Facebook and Google Are in Trouble - and You're to Blame

×
AOL
Maybe you were one of those people who bought Facebook (FB) stock right after the initial public offering. You watched stock of the social network giant brought to its knees by worries about future growth and, most importantly, mobile. But those problems are all behind us now.

Facebook has become a king of mobile. After its latest blowout quarter, as Benzinga noted, everyone is deliriously happy. Fifty-nine percent of advertising revenue came from mobile, and the stock is over $76. If you hung in, you made some serious money. If you had bet on Google (GOOG) over the same period, you also would have had a payday, especially as the search giant owns the mobile platform of choice.

But don't get too comfortable, because there's a tiny problem. Facebook, Google and companies like them may not be able to keep delivering those massive increases in revenues and profits. The reason is your smartphone.

There's an Ad for That -- or Is There?

That's right, the mobile miracle -- that is transforming high tech, bringing the Internet everywhere, changing our lives and even finding parking spaces when we need them -- has a gotcha. Advertising on smartphones doesn't make money as much as it did on the old-fashioned Internet. And the more we all move toward doing our searching, social networking and everything else on those handheld devices, the tougher we're going to make it for the companies that deliver all those services to satisfy our stock portfolios.

Advertisers are dissatisfied with smartphone ads and therefore less willing to pay premium rates that can fuel growth. Some issues:
  • Carriers have been slow to tap the user data that advertisers depend on for targeted delivery, according to Advertising Age. Third-party ad networks and vendors offer some data, but the carriers have the richest data. However, they don't want to find themselves trying to convince a Congressional investigative panel on live TV why what they do doesn't affect consumer privacy.
  • Brands feel let down by mobile ad opportunities, according to iMedia. Companies view them as "seriously lacking the excitement and effectiveness that brand marketers need."
  • Mobile video use is down among consumers, according to AdNews. Video is the source of some of the highest-paying advertising space on mobile because it commands the best attention from consumers.
  • There isn't the room physically on a smartphone screens for numerous ads, so the Googles and Facebooks can't rack up as much revenue per user. Compare that to a web browser on your desktop or laptop, where you'll see plenty of ads simultaneously.
You can already see the results in the earnings reports. As the New York Times reported, the price Google gets per clicked ad dropped 6 percent last quarter from the same period a year before. That's the continuation of a two-year trend. Google's explanation was that "mobile does not monetize as well as other forms."

Facebook isn't out of the woods, either. The company announced that mobile represented 62 percent of its advertising revenue. Sounds good until you look at the audience composition: 79 percent of daily active users and 71 percent of daily monthly users were mobile. That means you.

Many investors are betting, whether they realize it or not, that somehow, somewhere, someone will figure out how to make mobile pay off more thoroughly. But until they do, you and I and every other Internet user who shifts more of their online time to mobile will put the pressure on the revenues, profits and eventually the stock prices of the service providers.


Increase your money and finance knowledge from home

Asset Allocation

Learn the most important step in structuring an investment portfolio.

View Course »

Forex for Beginners

Learn about trading currencies and foreign exchange transactions

View Course »

Add a Comment

*0 / 3000 Character Maximum

32 Comments

Filter by:
janet2derek

nothing bothers me more when I am on the internet than having a stpid ad pop up on my screen while I am in the middle of reading an article. Facebook is completely bull crap and I would never join it for any reason. They stink. No cell phone here either and seeing spam is now illegal in Canada I have fun reporting all the cheater who clog my inbox.

July 28 2014 at 7:28 PM Report abuse rate up rate down Reply
STAN

The only way i click on ads are by pure accident.The biggest problem i have with ads is if i'm paying for a service and then getting ads on top of that is bullcrap.

July 28 2014 at 6:49 PM Report abuse +1 rate up rate down Reply
ectullis

In any event OMG

July 27 2014 at 8:05 PM Report abuse rate up rate down Reply
Maverick

I think they are going to make phones more location specific and tell advertisers WHERE you are

July 27 2014 at 7:02 PM Report abuse rate up rate down Reply
Charlie Jackson

We all blame NSA but in actuality--All these websites, Facebook and Google are far more offensive than NSA.

July 27 2014 at 4:15 PM Report abuse rate up rate down Reply
hsstempe

truliberal 1 - a phone is a phone is a phone pull your head out along with everyone else who thinks a PHONE is any good for anything other than being a PHONE. SPEND MORE TIME DOING YOUR JOB OR OTHER PRODUCTIVE THINGS WITH YOUR LIFE. A PHONE IS A PHONE IS A PHONE DUMB ASS.

July 27 2014 at 3:43 PM Report abuse rate up rate down Reply
1 reply to hsstempe's comment
jakki051

That's just what you say and how you see it! (as my 80 yr old father would say)

July 28 2014 at 9:51 PM Report abuse rate up rate down Reply
suealiaim

good. lets bring advertising to its knees! i've been running ad blockers on my pc's ever since the blockers became available, i run flash block too..so, i get very few ads. i don't use my phone online much and pay for the few games i really like so not many ads there, either.

July 27 2014 at 11:49 AM Report abuse +1 rate up rate down Reply
alfredschrader

Myspace

July 27 2014 at 11:26 AM Report abuse rate up rate down Reply
Emmanuel Chidiebere

Facebook is doing alot to bring change of mindset, lets talk good of the media.

July 27 2014 at 10:12 AM Report abuse -1 rate up rate down Reply
1 reply to Emmanuel Chidiebere 's comment
savannahswithgod

Well have to wait til the Commercials run first. I won't talk to the media until they speak about American Greed destroying us. We can't control that. Also did any real estate agents have a hand in the Housing collapse a few years ago or just wash their hands clean and enjoy the commissions? Yes young lad in the Gremlin that needs new tires, this house if perfect for you. 600 thou, a job at Dominoes part time, yeh be no problem at all. 5 kids and one in the oven, no problem at all. Sign here so I can get my commission!

July 28 2014 at 3:36 AM Report abuse rate up rate down Reply
cpruitt221

facebook was fun at first but boring now-i use google as a dictionary, mapquest, and encyclopedia-news too but i don't stay on it and only use when i need it-i have a life

July 26 2014 at 7:38 PM Report abuse +3 rate up rate down Reply
1 reply to cpruitt221's comment
rrob.smythe

I said the same thing about my girlfriend after I married her.

July 26 2014 at 10:24 PM Report abuse rate up rate down Reply
2 replies to rrob.smythe's comment
Charlie Jackson

Not so nice -- Are still with her? but that's your life and your choice? who knows what you go through or went through??

July 26 2014 at 10:45 PM Report abuse rate up rate down
savannahswithgod

Do a little role playing. She is the hottie down at the library. Go check out a book.

July 28 2014 at 3:37 AM Report abuse +1 rate up rate down