Apple's New iPhone Helps Drive Facebook Stock Gain

Wednesday, 12 Sep 2012 02:04 PM

 

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Shares of Facebook Inc. posted a record gain Wednesday after Apple Inc. debuted the iPhone 5 with tighter integration for the social network, enabling voice-activated posts and photo sharing.

The stock rose 7.7 percent to $20.93 at the close in New York.

Facebook's prominence on the iPhone 5 debuted Wednesday bolstered efforts by Chief Executive Officer Mark Zuckerberg to allay concerns over its ability to generate sales from users who increasingly socialize over handheld devices. The stock has plunged 45 percent since an initial public offering on May 17.

“Now we are a mobile company,” Zuckerberg said in an on-stage interview at the TechCrunch Disrupt conference in San Francisco yesterday, his first since Facebook’s IPO. “Over the next three to five years I think the biggest question that is on everyone’s minds, that will determine our performance over that period, is really how well we do with mobile.”

Integration with the iPhone, the world’s best-selling handset, offers some evidence that Facebook’s mobile push can work, said Mark Harding, an analyst at JMP Securities LLC in San Francisco. “Investors feel more confident that Zuckerberg is now focused on mobile and focused on monetizing mobile.”

Zuckerberg “struck an upbeat tone,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco. “Clearly, from his words, they are making progress in mobile.”

Zuckerberg, who appeared at ease while trading laughs with his interviewer, for the first time elaborated on technical struggles that have impeded Menlo Park, California-based Facebook from creating a user- and advertiser-friendly mobile application. The company spent too long trying to build mobile products using a programming language known as HTML5, Zuckerberg said.

‘Biggest Mistake’

“The biggest mistake we’ve made as a company is betting too much on HTML5,” he said.

Facebook is lessening its reliance on the tools, and it has built an application better tailored for Apple Inc.’s mobile software, Zuckerberg said. It’s also working on an application for Google Inc.’s Android system. New features will be available to the mobile service in the coming weeks and months, he said.

Based on the amount of time users spend on mobile, the company should make “a lot more money” via wireless devices than through desktops, Zuckerberg said. Mobile users also tend to be more interactive than desktop users, he said.

“It makes perfect sense to us that more people have mobile phones so there is a far larger universe of potential Facebook users and it is much easier to check Facebook mobile regularly,” said Richard Greenfield, an analyst at BTIG LLC in New York, in a research report.

‘Communications Tool’

At the same time, mobile ads may alienate users if the promotions disrupt use of the social-networking service, he said.

‘Facebook is not a media consumption service, it is first and foremost a communications tool,’’ said Greenfield. “If your phone call, IM or iChat were disrupted by ads you would never tolerate it. Facebook users did not mind advertising on desktop because it could be ignored."

Zuckerberg said Facebook is taking steps to strengthen search capabilities. The company is fielding about a billion search queries a day.

“We have a team working on search,” said Zuckerberg, who was interviewed by Michael Arrington, a venture capitalist and the founder of the TechCrunch technology blog. “Search engines are really evolving towards giving you a set of answers.”

Zuckerberg also said Instagram, the mobile photo-sharing service recently acquired by Facebook, has more than 100 million registered users. Facebook wants to help Instagram, which cost the company about $740 million in cash and stock, to grow to hundreds of millions of users, he said.

Slower Growth

Facebook, which hasn’t closed above the $38 IPO price since its first trading day, reported in July that second-quarter sales increased 32 percent, down from 45 percent in the previous three months.

The share-price performance has been “disappointing” and it “doesn’t help” in terms of employee morale, Zuckerberg said.

Still, Zuckerberg would rather Facebook be underestimated rather than lavished with praise, he said. That gives the company flexibility to make big bets on the future.

“Sure, maybe some people will leave,” he said. “But I think it’s a great time for people to join and a great time for people to stay and double down."

Zuckerberg’s comments helped boost shares of Millennial Media Inc., operator of a mobile-advertising network. The stock gained 12 percent to $13.68 at the close in New York.

Millennial stands to gain from Facebook’s transition to custom-built apps because it may help increase demand for mobile-ad networks, according to Jason Helfstein, an analyst at Oppenheimer & Co. in New York.

© Copyright 2014 Bloomberg News. All rights reserved.

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