Facebook reaches 1 billion users
Analysts question company’s ability to cash in on its audience
With a billion users, Facebook Inc. is in the rarefied space of companies including Coca-Cola, McDonald’s and Microsoft that can count one-seventh of humanity as loyal customers, says Mark Zuckerberg, the social network’s CEO.
“Helping a billion people connect is amazing, humbling and by far the thing I am most proud of in my life,” the 28-year-old wrote in a Facebook blog post Thursday announcing that the milestone.
Zuckerberg said Facebook had grown from 955 million active accounts at the end of June to 1billion on Sept. 14.
But analysts said any comparison with companies like McDonalds has limited relevance for Facebook, which has struggled since its $38 (U.S.) initial stock offering in May to convince investors that it can generate revenue growth from users, especially on mobile devices.
“There is little that is incremental in the one billion announcements,” said Jeffries analyst Brian Pitz, who said the stock has enjoyed a run-up recently on Zuckerberg’s bullish comments on the future of mobile commerce on Facebook.
Pitz said the company was actually a few days behind forecast in hitting the billion user threshold, adding that analysts will be looking to Facebook’s next earnings report in October for signs of progress in its effort to drive new revenue
Zuckerberg, who co-founded Facebook in a Harvard University dorm in 2004, also rolled out the company’s first brand video, comparing the social network to other things that bring people together.
Facebook shares have struggled on a believe the initial price was too high relative to sales, on evidence of slowing user adoption, and as users in developing markets generate less revenue than North American counterparts. More than 600 million users now access Facebook primarily on mobile devices, but the company still derives the lion’s share of revenue from laptop PCs, whose larger format better lends itself to digital advertising. “Facebook has changed the way people communicate but it hasn’t figured out how to make money without violating people’s privacy expectations and the privacy laws of most governments,” said Queen’s University digital media expert Vincent Mosco. “Hence the irony: it brings together a large fraction of the world’s population but the value of the company is disappointing to the world’s investors.” The company has introduced initiatives to add revenue such as gambling, the ability to order gifts via Facebook, and new forms of advertising such as promoted events. Facebook is also letting users in the United States pay a fee to boost the visibility of their postings, though its main social networking service will remain free. The move is an attempt to expand beyond advertising, which accounted for about 84 per cent of Facebook revenue in the second quarter. The company also earns 30 per cent on purchases of virtual goods by users playing social games on its website. Facebook shares rose 0.54 per cent on Thursday to close at $21.94 on the Nasdaq.