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Facebook warns that shift to mobile devices could harm business

May 09, 2012|By Jessica Guynn
  • A man checks Facebook on his smartphone while waiting for a train in a subway station in Washington.
A man checks Facebook on his smartphone while waiting for a train in a subway… (Jewel Samad / AFP / Getty…)

For Facebook Inc., the No. 1 challenge is making money from mobile devices. And it's warning investors that so far its ad business is not keeping up with the shift to mobile devices, a crucial point as Facebook heads into the last stretch before its initial public stock offering.

The Menlo Park, Calif., company's executives have been fielding questions about its mobile advertising strategy during the roadshow this week. Facebook flagged the potential slowdown in advertising growth in its latest filing with the Securities and Exchange Commission.

More people are accessing Facebook from mobile devices, on which Facebook is showing them fewer ads. Facebook said it began showing mobile users "sponsored stories" ads in their news feed in March, but has limited the number of ads users see.

"We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users increasing more rapidly than the increase in the number of ads delivered. If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected," Facebook said.

The average time people spent on Facebook on their smartphones jumped to seven hours and 21 minutes in March compared with 6 hours and 31 minutes on personal computers, according to new research from ComScore Inc.

Comscore has begun measuring mobile usage for Apple's iOS, Google'sAndroid and Research in Motion's BlackBerry on sites like Facebook.

Facebook commands most of smartphone users' time, according to ComScore. Other popular services are Foursquare with 146 minutes, microblogging service Twitter with 114 minutes and Tumblr with 68 minutes.

Getting serious about mobile was one of the major drivers behind Facebook's $1-billion play to buy mobile photo-sharing app Instagram.

Facebook is seeking a $96-billion valuation in its IPO, largely because of how deeply it has knitted itself into people's lives.

Facebook has about 158.9 million unique U.S. visitors who reach the site on computers and 78 million who reach it via mobile phones, although there is plenty of overlap between the two, ComScore found.

Facebook declined to comment.

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