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What Caught Wall Street's Eye in Facebook’s New Ad

Thursday, 4 Oct 2012 | 11:47 AM ET

In conjunction with its 1 billion users milestone, Facebook released an ambitious new video advertisement that positions it as one of the basic forms of human interaction in this new world.

Facebook
Juan Mabromata | AFP | Getty Images
Facebook

The ad compares the social network to a chair, a door bell, an airplane…even a dance floor.

But it was the flash of an image lasting less than a second toward the end of the ad that caught the eye of many investors and analysts. That flash was a phone.

After all, it is the phone that holds the key to Facebook’s future success as the world’s populace transitions over to mobile devices. And it is the company’s ineffectiveness to leverage the phone that has caused its share price to stumble badly since its IPO.

To the bulls buying the stock Thursday, the image symbolizes CEO Mark Zuckerberg’s commitment to conquering mobile and essentially displacing the phone. (The image is of an older-era rotary phone and the ad can be viewed here.)

“Zuckerberg has said before that the company has 1 billion users now, but 5 billion people worldwide have phones, and Facebook only has 600 million mobile users,” said Enis Taner of RiskReversal.com, in response to the advertisement. “Clearly, this indicates its strategy for growth going forward will be focused on mobile.”

Facebook shares climbed in early trading today, cutting their loss since the May IPO to 42 percent. The stock has been on a bit of a run as of late, up 25 percent from its low at the start of September.

“It’s the modern version of the vintage AT&T commercials: ‘Reach out and touch someone,’” said Richard Rosso, a financial advisor. “Then the ad shows how Facebook will open up the world to us now with the phone shot. To me it shows how they’re just at the beginning of changing how consumers use mobile communication.”

Zuckerberg has his work cut out for him in that area. Facebook mobile ad revenue will total just $72.7 million this year, according to eMarketer. Meanwhile, Google’s mobile advertising revenue will total $1.4 billion, according to the research firm.

To be sure, not all investors were wowed by the advertisement or the 1 billion user mark.

“You've just seen the peak,” said Josh Brown, investor and author of The Reformed Broker blog. “The question is can they monetize them? They're out of new users other than replacement, so what are these users now going to be worth?”

Still, the growth statistics released Thursday are impressive. Facebook notes that the median age of users joining this week is 22 years old and that they came mostly from emerging markets such as Brazil and India.

“Facebook is a mini-Internet, an organized Internet, an Internet that connects our friends, mobile devices, commercial transactions, interests … all into one advertising juggernaut,” said James Altucher, hedge fund manager and author. “The funniest thing I hear people say isw ‘Facebook is the next MySpace.’ With one billion users, these people have clearly deluded themselves the way 4-year-olds still believe Santa Claus exists.”

For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:00 ET on CNBC. Follow @CNBCMelloy on Twitter.




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