(By Rich Bieglmeier) By now, plenty has been written about what's wrong with the company, and why they suck, most of which revolves around advertising, specifically mobile. iStock doesn't like to run with the herd. As they say, the masses are, well, um, we will go with a donkey's backside.
While the rest of the investment world frets about the company stumbling out of the starter's box, iStock decided to look at what's right with the most recent announcement. And, while most people see the company as an advertising company, we see it as a data collection company. The better FB's talent becomes at utilizing the data, the more expensive access to that data – via ads – will become.
The most eye-popping item on the web giant's income statement is the commitment management is making to research and development (R&D). Zuckerberg and company are investing heavily in the future.
Revenues increased 32.3% for the three month's ended June 30, 2012 versus the same 2011 timeframe. Meanwhile, R&D has increased 612%, from $99 million to $705 million – WOW!
R&D isn't the only investment the company is making, sales and marketing costs increased from $96 million to $392 million – a 308% jump. In total, FB spent nearly $1.1 billion on tomorrow. Had spending in these two departments remained flat, it could have added up to 42 cents to earnings. Let that digest for a moment. Can you imagine the street's reaction if Facebook beat by 42 cents?
So, while Wall Street is once again sinking their favorite whipping boy, down more than 10%, had Facebook worried more about yesterday than tomorrow, the stock price would have skyrocketed today.
Lest you be fooled into thinking that the R&D end won't pay off, Sponsored Stories, which launched in FB's mobile News Feed earlier this year, already has a run rate of more than $1 million per day, half of which is from mobile.
On the conference call, management stressed that they are committed to maximizing return on investment (ROI) for advertisers and monetizing their mobile presence. iStock believes Facebook, Inc.'s (FB) $1.1 billion investment will result in an excellent ROI for shareholders and advertisers alike.
Somewhere, Mark Zuckerburg is singing along -
Don't stop, thinking about tomorrow,
Don't stop, it'll soon be here,
It'll be, better than before,
Yesterday's gone, yesterday's gone