Wait a Minute! Did Facebook's Mark Zuckerberg Really Say Anything New?

By Michael Comeau  SEP 12, 2012 11:50 AM

Facebook CEO Mark Zuckerberg was extremely bullish on the company's mobile products at the TechCrunch Disrupt Conference.

 


MINYANVILLE ORIGINAL

You talk the talk. Do you walk the walk?
-- Animal Mother, Full Metal Jacket

I'll get right to the point.

Facebook (FB) had better report a HUGE quarter.

Why?

Well, at yesterday's TechCrunch Disrupt conference in San Francisco, Mark Zuckerberg gave a very, very bullish outlook on the company's future in mobile, and that's got the bulls hot-blooded today. Hot enough, in fact, to send Facebook over $20 for the first time since August 20.

This is the statement that laid down the gauntlet:

So mobile is, there are going to be more users, each user's going to use spend more time, and per amount of time that they spend, we're going to make more money than we make on desktop.

There is no doubt that Facebook is seeing renewed momentum in mobile, particularly with the recent release of its new Apple (AAPL) iOS app, which as anyone who has used it knows, is light years ahead of the garbage that was its predecessor. Facebook should also benefit from direct integration into iOS, something that will likely be featured at Apple's iPhone 5 unveiling later today.

Likewise, Facebook will one day release an equivalent new-and-approved app for Google (GOOG) Android.

But here's the thing: Zuckerberg didn't really say anything new! He was maybe a little more aggressive in pushing the monetization advantages of mobile over desktop. But beyond that, it was the same old stuff, and he wasn't necessarily saying that mobile would pay off this quarter.

Here's a quote from the company's earnings call on July 26:

Mobile is a huge opportunity for Facebook. Our goal is to connect everyone in the world. And over the next five years, we expect 4 billion to 5 billion people to have smartphones. That's more than twice as many people that have computers today. So building great services for these devices is essential for us to help people connect. We also think that people are inherently social, and having a device with you wherever you are creates more opportunities for sharing and connecting.

We're finding that people are quickly adopting our mobile services. As of the end of June, 543 million people were actively using our mobile services every month, each month. That's 67% more people than the 325 million who were using our mobile services just a year ago. We've also found that people who use our mobile services are more active Facebook users than people who only use our desktop services. On average, mobile users are around 20% more likely to use Facebook on any given day.

And while at the TechCrunch conference, Zuckerberg actually went so far as to say that mobile ads are performing better than traditional desktop ads, he did touch on monetization on the earnings call:

By the end of June, Sponsored Stories in News Feed was at a run rate of over $1 million per day in revenue and about half of that is coming from mobile. This is an encouraging start in our effort to generate revenue from the mobile use of Facebook.

Here's one more quote from the earnings call for good measure:

As measured by click-through rates, Sponsored Stories in News Feed perform multiple times better on both desktop and mobile than ads in the right-hand column.

Therefore, I think it's clear that Zuckerberg didn't really offer anything new on the mobile front. Yes, he was very bullish on monetization, but what if it doesn't come in the third quarter?

Zuckerberg is notoriously long-term minded. He's never said anything to indicate that he cares about the company's performance quarter-to-quarter.

Of course, he has to appear positive in order to keep employee morale up and continue attracting new talent. The best and brightest don't like sinking ships.

But Zuckerberg may have screwed up by raising investor expectations too high -- a common death knell for high-flying momentum stocks.

Wall Street is all about the here and now, and it is clearly interpreting Zuckerberg's words as a reason to buy and/or cover shorts.

But on the positive side, I think Facebook bulls should be very, very excited by Zuckerberg's comments on search.

Facebook is doing 1 billion search queries per day, primarily for people, but a good deal of them pertain to "commercial behavior," as Zuckerberg describes it.

Here's the key passage, courtesy of our friends at WIred:

“Search engines are really evolving toward giving you a set of answers,” Zuckerberg said. “It’s not just like, ‘I’ll type in something and show me some relevant stuff.’ It’s, ‘I have a specific question, answer this question for me.’ When you look at it from that perspective, Facebook is pretty uniquely positioned to answer the questions people have: ‘What sushi restaurants have my friends gone to in New York in the past six months and liked?’ ‘Which of my friends and friends of friends work at this company I’m interested in... so I can talk to them about what it’s like to work there?’

“These are queries you could potentially do in Facebook if we built out the system that you couldn’t do anywhere else. And at some point we’ll do it... That’s one obvious thing that would be interesting for us to do in the future.”

This is tremendously bullish for Facebook as its dataset is perfect for delivering relevant search results to its users, who give up gobs of personal information voluntarily.

At the end of the day, I view the interview as a wash.

I love the idea of Facebook search, but I'm not as convinced as everyone else that Zuckerberg just virtually preannounced a good quarter.

And besides, if Facebook really is a growth story on the scale of an Apple or Google, there will be plenty of opportunities join the party. So what's the point of betting on one quarter simply because a CEO made some bullish comments?

Remember what happened to Netflix (NFLX) back in July? (Please see: With a Fantastically Foolish Facebook Update, Netflix Once Again Let Expectations Get Out of Control.)

The stock took a beating because Wall Street interpreted this Facebook update ((ironic, ain't it?) from Netflix CEO Reed Hastings as an indication that the company was having a great quarter.



So yeah, I can wait for Facebook to report earnings again before deciding whether to slam the buy button.

Twitter: @MichaelComeau

Position in AAPL

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