Wible's Weekly: Facebook: Initiating Coverage with a Buy; Mobile Drives But New Payments May Thrive - Janney/Media Entertainment

We see FB benefiting from many of the obvious drivers like the massive secular move to mobile advertising the scaling of recent investments as soon as 2014 the consolidation of ad inventory around fewer publishers and the growing demand for marketing segmentation and efficiency especially in mobile We believe the company also stands to benefit from 1 the secular shift to the second screen during prime time TV hours 2 the potential for a viable payment platform 3 pricing leverage and 4 a more seamless integration with traditional ad measurements and systems This optimism is partly tempered by risk to payments revenue tied to the next gen game cycle and our disbelief that social ad spend will be at parity with time spent On balance we believe the opportunities far outweigh the risk which leads us to launch coverage of FB with a Buy rating and 50 fair valueMobile amp8211 Mobile products improve accessibly customization and reach which provides a massive opportunity for FB as its network provides unparalleled targeting and reach We estimate global ad sales around mobile will grow to 218 billion by 2015 FB is positioned to capture a greater share than most others and privacy limitations may ironically improve FB39s ability to gain sharePrime Time amp8211 Our real time sampling of millions of set top boxes in the US shows that consumers are failing to fast forward through commercials This is a relatively new phenomenon that we attribute to smart device use during commercial breaks Given that 40 of TV ad spend happens during key prime time hours we believe there is a unique opportunity to gain share by working with TV networksPayments Catalyst We believe the opportunity around payments is the biggest speculative opportunity that can rival that of advertising FB is ideally positioned to break historical barriers to entry based on the 1 million ad buyers 11 billion users and broad FB Connect integration Any product would seem to build upon two of the company39s three goals of building an economy around the FB platform and enabling it to collect more information We estimate a 10 share of global payment commerce would amount to 234 billion of revenue which is so massive that FB may need to explore its potentialNext Gen Risk We believe a substantial portion of the unique payers on FB39s game platform are hard core gamers that may incrementally allocate time and money towards the next gen systems launching this holiday We estimate this demo may account for as much as 60 to 80 of the payer base and may be an even larger portion of revenue given the skewing of payments towards a small group of larger purchase payers This massive risk is tempered by the fact that peak game activity is during work hoursFacebook Inc FB Price 3708 Rating BUYTony Wible joined Janney Montgomery Scott in 2008 and is a Managing Director covering the Media and Entertainment sector after spending the previous 10 years at Citigroup Investment Researchamp8212most recently covering the Broadcasting and Entertainment Services industries Tony can be reached at twiblejanneycom Janney Montgomery Scott LLC is a US brokerdealer registered with the US Securities and Exchange Commission and a member of the New York Stock Exchange the Financial Industry Regulatory Authority and the Securities Investor Protection Corp Disclosures may be reviewed at Wible39s WeeklyRead all Tony39s MediaBizBloggers commentaries at Wible39s Weekly JanneyMediaEntertainment Check us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggerscom management or associated bloggers MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries

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Wible's Weekly: Facebook: Initiating Coverage with a Buy; Mobile Drives But New Payments May Thrive - Janney/Media Entertainment

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Wible's Weekly: Facebook: Initiating Coverage with a Buy; Mobile Drives But New Payments May Thrive - Janney/Media Entertainment

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