How do you build a $100 billion business serving ads on a three-inch screen?
Facebook, Inc. just had the best day of its young life.
The stock surged 20 percent in morning trading after Mark Zuckerberg announced third quarter earnings. Mobile advertising -- the elusive golden snitch of the social media biz -- increased infinity percent (that's a real statistic!) from $0.00 a few months ago to $153 million in the last quarter. For perspective: Facebook is now on pace to make more than $1 billion in the next year from a business that didn't exist in 2011.
All of this is good news for Facebook's investors, who can finally catch their breath, and good news for Facebook's leadership, who can finally stop fielding questions about whether the company is too quixotic to build a real business. But there's a dark lining to Facebook's mobile triumph.
The company is transitioning to a business, mobile advertising, that just isn't very good, yet.
Just last week, Google announced that mobile clicks were dragging down the average value of their ads. This was a harsh reality check. On a desktop, clicking a Google ad is worth $1. On a phone, it's worth $0.50. The more users move from desktops to phones, the cheaper the clicks.