advice. After all, who better to lend an ear than some of the biggest leaders in technology today? Facebook's board includes Peter Thiel, co-founder of eBay's (EBAY) PayPal and Reid Hoffman, co-founder of LinkedIn (LNKD). Zuckerberg is still young and could certainly use advice from industry veterans like Thiel and Hoffman. Thiel recently sold off a significant portion of his shares in the company, so while he might not be Zuckerberg's favorite person right now, he remains on the board nonetheless.
The latest strategy has the company including sponsored results when users search. For instance, if you type "Florida" into the search box, you may get results that are actually paid advertisements from, say, a resort. While the results are clearly labeled as advertisements, it is currently unclear how well this will work. Either way, it's not going to solve the problem entirely. Ken Wisnefski, CEO of Webimax, an Internet marketing company, told Fox Business none of his biggest clients had gotten "any value" out of its Facebook ads.
"Most will tune it out, skip over them and go look at what's more pertinent to them," Wisnefski said. "Aside from targeted customers, we've never had anyone come back and say, 'Hey, Facebook has been a huge return for us.' It's more fluff than substance."
Ouch. On the bright side, the new mobile app has received near-unanimous praise. The Apple (AAPL) iPhone version will launch first, though it is unknown whether Android phones will receive an update as well. Those who have tested the app have noted its aforementioned much faster speeds, as well as some new cool design features. But again, cool design features don't pay the bills. Before you get too excited about the new mobile version of Facebook, keep your eye on the money: Facebook's issues are far from over.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.