Facebook's troubled stock passed a major milestone Wednesday just by getting back to the starting line.
Shares in the social media giant finally matched the company's much-hyped initial public offering price of $38 when it went public 14 months ago. But while some applauded the company's recent recovery, which analysts attributed to a major increase in revenues from mobile advertising, Facebook's market challenges aren't over just yet.
"We're going to see competition hone in," said Daniel Castro, a senior policy analyst at the Information Technology & Innovation Foundation. "Companies are going to see how they can use their data and the consumers they have access to to prove to advertisers that they are profitable and worthwhile. [Facebook] needs to be able to prove they can do this better than someone else."
Ever since Facebook went public in May 2012 with an opening bid of $38 per share, the company's stock price has spiraled downward, hitting a low of $17.55 in September. But the company's second-quarter revenue of $1.8 billion, announced last week, exceeded analysts' expectations and jump-started the stock's recovery.
During early-morning trading Wednesday, prices finally broke the psychologically significant $38 mark, with a high of $38.31 before falling back in the face of profit-takers to close at $36.80, down 83 cents.
The huge initial interest in Facebook's public offering and its subsequent embarrassing fall have played out like a morality play as the markets have tried to gauge the long-term value of Facebook and a slew of other new Internet-based stocks.
"I thought it was about time that Facebook returned to good fortunes," said Neil Hair, an associate professor of marketing at the Rochester Institute of Technology. "There are multiple revenue streams when you've got access to literally billions of people across the face of the Earth. Mobile is a great way of generating value."
Mr. Hair said Facebook's rebound shows users increasingly prefer to use mobile devices and stay connected to their networks online.
"Facebook is facilitating that hyperconnectivity that we're all experiencing. That's becoming increasingly common with young working professionals, but also the older crowd as they start to embrace the technology," Mr. Hair said.
In the April-June quarter, Facebook derived 41 percent of its ad revenue from mobile advertising, or about $656 million of $1.6 billion. That's up from zero in the spring of 2012 and from 30 percent in the January-March quarter of this year. CEO Mark Zuckerberg said last week that the company has "made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile."
And some analysts say Facebook has room to grow. Research firm eMarketer expects Facebook to increase its mobile advertising revenue more than fourfold to more than $2 billion this year. This would give the Menlo Park, Calif., company a 13 percent share of the global mobile ad market, up from about 5 percent last year.
Facebook is currently No. 2 in mobile ads, well behind Google. EMarketer estimates that Google had a 52 percent share of the global $8.8 billion mobile ad market last year. This year, the firm expects Google's share to grow to 56 percent.
And Facebook still needs to work out some key issues regarding privacy and control, said social media lawyer Bradley S. Shear.
"Digital platforms need to figure out how much personal data they can utilize to monetize. For example, location data and personally identifiable information. It's a work in progress," said Mr. Shear, who is also an adjunct professor at George Washington University's MBA program.
• This article is based in part on wire service reports.
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