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Facebook Surges as Mobile Ad Growth Seen Over Next Year

Facebook Inc. (FB) 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 yesterday, advancing 1.3 percent to $31.72 in New York. As concerns ease over the social network’s ability to boost revenue, the stock has rebounded 79 percent 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 & Co., wrote in a research report yesterday. Features such as Facebook Exchange, which helps companies target ads based on users’ past Web activities, will help boost sales this year, he said.

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

Shares may also be gaining from speculation that Facebook could use an event scheduled for Jan. 15 to assuage user concerns about ad 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 Jan. 16.

Photographer: David Paul Morris/Bloomberg

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Instagram Integration

“Because of the timing, I think there’s going to be some kind of Facebook-Instagram integration,” Pachter said in an interview. “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 & Co.

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 percent 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 percent a year earlier. Investors were reassured in October when Facebook said about 14 percent of advertising sales were already coming from smartphones and tablets.

Mobile Push

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

Companies are ramping up spending as they see an impact from advertising on Facebook, said Aaron Goldman, 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,” Goldman said. “People are starting to realize, ‘I need an always-on strategy.’”

Facebook will post third-quarter results Jan. 30. The company should report sales rose 34 percent to $1.51 billion in the fourth quarter from the year-ago period, faster than the growth rate of 32 percent in the two previous quarters, according to estimates compiled by Bloomberg.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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