Facebook’s Clout in Wireless Industry Is Growing Fast

SAN FRANCISCO (Los Angeles Times/MCT) -

Less than two years ago, disillusioned investors were fleeing Facebook Inc. stock, worried the company would never figure out how to make the leap to mobile devices from personal computers, let alone make money on them.

Now, more than half of the giant social network’s advertising revenue is coming from ads for its 1.2 billion users on smartphones and tablets. And it’s buying WhatsApp after outbidding rival Google Inc. for the most popular mobile app for sending messages on smartphones.

Facebook’s big shift to wireless helped give CEO Mark Zuckerberg top billing Monday at the Mobile World Congress in Barcelona, Spain, his highest profile yet at the industry’s largest trade show.

At the time of its initial public offering in May 2012, Facebook looked as if it might get left in the dust as consumers increasingly ditched their computers for mobile devices.

With its stock value plummeting, Zuckerberg had one challenge greater than all others: to reinvent Facebook from its roots in personal computers into a company geared to the mobile generation. Results came quickly.

In last year’s final three months, Facebook picked up more than half of its advertising revenue from its 945 million mobile users. And in a major move last week, it agreed to pay $19 billion in cash and stock for mobile-messaging phenom WhatsApp, the tiny, 55-person company that provides a cheap, easy way for its 465 million users worldwide to send text messages and photos.

Facebook hasn’t just caught up in mobile. With WhatsApp, it could become an even more significant force in the wireless industry.

WhatsApp CEO Jan Koum, also speaking at Mobile World Congress, said his company would begin offering voice calls this spring. The news sent shudders through the telecommunications industry, which lost $32 billion in revenue last year to companies offering free texting, according to research firm Ovum.

Device makers and wireless carriers need Facebook to drive more people to spend time and money on mobile phones. And they certainly benefit from skyrocketing demand for mobile data access. But the industry is growing collectively more concerned about Facebook’s fast-growing footprint.

The 29-year-old Zuckerberg used his time in the trade-show spotlight to talk up his ambition to reach the next 5 billion internet users, most of whom hail from developing countries and will experience the internet only on a mobile device.

In August, Facebook formed the Internet.org foundation, a coalition of companies that aims to make internet access cheap and ubiquitous throughout the world.

The foundation announced new initiatives Monday to give students in Rwanda free online access to educational materials and to work toward bringing internet access to rural Indian communities.

Facebook also said it will work with Swedish mobile phone and software maker Ericsson to create an Internet.org Innovation Lab on Facebook’s campus in Menlo Park, Calif.

And at $19 billion, he said, WhatsApp was a bargain for Facebook.

“I actually think that by itself, it’s worth more than $19 billion,” Zuckerberg said.

But S&P Capital IQ analyst Scott Kessler said it’s unclear if the deal would stand the test of time.

“The two most obvious questions are: How sustainable is WhatsApp’s growth, and how do you rationalize the sheer size and valuation of the deal?” Kessler said.

Still, most analysts remain bullish.

Facebook has gained 30 percent this year, giving it a market value of more than $180 billion.