Facebook shares have rallied recently, buoyed by new advertising platforms and the company's potential to grab more mobile dollars.
NEW YORK (TheStreet) -- Facebook(:FB) has not had the easiest of times since going public earlier this year, dashing investor hopes of a massive IPO pop. Since then, CEO Mark Zuckerberg and his team have faced ongoing questions about slowing growth and the company's ability to deliver long-term value.
Shares of the social networker have tumbled 40% since its offering in May, but have rallied recently thanks to a number of catalysts, including a new advertising platform.
The Menlo Park, Calif.-based company began testing the Facebook Ad Exchange, or FBX, during the second quarter of this year, letting marketers bid for ad impressions on the site. Touted as a way to deliver more relevant ads to users, FBX lets advertisers reach users based on their browsing history, a practice known as retargeting.
If a user, for example, visits an online retailer, FBX can generate a related ad when he next logs onto the social networker's site. Advertisers can then purchase these ads through what's been described as an automatic auction, known as real-time bidding (RTB).
"Facebook Exchange allows marketers to use their own real-time consumer insight data to reach an audience on Facebook," noted Scott Shapiro, a Facebook product marketing manager, in a recent blog posting.
The real-time aspect of FBX is key, giving sportswear companies the ability, for example, to market their wares during the World Cup final or the Super Bowl.
Now out of beta, FBX has garnered stellar reviews from a host of marketing specialists. Retargeting platform ADRoll, which was one of the earliest companies on the Facebook Exchange, said that its advertisers saw an average 16x return on investment thanks to FBX. AdRoll has already used the technology to launch campaigns for 60 advertisers, including home furnishing company Room & Board, social media dashboard HootSuite and camera specialist GoPro.
TellApart, which has been serving ads through FBX for three months, said that its clients have seen a 10x to 20x ROI.
In a blog posting, Zach Coelius, CEO of retargeting specialist Triggit, said that FBX has a four-time higher return on advertising spending compared to exchanges such as Google's(:GOOG) AdWords.
Clearly, this could be a big deal for Facebook.
IDC estimates that RTB will account for 27% of ad spending in the U.S. by 2015, up from 10% in 2011. Total spending on RTB in the U.S. will reach $5.1 billion, according to the tech research firm.
Investors may have been largely underwhelmed by Facebook during its short life as a public company, but have given the company some love recently.
Shares of the social networker closed up 6.49% at $23.29 on Wednesday, boosted by positive comments by Salesforce.com(:CRM) CEO Marc Benioff about Facebook's impact on the marketing community.
Speaking during Salesforce.com's Dreamforce event in San Francisco, Benioff said that Facebook's influence will change the way companies develop and market their technologies, according to Direct Marketing News.
Another positive catalyst for Facebook is Apple's(:AAPL) latest mobile operating system, iOS 6, which offers tighter integration with the social networker.
"Our recent management meetings further reiterated the company's bullish long-term vision in mobile, especially with the deep integration with the Apple iOS 6," said Herman Leung, an analyst at Susquehanna Financial Group, in a recent note. "Deeper engagement with Facebook can lead to users sharing more content and deepen the user's identity profile on Facebook."
Facebook's mobile strategy, of course, has been one of the biggest question marks hanging over the firm, something which Zuckerberg himself recently acknowledged. Speaking during the TechCrunch conference in San Francisco last week, the youthful CEO nonetheless promised that Facebook will make "a lot more money" on mobile than on desktop.
With almost a billion users, Facebook certainly has the launch pad for driving mobile dollars, and has already started to push into the space.
Earlier this year, for example, Facebook expanded its sponsored stories feature, enabling advertisers to buy sponsored stories in its mobile News Feed.
"Mobile sponsored stories revenues largely just started in the beginning of June," noted Susquehanna's Lueng, who estimates that total sponsored stories revenue could reach $612 million in 2013, up from $336 million in 2012. Within this number, Leung predicted that the mobile portion of sponsored stories will grow 122% to $390 million in 2013, up from an estimated $178 million this year.
Clearly, though, many investors still need to be convinced about the long-term Facebook story. The company's rally petered out on Thursday, pushing its shares down 2.45% to $22.72.
--Written by James Rogers in New York.
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