FB - Facebook

[KCLarkin]

I attached my random thoughts on why I find Facebook attractive now. The Facebook is well-covered here and elsewhere, so I didn't do a full writeup. Just some thoughts on what I see in this thing.

Facebook__The_FAMG_I_Like_Most-2.pdf

[Casey]

Anyone at >10%? I'm at 10% now, but starting to feel that is undersized.

 

I was. Been selling a bit. About 10% now.

[Krapdivad]

I attached my random thoughts on why I find Facebook attractive now. The Facebook is well-covered here and elsewhere, so I didn't do a full writeup. Just some thoughts on what I see in this thing.

 

What do you think about the "war" between Apple and Facebook? Apple's upcoming iOS update would hurt FB's growth by hampering its ability to collect data from its users.

 

Apple will require app makers to send a push alert that asks them to "allow" or "ask app not to track" to curb data harvesting from users. This directly hurts FB's ability to show targeted ads.

 

In retaliation FB has been spending money on ads on TV and in newspapers saying that changes to apple's iOS will hurt small businesses. It looks to me like Facebook realizes this may be a huge hit if Apple is able to keep pushing towards privacy. It looks like this is just the beginning of a long battle between the privacy gatekeepers and the data collectors.

 

"A recent study from the group TapResearch found that 55% of people surveyed said they would not let Facebook track them across apps if they were prompted."

 

https://www.npr.org/2021/02/26/971367875/why-is-facebook-launching-an-all-out-war-on-apples-upcoming-iphone-update

[Arski]

I attached my random thoughts on why I find Facebook attractive now. The Facebook is well-covered here and elsewhere, so I didn't do a full writeup. Just some thoughts on what I see in this thing.

 

What do you think about the "war" between Apple and Facebook? Apple's upcoming iOS update would hurt FB's growth by hampering its ability to collect data from its users.

 

Apple will require app makers to send a push alert that asks them to "allow" or "ask app not to track" to curb data harvesting from users. This directly hurts FB's ability to show targeted ads.

 

In retaliation FB has been spending money on ads on TV and in newspapers saying that changes to apple's iOS will hurt small businesses. It looks to me like Facebook realizes this may be a huge hit if Apple is able to keep pushing towards privacy. It looks like this is just the beginning of a long battle between the privacy gatekeepers and the data collectors.

 

"A recent study from the group TapResearch found that 55% of people surveyed said they would not let Facebook track them across apps if they were prompted."

 

https://www.npr.org/2021/02/26/971367875/why-is-facebook-launching-an-all-out-war-on-apples-upcoming-iphone-update

 

It will definitely hurt FB, but I don't think so in a meaningful way. Businesses still need to advertise and FB is still going to be their number one place to advertise. If they would like to advertise elsewhere, they would have the same problem as with FB; that the advertising is less effective because of Apple's update.

 

So, I believe as well that it's going to hurt small businesses more than FB. Nevertheless, FB's revenue will be impacted by Apple's action.

[Longtermlens]

Just some anecdotal information.

 

Was around a bunch of younger family members last year - all obsessed with tiktok. spending hours scrolling through it everyday.

 

Was around a bunch of the same younger family members recently - all replaced time spent on tiktok with viewing those short videos on IG instead. I asked why. Answer : "its just more convenient - same content at tiktok"

 

Love him or hate him - zuck is a heck of a ceo.

[ourkid8]

Yup, that's IG Reels and it looks like it is taking off  :)

 

Just some anecdotal information.

 

Was around a bunch of younger family members last year - all obsessed with tiktok. spending hours scrolling through it everyday.

 

Was around a bunch of the same younger family members recently - all replaced time spent on tiktok with viewing those short videos on IG instead. I asked why. Answer : "its just more convenient - same content at tiktok"

 

Love him or hate him - zuck is a heck of a ceo.

[LC]

I think the entire competency of facebook is to be the platform under which people socialize online, and the biggest risk (and perhaps, the core competency) of facebook is the ability to migrate users from platform to platform, e.g. facebook to whatsapp; facebook to instagram, as those platforms become the de-facto norm of online social interaction.

 

Certainly there are also other core activities that facebook performs (expanding the userbase of existing platforms; usage extensions on each platform e.g. facebook marketplace), but I think those are purely ancillary.

 

I'm not sure how to think about facebook's ability to continue maintaining their userbase across shifting platforms. How do you measure that, or estimate FB's ability to own the next Instagram? Other platforms (snapchat) have resisted FB's purchase attempts, how do we estimate whether the next big social platform will do the same?

 

Pretty much my lack of a good answer there is what is causing hesitation.

[KCLarkin]

FB's competency is getting SMBs to advertise online. There are plenty of other social platforms (Reddit, Twitter, Snapchat, Tumblr), but they've all struggled to make money. The problem for emerging platforms is that Facebook spends $18B per year on R&D and hires many of the best engineers.

 

--

Facebook has a teenager/young adult problem. Teens are always looking for their own space, so there is always whitespace for a new social media app. But that is a bigger problem for the social media company's that own the "teen" space. If it takes Snapchat >10 years to become profitable, but then TikTok steals their core audience, it is hard to make a good return on the billions invested in the company.

[Longtermlens]

I think the entire competency of facebook is to be the platform under which people socialize online, and the biggest risk (and perhaps, the core competency) of facebook is the ability to migrate users from platform to platform, e.g. facebook to whatsapp; facebook to instagram, as those platforms become the de-facto norm of online social interaction.

 

Certainly there are also other core activities that facebook performs (expanding the userbase of existing platforms; usage extensions on each platform e.g. facebook marketplace), but I think those are purely ancillary.

 

I'm not sure how to think about facebook's ability to continue maintaining their userbase across shifting platforms. How do you measure that, or estimate FB's ability to own the next Instagram? Other platforms (snapchat) have resisted FB's purchase attempts, how do we estimate whether the next big social platform will do the same?

 

Pretty much my lack of a good answer there is what is causing hesitation.

 

Its a great point and one I think about a lot. To me, its the most important thing to think about when investing in FB.  In short, I often underestimate just how sticky their products are and the sheer size of their respective userbases. WhatsApp for example has over 1 billion users alone - very difficult to dismantle that type of network effect.

 

Also - a large part of my investment in FB - is investing and trusting Zuck. At 36 years of age and with a long runway ahead - I am optimistic (but not certain ofcourse) that he will always have an eye on the future and continuously massage his product. His already displayed this to massive magnitude in my opinion.

 

Will again refer to John Hubers article on Facebook (from 2018, I think its brilliant). I have picked out some specific points below that really help me think about the question, "how does facebook maintain their userbase."

 

"Facebook’s network of 2.3 billion people is much stronger than Twitter’s 300 million or Snap’s 200 million. And for those who compare Facebook to MySpace: keep in mind the latter had 75 million users at its peak in 2008, roughly 3.3% of Facebook’s current user base. So far in 2018 alone, Facebook has added 142 million users, a sum that is nearly twice the number of users that MySpace ever had in total. Facebook’s huge user base doesn’t mean the network is invincible, but it is much more durable than many people believe.

 

Instagram & WhatsApp

 

"The company also has an enormous potential for growth on Instagram (which is still in the early innings of growth) and WhatsApp (which has over 1 billion users but has yet to be monetized). Over 100 billion messages are sent every day across the company’s services, and in many countries, they are the main tool for communicating. A fast-growing number of these messages are sent between merchants and customers, a service that hasn’t been monetized yet but is obviously very valuable for businesses."

 

"These platforms will make more money from advertising in the near future, but there are also other potential sources of revenue from mobile payments, video content, subscriptions, or even commissions or usage fees from businesses that originate sales on these platforms. These business lines may or may not develop, but they are all possible, and they are all valued as free call options at the current stock price."

 

"Mission-driven companies often have intangible qualities outside of money that motivate individuals. Facebook’s mission of connecting the world has gotten overshadowed by the current issues and the negative news momentum, but I don’t think the mission is any less meaningful. Zuckerberg has certainly taken a beating this year, but I’ve always been impressed with his foresight and his focus on the company’s long-term future. He’s faced adversity before (transitioning the company from desktop to mobile was a monumental feat), and his focus on doing what he thinks is best for the long-term health of the platform is what all shareholders should want."

 

"I also think it’s comical to watch pundits debate whether Zuckerberg should step down. He and Sheryl Sandberg have created more equity value in the last decade than just about every other management team alive, and just like when chick-scoffs-at-question-about-Brady-s-future” target=”_blank” rel=”noopener noreferrer”>reporters started questioning Tom Brady’s future in 2014 after an early season blowout loss in Kansas City, sometimes the market’s short-termism leads to a large gap between perception and reality. The Patriots went on to win 8 straight games after that question was posed, and Tom Brady ended the year as the Super Bowl MVP."

 

 

[Longtermlens]

https://tech.fb.com/inside-facebook-reality-labs-the-next-era-of-human-computer-interaction/

 

https://tech.fb.com/inside-facebook-reality-labs-wrist-based-interaction-for-the-next-computing-platform/

[Krapdivad]

Zuckerberg was just on clubhouse. I caught some of the middle to end of the conversation.

It's supposed to be uploaded to constine.club in a bit

 

Zuckerberg said he's confident that FB will come out strong after the iOS 14 update. He referenced the success they maintained in Europe after the GDPR regulations went into effect. What he had an issue with was the wording of the iOS 14 privacy pop up. He believes ad supported products are the way to go in order to give everyone access to the tools that were only typically available for larger companies in the past.

 

Zuckerberg said he was more worried about Apple's unfair use of "private api's" which only Apple can use. He mentioned the ability of apple airpods and iWatch to connect to the iphone much quicker than any of the competitors could because no one else was allowed access to these private api's. Also how there's no way to switch to a different default messaging app than iMessage, and how iMessage comes default with notifications enabled.

 

Seems like Zuckerberg is optimistic about the audio-only space and will be releasing some tools soon.

 

After listening to this conversation, I can tell that Zuckerberg remains passionate about constantly improving and introducing new features to FB, and that he's annoyed at Apple's lack of "fairness".

[dutchman]

Krapdivad, thanks for ur post

Can you clarify where it will be uploaded?

[Krapdivad]

Krapdivad, thanks for ur post

Can you clarify where it will be uploaded?

 

my mistake I mistyped. The host said he would upload the conversation to:

https://constine.club/

[Longtermlens]

Zuckerberg was just on clubhouse. I caught some of the middle to end of the conversation.

It's supposed to be uploaded to constantine.club in a bit

 

Zuckerberg said he's confident that FB will come out strong after the iOS 14 update. He referenced the success they maintained in Europe after the GDPR regulations went into effect. What he had an issue with was the wording of the iOS 14 privacy pop up. He believes ad supported products are the way to go in order to give everyone access to the tools that were only typically available for larger companies in the past.

 

Zuckerberg said he was more worried about Apple's unfair use of "private api's" which only Apple can use. He mentioned the ability of apple airpods and iWatch to connect to the iphone much quicker than any of the competitors could because no one else was allowed access to these private api's. Also how there's no way to switch to a different default messaging app than iMessage, and how iMessage comes default with notifications enabled.

 

Seems like Zuckerberg is optimistic about the audio-only space and will be releasing some tools soon.

 

After listening to this conversation, I can tell that Zuckerberg remains passionate about constantly improving and introducing new features to FB, and that he's annoyed at Apple's lack of "fairness".

 

good summary by marcelo p.lima on twitter

 

 

of note to me - FB shops has 1MM active shops and 250MM visitors a month. Zuck said this will be explosive in the years to come...

[Krapdivad]

Krapdivad, thanks for ur post

Can you clarify where it will be uploaded?

 

my mistake I mistyped. The host said he would upload the conversation to:

https://constine.club/

 

Transcript of the clubhouse meeting:

https://constine.substack.com/p/pressclub-with-mark-zuckerberg-daniel

 

Podcast:

https://pod.link/1547512963/episode/2e7738d287b998caee38626ac1c6bce9

[cmlber]

Anyone at >10%? I'm at 10% now, but starting to feel that is undersized.

 

I'm at ~18%.  I think iOS concerns are overblown and while they may be a short-term headwind, I think long-term it pushes more commerce into Shops which is hugely positive for FB.  For 30%+ top line growth it's a very reasonable multiple of earnings; earnings that are burdened by many billions of dollars of expenses that are either (1) deflationary in the long-run (will human content moderators be a thing in 10 years? isn't the server cost to support one user always going down?) or (2) generate no revenue now and someday likely will (VR/AR/messaging).  I also think persistent terminal value concerns are way overblown.  Instagram / FB will just keep copying successful features in other app like they've been doing.

[Ice77]

FB ad prices rising again in 2021 after a flatline and a dip in 2018-2020 (chart). The stock is ready to rock and roll.

Edited April 1, 2021 by Ice77

[fareastwarriors]

3 hours ago, Ice77 said:

FB ad prices rising again in 2021 after a flatline and a dip in 2018-2020 (chart). The stock is ready to rock and roll.

At the end of the day, FB (and Insta) ads work and they work well. For smaller businesses especially, their ads are even better than Google. 

Edited April 1, 2021 by fareastwarriors

[johnny]

On 4/1/2021 at 9:26 AM, Ice77 said:

FB ad prices rising again in 2021 after a flatline and a dip in 2018-2020 (chart). The stock is ready to rock and roll.

Which shop is this data from?

[CorpRaider]

What kind of run rate dilution do you guys think about here?  

[Ice77]

On 4/2/2021 at 7:43 PM, johnny said:

Which shop is this data from?

The Information

[Pistachio_Lawyer]

Absolutely glad I purchased FB back in March.

For the bears, do you think anti-trust considerations will impact earnings in near future?

[Tintin]

I've been looking into FB more deeply over the past few weeks and am attracted to the stock's continued earnings potential moving forward.  But in trying to calculate a margin of safety, one of the headwinds seems to stem from the regulatory risk that the company might be broken up.

 

I'm nowhere near smart enough to put a probability on that outcome, so would rather be conservative and just assume there's a 50% chance it will happen anyway.  So if WhatsApp and Instagram were forcibly spun off, would it be the case that existing FB shareholders would automatically receive shares in the new spinoffs?  Or would existing shareholders have to buy into them, just like everyone else would in an IPO?  I am unfamiliar with the process of what would happen to existing shareholders in a scenario involving a forced regulatory spinoff.

 

The way I look at it - if existing shareholders were indeed to receive 'free' shares in the spinoffs then it becomes far less of a concern in calculating an initial margin of safety on the FB stock today, because the owners get free shares in 2 great businesses with good runways ahead of them.  But if FB shareholders aren't entitled to free stock in the new companies, then the margin of safety needs to be higher now.

 

Is this a fair way of looking at the problem?  Thanks.

[n.r98]

58 minutes ago, Tintin said:

I've been looking into FB more deeply over the past few weeks and am attracted to the stock's continued earnings potential moving forward.  But in trying to calculate a margin of safety, one of the headwinds seems to stem from the regulatory risk that the company might be broken up.

 

I'm nowhere near smart enough to put a probability on that outcome, so would rather be conservative and just assume there's a 50% chance it will happen anyway.  So if WhatsApp and Instagram were forcibly spun off, would it be the case that existing FB shareholders would automatically receive shares in the new spinoffs?  Or would existing shareholders have to buy into them, just like everyone else would in an IPO?  I am unfamiliar with the process of what would happen to existing shareholders in a scenario involving a forced regulatory spinoff.

 

The way I look at it - if existing shareholders were indeed to receive 'free' shares in the spinoffs then it becomes far less of a concern in calculating an initial margin of safety on the FB stock today, because the owners get free shares in 2 great businesses with good runways ahead of them.  But if FB shareholders aren't entitled to free stock in the new companies, then the margin of safety needs to be higher now.

 

Is this a fair way of looking at the problem?  Thanks.

Facebook was really cheap a few months ago at around 11-12x consensus EV/NTM EBITDA when the pessimism and uncertainty was abounding. $FB seems to be re-rating on the idea of an impending morphing into a commerce business as opposed to the current perceived evil advertisement/privacy-merchandising company.

I surmise if the breakup happens, it will be similar to AT&T's breakup in 1984; shareholders received the stock of the broken off Baby Bells. I wonder if the probabilities of a break-up are as high as many put it to be; $FB though an excellent business doesn't seem to be as indomitable as its big tech counterparts(esp Amazon and Alphabet). It might be in a few years time though.

Edited April 28, 2021 by n.r98

[Nomad]

15 hours ago, n.r98 said:

I wonder if the probabilities of a break-up are as high as many put it to be; $FB though an excellent business doesn't seem to be as indomitable as its big tech counterparts(esp Amazon and Alphabet). It might be in a few years time though.

I do wonder if the increasing importance of FB Marketplace becomes a target for regulators. It's effectively a huge online classifieds section and I could see it being targeted for excision from the company as a whole since it seems somewhat qualitatively different from the rest of the business.

But overall, I agree that FB does seem less indomitable than the rest of Big Tech. Perhaps it's due to the rapid turnover that we've seen in social networks since the early 2000s. Who remembers Friendster or MySpace these days, and what's to say that TikTok or some newer competitor doesn't come along and totally displace Instagram or FB like Zuck did to his old competitors?

The way I look at FB, I think many investors are overestimating regulatory risk and actually somewhat underestimating the risk of disruption as younger generations come online and seek out their "own" social networks.