Facebook's long-range plans
For Facebook, the issue isn't so much about its flagging stock price but its long-term plans. The company has the flexibility — unlike many of its peers — to pursue revenue for mobile ads and targeted marketing.
Facebook is in the enviable position of being the center of the social-network ecosystem, where users manage all of their third-party apps, says Gina Bianchini, founder of Mightybell, a new social-networking app for online groups.
"They're doing something right with $4 billion in revenue (in 2011), and they're in good position to build targeted ads," says Jon Elvekrog, CEO at 140 Proof, a technology platform that analyzes publicly available social feeds on Facebook and Twitter.
Because Facebook is so rich in demographic data on millions of people, it could unleash billions of dollars in ads for advertisers that target what consumers say and whom they follow, says Elvekrog.
"It is the largest Internet site in the world, with a strong global reach," says Bill Gurley, a general partner at Benchmark Capital, a backer of Twitter, Instagram, Yelp and others.
Facebook's stock performance doesn't change the fact that social is "the No. 1 online activity," ahead of e-mail and video, Elvekrog says. "A blowout IPO would have set a better mood, yes," but the opportunity for Facebook to capitalize on its audience "is huge," he says.
The company may have some investors worried, but software developers are pumped. "Our brands continue, day-to-day, to be discovered via the Facebook platform," says Christian Taylor, CEO of Payvment, an e-commerce platform on Facebook that is signing 1,500 small and midsize sellers per week and is up to 165,000.
Brian Blau, consumer analyst at market researcher Gartner, says it's all about Facebook's customer base. Developers "are run by boards, who want them to reach consumers and make money. Facebook helps them do that."
Not that Facebook is taking chances. On June 7, it unfurled its own App Center, modeled after Apple's App Store, that gives developers a reason to stick around by helping Facebook members find their apps.
Without an app store, developers might flee to other platforms that aren't connected to Facebook, such as iPhone or Android apps, or apps connected to Google+.
To be sure, Facebook faces severe challenges. Its user growth rate has sputtered in the U.S. Unique visitors to the site in April were 158 million, up 5% from a year ago, the lowest growth rate since research firm ComScore began tracking the data in 2008. Facebook's growth rate was 24% in April 2011 vs. a year earlier and 89% in April 2010 vs. the previous year, ComScore says.
Not only that, Facebook's respected chief technology officer, Bret Taylor, says he is leaving for an unnamed start-up this summer.
Earlier this month, Facebook said it would make it easier for advertisers to place ads on mobile devices. It acquired mobile-commerce start-up Karma and hired the mobile-development team away from Pieceable Software.
Mobile advertising spending in the U.S. is expected to reach $2.61 billion this year, up 80% from $1.45 billion in 2011, eMarketer estimates. For now, Google has about 52% of the market. Apple and Millennial Media, which do not sell mobile search ads as Google does, lag far behind, at Nos. 2 and 3.
Twitter CEO Dick Costolo, meanwhile, says his company generated more advertising revenue from smartphones and tablets than from its website on many days in the past quarter: He declined to provide dollar figures.
Counters Carolyn Everson, vice president of global marketing solutions at Facebook, "We've seen powerful indicators that when people see sponsored stories on mobile, they engage … as much as they do on the Web."
In the end, Facebook's unprecedented scale, technically and in terms of marketing, offers it immense advantages — but only if it learns how to harness it, says Jeffrey Davitz, CEO of Solariat, which helps companies filter and respond to social content. "There has never been a window into that many people," he says.