Facebook shares at highest in six months

Facebook is climbing back from a stock plunge last year that made it one of the worst-performing technology initial public offerings of 2012.

The shares set a six-month high on Friday, advancing 1.3 per cent to US$31.72 in New York. As concerns ease over the social network's ability to boost revenue, the stock has rebounded 79 per cent from a record low in September.

Facebook is still in the early stages of developing ads for users who access the social network via mobile devices instead of desktops, Doug Anmuth, an analyst at JPMorgan Chase, wrote in a research report published on Friday. Features such as Facebook Exchange, which helps companies target advertisements based on users' past Web activities, will help to boost sales this year, he said.

"We expect continued ad growth acceleration," said Mr Anmuth. "We do not believe Facebook shares are well-owned."

Shares may also be gaining from speculation that Facebook could use an event scheduled for January 15 to assuage user concerns about advertisement policy changes for its Instagram photo-sharing service, according to Michael Pachter, an analyst at Wedbush Securities.

A proposal letting advertisers display user names and images in marketing materials was scrapped last month. Many people threatened to leave Instagram before the plans were to take effect on January 16.

"Because of the timing, I think there's going to be some kind of Facebook-Instagram integration," said Mr Pachter. "The announcement will clear up the confusion about the terms of use."

Some investors are also anticipating that the event may relate to a new Web search or advertising platform, said John Blackledge, an analyst at Cowen & Company.

Before rebounding, Facebook had lost more than half of its value since selling shares at $38 apiece in an initial public offering in May. Investors fretted about the prospects for growth with an untested mobile advertising service that had only been started in March.

About 60 per cent of the more than 1 billion Facebook members accessed the social network via mobile devices at the end of the third quarter, compared with about 47 per cent a year earlier. Investors were reassured in October when Facebook said about 14 per cent of advertising sales were already coming from smartphones and tablets.

Spending on mobile devices now makes up a fifth of total advertising on Facebook, according to Kenshoo, a provider of technology that helps companies buy online advertising. Facebook gets 70 per cent more for mobile advertisements than it does with its counterparts on desktops, helped by fewer advertising spots being available on the smaller mobile devices.

Companies are ramping up spending because of an effect from advertising on Facebook, said Aaron Goldman, the chief marketing officer for Kenshoo. Big brands are spending more consistently on the service instead of one-time campaigns, he said.

"Overall, Facebook has a lot of momentum," said Mr Goldman. "People are starting to realise: 'I need an always-on strategy.'"

Facebook will post third-quarter results on January 30. The company should report sales rose 34 per cent to $1.51 billion (Dh5.54bn) in the fourth quarter from the same period a year, faster than the growth rate of 32 per cent in the two previous quarters, according to estimates compiled by Bloomberg.

* Bloomberg News