For Facebook mobile users who have noticed an uptick in ads on phone apps, you’re not alone: The publicly traded social media company has wowed Wall Street with an increase in mobile advertising revenue, fueling a spike in its stock price.
Ron Fry and Marty Davidson's 25-member investment club, Buy Loe, bought Facebook on the day of its initial public offering.
"It was really exciting because a lot of us in the club use Facebook,” Fry said.
But it wasn’t exciting for long: for the next 14 months Facebook was a dud.
"We were like, ‘uh oh,’” said Fry.
But investors who rode it out are being rewarded as Facebook is hot again. What's the deal?
Facebook's revenue on mobile devices has increased each of the last four quarters. In October, mobile revenue made up 14 percent of the overall amount. That jumped to 23 percent in January and to 30 percent in April. Most recently, it’s up to 41 percent of the company’s revenue streams.
"So that's what's got the stock up,” said Clark Hodges of Hodges Capital, Dallas-based investment advisory firm. “That really rapid growth that you're seeing in this mobile ad revenue is really why people are excited about the stock.”
When it comes to mobile ad revenue, Wall Street is watching. The big concern is that mobile ads, on a smaller screen, are less lucrative than desktop ads. Facebook's growth is breaking the mold on that concept.
It’s a trend Hodges believes will continue.
"Growth trends don't start and stop really fast. So, they're going through a growth spurt as it relates to mobile advertising," Hodges said.
The Buy Loe investment club is glad they rode it out.
"Facebook has a lot of potential,” said club president Marty Davidson.
But they'll wait to see if Facebook posts more mobile ad growth before doubling down.