In the sixth update to its S-1 filing so far, Facebook admitted in unambiguous terms on Wednesday that it's in trouble on the mobile front and not quite sure what to do about it. Trouble doesn't mean that they're lacking mobile users -- in fact, 488 million people used Facebook on a mobile device in March alone. The challenge, rather, is generating meaningful revenue from all that activity. This is a unwelcome chunk of bad news coming from the company set to make its initial public offering in just eight days.
We'll bold the key snippet from the updated S-1 filing for clarity. Note the use of the phrases "meaningful revenue" and "unproven," emphasis ours:
We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users (DAUs) increasing more rapidly than the increase in the number of ads delivered.
So why is this a bad thing? The S-1 immediately explains, emphasis ours again:
If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.”
You have to give Facebook some credit for being so candid. (Then again, federal regulations around IPOs require such candor.) They're not wrong to flag the importance of mobile, a space that's expected to generate $1.8 billion in advertising this year. It was also recently revealed that people now spend more time gazing at content on their mobile devices than they do looking at print. It's also worth pointing out, however, that Facebook users still spend the vast majority of their time clicking through the desktop version according to the latest comScore data. Unfortunately, Facebook's revenue as a whole was down six percent in the first quarter of this year, a signal that their advertising business is slumping in general.