Facebook Advertising Has NO BITE

While Mark Zuckerberg made it clear on Thursday that a full-fledged smartphone does not make business sense for Facebook (NASDAQ:FB), his answers about mobile content were less convincing. The company’s executives spent most of the earnings call on Thursday discussing efforts to improve its advertising business, over both desktop and mobile platforms. Both Zuckerberg and chief operating officer Sheryl Sandberg accepted that an improved mobile strategy was important for the sound future financial health of their company, but analysts, and investors, are clearly still not convinced that their plans held any real answers.

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The company’s stock fell almost 15 percent on Friday morning to drop below $23 and at an all-time low.

“I think Facebook is going to have to find a different way to monetize mobile that isn’t about little display ads,” Forrester Research analyst Melissa Parrish told IDG News, referring to Sponsored Stories. Sandberg had said Sponsored Stories were central to the social network’s mobile monetization plans.

Zuckerberg said the company was “beginning to demonstrate that we can advertise effectively within the mobile experience” with Sponsored Stories. Analysts don’t agree, saying that it can’t stay as the company’s main mobile advertising offering for long. Altimeter Group’s Chris Silva called Sponsored Stories “blunt instruments” and said Facebook was the leader at the moment only because of “lack of anybody coming along and innovating.”

According to the experts, the social network will have to introduce location-specific advertising as well as provide support on the mobile platform for interactive, rich media advertising. It will also have to make better use of its user data to target ads better.

Barclays’ Anthony DiClemente, who lowered his price target on the stock to $31 from $35, wrote that while ad pricing growth beat his expectations, volume growth decelerated. “It is very early days on deciphering the impact of how these ad products will affect the Facebook ad revenue trajectory,” he wrote.

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