When Facebook stock made its public debut last May, investors were hesitant about whether or not the social network could find new ways to make more money – especially with advertising.
But on Monday, Facebook's stock passed its $38 IPO price for the first time after sources told AdAge Facebook would be selling video ads, charging as much as $2.5 million a day. The ads would be capped at 15 seconds for $1 million per day for U.S.-based users.
The move not only represents a much wanted new revenue stream by investors but also challenges the ad revenue long dominated by the television industry.
In the last few months, the world's largest social network has answered the call with higher than expected earnings since July 24, thanks in large part to investors who are especially upbeat about its fast-growing mobile advertising revenue.
Shares of Facebook Inc. increased 1.2 percent to $38.08 in morning trading Wednesday. That's the highest the stock has traded since the company's highly anticipated initial public offering ended with a thud. The stock is up by more than 50 percent since last week.
Facebook's ability to grow mobile revenue was one of the biggest concerns in the weeks leading up to its IPO last year. Investors were worried that its ad business was not migrating to mobile gadgets as quickly as its user base. Facebook urged patience.
In the April-June quarter, Facebook derived 41 percent of its ad revenue from mobile advertising, or about $656 million of $1.6 billion.
That's up from zero in the spring of 2012 and from 30 percent in the January-March quarter of this year. CEO Mark Zuckerberg said last week that the company has "made good progress growing our community, deepening engagement and delivering strong financial results, especially on mobile."
Still, Facebook has room to grow. Research firm eMarketer expects Facebook to increase its mobile advertising revenue more than fourfold to more than $2 billion this year. This would give the Menlo Park, Calif., company a 13 percent share of the global mobile ad market, up from about 5 percent last year.
Facebook is currently No. 2 in mobile ads, well behind Google. EMarketer estimates that Google had a 52 percent share of the global $8.8 billion mobile ad market last year. This year, the firm expects Google's share to grow to 56 percent.
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