What is the long-awaited solution to Facebook's (FB) problems? If a solution does exist, could it indeed reverse the social network's lopsided fortunes? While I can't give conclusive answers to these questions, I am inclined to believe that this solution will restore some sense of bullishness to Facebook stock.
Ever since the infamous IPO back in May, Facebook's stay in the public market has been marked by criticism. Analysts have repeatedly commented about its ever dipping stock price and endless scandals. Nonetheless, there is a shred of hope for this embattled stock. The solution could be in sight and analysts will be more than surprised when its stock shoots back up.
Before looking at this potent solution, it would be helpful to briefly examine some of the problems currently faced by Facebook.
Things as They Are
At this moment, Facebook is neck deep in problems and there is a lot of finger pointing going on within its top level management. In addition, its stock price is constantly dipping to record lows and there are concerns as to whether the social network's advertisements are as effective.
With regard to advertisements, Facebook has already started cracking down on counterfeit "likes." Similarly, CFO David Ebersman has received the final finger-point as he is being traced to the botched IPO.
However, following the downgrade by BMO Capital Markets that happened amid hyped stories of bigwig shareholders selling huge chunks of shares, the stock has taken a worse for the worse. This tells a story of a stock stuck in the trenches of poor performance and endless bearish bouts.
The solution lies in mobile. I know critics may be quick to lash out, especially after considering the difficulties that Facebook has experienced in converting desktop users to mobile.
All the same, mobile will soon be a huge revenue earner for Facebook. I am not alone in my reasoning. Analysts from Morgan Stanley compiled and published a report that exclusively focused on the possibilities extended by Facebook's mobile sector.
Mobile monetization at Facebook has begun gaining momentum. This will not only play an instrumental role in restoring order, but it will also improve the social media giant's long-term outlook. And that will greatly increase the demand for its stock.
Some IOS mobile apps updates were released on Aug. 23. This perhaps explains the improved functionality and speed of Facebook's mobile apps. In my line of thinking, this move will go a long way in improving the current deplorable state of affairs at Facebook.
After considering the incredible rate at which the smartphone market is evolving, it wouldn't be a surprise to see Facebook growing with it. The social network is not only the world's most popular and active social network, but it also boasts of an increased number of mobile users. In fact, more than 50% of current active users have accessed the site via a mobile device. This is a huge accomplishment compared to the less than 1% of active mobile users back in 2007.
If Facebook clings to the global shift from PC to mobile devices, it will greatly benefit. Not only will it increase its user base, but it will also be able to make more money from mobile marketing.
The Macro View
In as much as Facebook's mobile monetization has begun materializing, it would be completely out of order to view this achievement as an isolated event. It is obligatory to know what is happening at competitors' backyards and in the industry as a whole.
Looking at Google (GOOG), I must say that its odds in the social networking space are still not as high. Google+ still doesn't have the numbers or popularity to extend formidable threat to Facebook. Similarly, most of Google's efforts and attention are currently placed on its Android operating system.
Yahoo (YHOO), on the other hand, is also wedged in some restructures. It recently had a leadership change and most of its attention is focused on creating new results-oriented strategies. Its stalled operations therefore act as a delay timer for Facebook.
Microsoft (MSFT) has to worry about its partnership with Nokia. While expectations for the new Lumia 920 are high, Nokia's inability to send ripples through the smartphone market could largely affect the launch of this new smartphone and, in the process, bring Microsoft down. However, the Yammer acquisition gives Microsoft a chance to battle things out on the social front.
In conclusion, all these competitors extend some fashion of formidable threat. Nonetheless, Facebook currently has an invisible edge because of the improvements in its mobile sector. I believe that Facebook is headed for recovery and that the long haul extends favorable prospects.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.