Here’s Facebook’s Difficult Mobile Advertising Tango

Investors and analysts are looking closely at Facebook’s (NASDAQ:FB) fourth-quarter results to determine whether the problems of its business model, the very ones that helped deflate its stock market debut, have been put aside. Even though the company’s stock has soared more than 60 percent since November and its third-quarter earnings report showed that the company was beginning to make money in the all-important mobile arena, its stock has yet to return to its initial offering price of $38 per share. The social network’s chief executive Mark Zuckerberg would have the company’s critics believe that mobile is not a problem, but is that really the case?

“Today, there’s no argument. Facebook is a mobile company,” said Zuckerberg during the earnings conference call, referencing a comScore study that showed the Facebook app accounts for 23 percent of all time spent on apps, and recent acquisition Instagram ties for second at 3 percent.

Mobile is where technology is headed and advertising is the primary way Facebook makes money. However, it is important to remember that Facebook mobile is far different than the desktop version. The difference is not just screen size and portability — mobile advertising makes less money than ads displayed on laptops and desktops because it’s harder to grab a user’s attention on the small screen.

In the last quarter, the company generated 14 percent of its revenue from mobile advertising. This quarter that number jumped to 23 percent, or $306 million. This increase showed that Facebook has made mobile a priority, but its mobile revenue growth was not significant enough to satisfy investors or analysts. Shares of the social network dropped seven percent when the earnings report was released after the bell on Wednesday, and at 6:30 p.m. Eastern Standard Time, following the earnings call, the stock was trading down 3.65 percent at $31.24 per share…