Facebook's (FB) Biggest Challenge: How To Monetize
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Price: $44.68 --0%
Rating Summary:
46 Buy, 17 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 9 | Down: 19 | New: 5
Rating Summary:
46 Buy, 17 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 9 | Down: 19 | New: 5
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Shares of Facebook (Nasdaq: FB) are trading up almost 3% to $32.79. The stock has slowly been gaining steam after getting clobbered out of the gate in May.
Last night, Nomura Securities offered some help by initiating coverage on FB shares with a 'Buy' rating and $40 price target.
Several firms will follow suit after the 'quiet period' has expired, since many of the large Wall Street firms were involved in the underwriting of Facebook's IPO.
Overall, Nomura analyst, Brian Nowak, is positive on the stock, however, he did highlight one major issue...Monetization.
Nowak said, "FB’s low (and unmeasurable) current advertising ROI is hindering growth reacceleration, but it is important to remember that the company’s monetization is still in its infancy and continues evolving. Our analysis of three opportunities—charging for branded pages, improved FB advertising units, and mobile—highlights the long-term optionality for substantial earnings upside. To wit, even one strategic change—charging for branded pages—would, in our view, nearly double FB’s long-term revenue opportunity and drive 2014 EBITDA 76% higher than our current estimate and 48% above the Street forecast."
Also, according to Nomura, Facebook's click-thru-rate is approx. .041% vs. the rest of the internet .100%. Nowak feels the company needs to continue innovating and developing new advertising offerings in order to boost rates and CPMs. If challenges continue, they may ended up building their own barrier to long-term outsized advertising growth. To top it off, some advertisers have debate with FB's ad analytics, and approx. 25% consider it a challenge to advertise on the site.
Nomura's ideas to help bolster revenues include:
1. Charge for Branded Pages: Strongest Monetization Opportunity and No User Disruption
2. Improved Advertising Unit Quality: More Risk than Opportunity?
3. Improved Mobile Monetization: Already Flagged as Hindrance but Will Take Years (Not Quarters) to Improve
Go to our Facebook page to see details on Nomura's initiation of coverage Click Here
Last night, Nomura Securities offered some help by initiating coverage on FB shares with a 'Buy' rating and $40 price target.
Several firms will follow suit after the 'quiet period' has expired, since many of the large Wall Street firms were involved in the underwriting of Facebook's IPO.
Overall, Nomura analyst, Brian Nowak, is positive on the stock, however, he did highlight one major issue...Monetization.
Nowak said, "FB’s low (and unmeasurable) current advertising ROI is hindering growth reacceleration, but it is important to remember that the company’s monetization is still in its infancy and continues evolving. Our analysis of three opportunities—charging for branded pages, improved FB advertising units, and mobile—highlights the long-term optionality for substantial earnings upside. To wit, even one strategic change—charging for branded pages—would, in our view, nearly double FB’s long-term revenue opportunity and drive 2014 EBITDA 76% higher than our current estimate and 48% above the Street forecast."
Also, according to Nomura, Facebook's click-thru-rate is approx. .041% vs. the rest of the internet .100%. Nowak feels the company needs to continue innovating and developing new advertising offerings in order to boost rates and CPMs. If challenges continue, they may ended up building their own barrier to long-term outsized advertising growth. To top it off, some advertisers have debate with FB's ad analytics, and approx. 25% consider it a challenge to advertise on the site.
Nomura's ideas to help bolster revenues include:
1. Charge for Branded Pages: Strongest Monetization Opportunity and No User Disruption
2. Improved Advertising Unit Quality: More Risk than Opportunity?
3. Improved Mobile Monetization: Already Flagged as Hindrance but Will Take Years (Not Quarters) to Improve
Go to our Facebook page to see details on Nomura's initiation of coverage Click Here
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