Potential Post-IPO Issues For Facebook: Mobile Revenue, Overvaluation, Google AdSense

By Julie D. Andrews 

The road ahead may be rough for Facebook, post-initial public offering. At least that is the speculation of Michael Mothner, founder and chief executive officer of El Segundo, Calif.-based online marketing firm Wpromote, who wrote about his predictions for Inc. magazine.

Although Facebook recently scarfed down new mobile talent from photo-sharing application Lightbox, monetizing mobile will not be enough, according to Mothner.

Facebook currently runs few ads on its mobile platforms, despite more users now accessing the social network through smartphones than through PCs. If the social network chooses to fold ads into mobile content, this could trigger some income, but not enough.

First, as Mothner points out, screens on mobile devices are mighty small. But moreover, it’s what will happen to the user experience that Facebook Co-Founder and Chief Executive Officer Mark Zuckerberg lords over.

Ads on Facebook are like putting billboards in a park,” angel investor Chris Dixon recently told GigaOM. On a mobile screen, magnify that effect by 1,000.

Zuckerberg has historically been careful to avoid gaudy ads that will distract users. He aimed to avoid the scenario that befell earlier would-be competitors. “MySpace cluttered its pages with ads and underinvested in product development, becoming an ad-choked cesspool,” wrote Henry Blodget in a recent New York magazine cover story about Zuckerberg.

Then there is what many are calling the overvaluation that the business will have to contend with after the IPO haze fades. Shares are currently overpriced, says Mothner, aligned with others who have recently made this claim. This has created what he calls a “bloated valuation,” meaning that Facebook will be under pressure to grow revenue in order to make the bloated valuation its true value.

Says Mothner: “I am a firm sell at today’s valuation,” adding that Google’s revenue in 2011 was $37 billion, and Facebook’s was $3.7 billion, but Google’s market capitalization is $200 billion, only two times that of Facebook at the time of IPO.

Should there be a Google AdSense-type ad network in Facebook’s future? Yes, says Mothner, adding:

This is the greatest asset and opportunity that Facebook has — and yet still nobody is talking about it.

After all, he writes, Google earned more than $10 billion of its revenue via AdSense in 2011, by showing ads related to content on third-party sites — blogs, news sites, etc. — on those sites. This was more than it earned showing ads on its own site.

Readers: Do you agree that some, all, or none of these issues will be struggles a post-IPO Facebook will have to overcome?

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