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Facebook rose to the highest price in seven weeks Wednesday after saying it is testing a service to place advertisements on mobile applications other than its own.
The shares of Menlo Park, Calif.-based Facebook advanced 6.5 percent to $23.29 at the close in New York, the highest since July 27. That helped pare the stock’s losses to 39 percent from the initial public offering in May.
By placing ads on third-party applications, Facebook follows competitors, including Google and Apple, in acting as a so-called ad network. The strategy would let it collect part of the revenue generated from mobile marketing and benefit from rising demand for ads that reach the growing number of people who download apps onto mobile devices. "We view the reported launch of a mobile ad network as another signal that Facebook is moving aggressively to improve user monetization," said ColinSebastian, an analyst at Robert W. Baird & Co., in a research report. "Facebook has the potential to become a more relevant ad network than Yahoo! and AOL, and to compete more directly with Google."
Facebook, owner of the most popular social network, is under pressure from investors to do a better job wringing sales from mobile services. The company may claim only 2.8 percent of the $2.61 billion U.S. mobile-ad market this year, ranking it sixth, behind No. 1 Google, which is expected to have 55 percent of the market, according to EMarketer Inc. Pandora Media is second, with 8.7 percent, and Twitter nabs the No. 3 spot, claiming 5 percent.
Facebook, which makes most of its money from advertising, didn’t roll out its first mobile-ad service until March. The company announced last month that it would let application developers target Facebook users on mobile devices."Showing mobile ads outside of Facebook is another great way for people to see relevant ads and discover new apps," Facebook said yesterday in an e-mailed statement. The new service is part of a "small test," the company said.
