Playing the Smartphone Addiction

If we were to track usage patterns for computers and mobile devices, it would surprise no one to see a continued shift toward the latter. For one thing, per such companies as HP (HPQ), Dell (DELL) and market-share leader Lenovo, we're certainly seeing more shipments in mobile vs. those for personal computers. But, beyond that, we're also seeing this trend in terms of usage time. Even in and around the Washington area, during the government shutdown people ate out less and spent less -- but they continued to use their mobile devices. At first blush, that may sound like a good thing for companies like AT&T (T) and Verizon (VZ), both of which benefitted from strong wireless businesses in the recently completed September quarter. There are, however, other companies -- social-media ones -- that are partly responsible for this near-addictive behavior when it comes to smartphone and tablet usage. As a casual observer, I can't tell you how many times I've seen people posting on Twitter, or checking Facebook (FB) or LinkedIn (LNKD), in the middle of a conversation or something else that demanded their attention. But not all of these Internet site-mobile app companies are performing well. Take Angie's List (ANGI), the consumer-driven research site that recently missed September-quarter earnings by 15%. With just under 2.4 million users, Angie's List is small player in the social-media space, and is dwarfed by such companies as Facebook, LinkedIn and the soon-to-be-public Twitter. Most alarming to me in Angie's List's third-quarter earnings release were the post-2010 cohort results, which showed the lowest penetration results and paid memberships despite being in 96 markets. One has to wonder if the business model for Angie's List has peaked in its current form. I suspect that both Facebook and LinkedIn will have more sold metrics to report this week when both issue their September-quarter results. Following are the consensus expectations for each of those companies. LinkedIn is set to report its third-quarter numbers Tuesday after the market close, and consensus expectations call for earnings of $0.32 per share on revenue of $385.4 million. For the December quarter, the Street consensus expects profit of $0.40 per share on sales of $438 million. As with Facebook, the number of active accounts here will be closely watched, and so will the mix between premium and corporate ones. Advertising revenue for both the Internet platform and for mobile will be in focus, and if you've been on your LinkedIn account lately, you've been able to see far more sponsored updates in your news flow. LinkedIn recently deployed a new app -- Intro -- that aims to give users complete profiles of the people they email. However, it has received much flak given potential issues with email security and privacy. Commentary on that, as well as on how LinkedIn is working with corporate customers, will dictate how well Wall Street will like what it hears from this company. As for social-networking giant Facebook, the firm is due to report its third-quarter results Wednesday. The consensus is calling for a bottom line of $0.19 per share on revenue of $1.9 billion. For the fourth quarter, expectations peg earnings at $0.22 per share on $2.22 billion in revenue. Key figures to watch will be the number of active account users and advertising revenue, particularly for mobile, given increasing shift by users and consumers to mobile platforms from desktop machines. Any update on the timing of Instagram monetization will also be welcome news. Speaking of Instagram, I continue to chuckle at the news that teenagers prefer Instagram over Facebook. According to data from eMarketer, this fall Facebook and Instagram were tied as the preferred social network among U.S. teens at 23%. A year ago, Facebook had 42% of the vote, compared with 12% for Instagram. The last time I checked, 23% plus 23% equals 46%, which is a net positive for Facebook, seeing as how it owns both properties. Again, investors will certainly appreciate any update on Facebook's plan to mobilize Instagram. For those wondering, Google's (GOOG) Google+ social network was the net loser to Facebook's gain. Twitter remains the lead social-media favorite among teens. In any case, the incremental revenue opportunity associated with Instagram could reverse the drag it has been on Facebook earnings, and the company has continued its move to improve mobile advertising. It's these two factors that tell me there is more upside potential in Facebook shares for the coming year. All things being equal, Real Money Pro subscribers should look to capitalize on any significant pullback in Facebook shares should one emerge later this week.

Playing the Smartphone Addiction

Among the social networks playing a part in this, Facebook looks to have sizable upside potential ahead.

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