Facebook CEO Mark Zuckerberg made it crystal clear Wednesday that the social networking juggernaut has a better working relationship with hardware giant Apple than it does with Web search leader Google. The 28-year-old billionaire said his company is working closely with Apple on applications for new mobile products. Google? Not so much.
“Our relationship with Google isn’t one where the companies really talk,” Zuckerberg told Wall Street analysts in a startling disclosure on the conference call following the company’s earnings report. By contrast, Zuckerberg spoke highly of his counterparts at Apple. “I’m really happy with the partnership we have with them,” he said.
With those comments, Zuckerberg laid down a marker in the escalating battle for Internet advantage between Facebook, Apple, and Google. The chips are now on the table; the war is on. Facebook recently launched a heavily-publicized new search product, which could pit the company against search leader Google. Facebook has over one billion users worldwide, but it hasn’t figured out how to make money off those users as effectively as Google has done with its search engine.
Facebook delivered a strong earnings report, especially in the crucial mobile space. In one year, the company has increased mobile revenue as a percentage of total revenue from 0% — nothing — to 23%. “Today there is no argument,” Zuckerberg told Wall Street analysts. “Facebook is a mobile company.”
There was some drama immediately following the close of the market as Facebook’s stock price plunged 10% — wiping out billions of dollars in shareholder value in a matter of seconds. Minutes later, Facebook’s stock recovered its losses, climbing back above $30 per share. This game is not for the faint of heart.
Facebook’s ad revenue in the fourth quarter grew 41% to $1.3 billion. The company’s overall fourth-quarter revenue was $1.6 billion, versus $1.1 billion one year ago. That topped analyst estimates. “It was a solid [fourth quarter] beat as daily mobile users outnumbered desktop users for the first time ever,” Jeffries’ analyst Brian Pitz wrote in a note to clients.
Mobile device advertising revenue is rapidly becoming the most important consumer Internet metric as the tech industry undergoes a profound structural shift thanks to the explosive growth of sophisticated smartphones like Apple’s iPhone and Google’s Android devices. Consumers are increasingly accessing the Internet on mobile devices as the locus of computing shifts away from the desktop and toward smartphones and tablets.
Despite the solid earnings report, Facebook is still dealing with the fallout from last year’s controversial IPO. The offering was supposed to be a triumphant moment for Silicon Valley and Wall Street. Instead, between trading glitches on the NASDAQ exchange, accusations of “selective disclosure” against Facebook’s bankers, and an offering level that was clearly mispriced, the episode turned into a major debacle.
After going public at $38 per share, Facebook’s stock price quickly plunged to about $20. The company and its bankers face multiple lawsuits from irate investors. The Securities and Exchange Commission has so far found no evidence of wrongdoing, although the investigation is continuing.
Facebook still has a ton of work to do, but Wednesday’s solid results indicate that the company is making progress with its strategy to generate revenue from mobile advertising, which is the next great tech battlefield in the war for Internet supremacy.
Wall Street analysts offered cautious praise for Facebook’s latest performance. “Quarterly results may be choppy as Facebook optimizes for the long term, but we continue to believe that Facebook is in the early stages of transitioning its ad platform to better targeted social and mobile ads that will become increasingly valuable to advertisers,” JPMorgan’s Doug Amnuth wrote in a note to clients. “We would be buying any near-term weakness in Facebook shares.”
After a tumultuous year, Facebook seems to be finding its footing, and Wall Street is taking notice. “The quarter was a little like a cold shower after you’ve been out all night — it’s something that makes you sober up very quickly,” Jordan Rohan, an analyst at Stifel Nicolaus, told the New York Times. He said the company’s results make it clear that Facebook intends to spend more “to go after the opportunities before them.”