PALO ALTO, California (Reuters) - Facebook Inc CEO Mark Zuckerberg on Friday laid out his 2012 goals to investors on the Silicon Valley leg of his IPO roadshow, saying his first priority was improving the social network’s mobile application.

Facebook Inc. CEO Mark Zuckerberg is escorted by security guards as he departs New York City's Sheraton Hotel May 7, 2012. REUTERS/Eduardo Munoz

About 200 investors showed up at an IPO presentation in Palo Alto, California, where they were given the opportunity to quiz Zuckerberg and his lieutenants. Wall Street had been concerned about the company’s ability to wring revenue from mobile users, considered crucial for long-term growth.

Zuckerberg and Sheryl Sandberg, Facebook’s chief operating officer, said the company’s overall advertising business was gaining steam, with most marketers increasing their spending with Facebook.

The two executives, who appeared on stage alongside finance chief David Ebersman, highlighted social ads as an important tool for Facebook to tackle its mobile challenge.

The ads, which incorporate information about Facebook users’ friends who “like” certain products, are better-suited to the smaller screens of smartphones, from which more than half of Facebook’s users currently access the service, executives said.

As Facebook collects more information about its users, such as location data, Facebook will be able to offer more relevant mobile ads, executives said.

Facebook aims to raise about $10.6 billion via its initial public offering, dwarfing the coming-out parties of tech companies like Google Inc and granting it a market value of up to $96 billion - rivaling Amazon.com Inc’s.

On Thursday, a source close to the process told Reuters its IPO was already oversubscribed, a week before final pricing.

The offering marks a watershed moment for the new generation of Web companies that are challenging established players such as Google and Yahoo for consumers’ online time and for advertising dollars.

With 900 million users, Facebook is the world’s dominant social network. Mark Zuckerberg, the company’s co-founder and 27-year-old CEO was Time Magazine’s Person of the Year in 2010 and was depicted in the fictionalized 2010 movie The Social Network.

“It is a bit of a celebrity event,” said Alice Evans, with London-based F & C Asset Management. “You’re not expecting to learn that much but it’s as close as you can get to kicking the tires.”

Zuckerberg made brief introductory comments at the event, which took place eight miles from Facebook’s new Menlo Park headquarters located at One Hacker Way, before opening the session up to questions.

The company had provoked some grumbles from investors earlier this week, when it took limited questions from the audience at an event in New York.

Investors managed to get in more than 10 questions at Friday’s event, ranging from capital spending to regulatory issues, even as Facebook maintained tight control over the proceedings, forbidding questioners from asking follow-up questions.

Zuckerberg was asked about Facebook’s $1 billion acquisition of mobile app maker Instagram, the largest deal in Facebook’s history. The deal was forged over a weekend, according to media reports.

Zuckerberg said the company had been thinking about buying Instagram for one to two months before the deal occurred. And he noted that the number of Instagram users has already increased from 30 million to 50 million since the deal was announced.