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Broadgate: Market News 6/6

6 June 2012

Facebook Inc. shares extended their decline today following a Reuters/Ipsos poll that showed sagging interest in the site and a minority of users being influenced by ads and comments when making purchasing decisions.

The stock fell 3.8 percent to $25.87 at the close in New York. The shares have lost 32 percent since they began trading at $38 on May 18.

Compared to six months ago, 34 percent of users are spending less time on Facebook, while just 20 percent are using the site more often, according to the poll. One in five people on Facebook have bought products because of advertising or comments they saw on the site, the poll found.

Facebook, owner of the world’s most popular social- networking service, has faced investor concerns about its prospects for revenue and profit growth. The company said last month that advertising is failing to keep up with growth in daily active users as more people access the site via mobile phones. Facebook, based in Menlo Park, California, has said its ability to generate revenue from mobile advertising remains unproven.

In its drive to lure advertisers, Facebook said today that it’s giving companies more flexibility in how they buy so-called Sponsored Stories ads. These ads let marketers pay to insert a message into the News Feed of a person who has signaled affinity for a brand or business.

Now, advertisers can use an online system, rather than the company’s sales team, to specify where these ads are placed — whether for mobile users or those who access Facebook via traditional computers.

Falling Mostly

Shares of the company have fallen eight of 12 trading days. Facebook and Morgan Stanley, its lead underwriter, have faced criticism for increasing the number of shares to be sold in the IPO by 25 percent to 421.2 million just days before the offering, and for boosting the asking price.

The poll was conducted online from May 31 to June 4 and included responses from 1,032 people in the U.S.

Sanford C. Bernstein & Co. analyst Carlos Kirjner initiated coverage yesterday with an underperform rating and a $25 target price. A near-term slowdown in sales growth will fuel investor concerns about full-year 2013 sales, Kirjner said.

The deceleration may “prove to be a temporary setback if, over time, Facebook manages to improve monetization of its inventory, both PC- and mobile-based, and maximize the value of social advertising,” Kirjner said.

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