Facebook now rises from IPO debacle

 

PHOTO | KAREN BLEIER | FILE A woman prepares to log on to the Facebook website on January 26, 2010 in Washington, DC. Facebook has been on an upward cycle since releasing earnings a week ago that showed a big jump in mobile advertising revenue.   AFP

By AFP

 

In Summary

• Company’s shares traded slightly above their IPO price for the first time since their debut in May 2012
• Firm’s mobile advertising revenue has increased

NEW YORK CITY, Thursday

Social networking giant Facebook on Thursday finally climbed out from the wreckage of its much-hyped but quickly panned stock market debut more than a year ago.

The company’s shares traded slightly above their initial $38 public offering price for the first time since their debut amid much fanfare in May 2012. The shares retreated, however, to end official trading at $36.80 on Wednesday.

Facebook has been on an upward cycle since releasing earnings a week ago that showed a big jump in mobile advertising revenue. Shares have rocketed more than 40 per cent since the earnings release.

The rally has been seen by some analysts as a turning point for the company, though more skeptical experts believe tricky curves need to be negotiated on the road ahead.

“They haven’t addressed the fundamental problem which is that they have yet to find a way to make the social aspects of the service uniquely powerful for advertisers,” said independent analyst Rob Enderle of Enderle Group in Silicon Valley.

“They are just finding ways to add ads and that tends to drive users away. Ads really don’t work well on small screens.”

Facebook got as high as $38.31 Wednesday shortly after the market opened.

The stock has only closed above $38 on one occasion: its first day on the markets.

Facebook shares plummeted after the highly anticipated IPO last year and languished, primarily due to doubts about the California-based company’s ability to make money from members using mobile devices to get online.

But the most recent earnings report showed that some 41 percent of its ad revenues came from mobile — compared with 30 percent in the prior quarter and virtually nothing a year ago.

“Over the last three months, there have been a lot of innovations from Facebook,” said Global Equities Research analyst Trip Chowdhry.

“The long-term trends are favourable, but it is still a bit early.”

Chowdhry noted that Facebook is distinguishing itself from rivals such as Google and Yahoo by establishing itself as “the social hub” where advertisers can target messages based on members’ “social, interest, and affinity graphs.” (AFP)