FB - Facebook

[decko]

Fb is now 20% of mine (after today)...  I started at $155 a few years ago.. Some people say FB is at risk of new entrants, but did we not hear the same thing about google from 2005-2014.. or Apple 2004 to now...  FB/instagram/whatsapp are so far ahead its ridicules (myspace, snapchat, etc): CEO, management, balance sheet, scale, and so forth.  Mark and Sheryl might be the most underrated duo in a long time.   If there is any new entrants FB will either buy them out or copy them; FB is 10 times larger than Snap.  Might be 13x in a year.   FB is now a mature company in an industry that is now 2 decades old..  It makes over 30% net profit (stupid strong)...and it just recently doubled its users in the past 4 and a half years.  doubled!     Revenue is still growing double digits, and just recently, removing cash, was a 21x...  They just now increased their ad. cost for the first time in two years(because they can), increasing arpu by 40% the past year (this quarter shows it). North American is fairly stagnant on users, but the juice of the squeeze is still growing.. immensely.     The rest of the world is still a long runway..   (my numbers are estimates, could be off some)  

No debt.  Havent Monetized whatsapp yet.. If you are an apple person then you dont understand whatsapp.. most used app in the world..  Might benefit from the digital currency somehow. Marketplace..  and lets talk about the behemoth Instagram is.... Its google of anything social media; It dominates and its not even close.     Im rambling, let me get to the point,  social media and internet advertising will continue to be a waterfall of cash flow.. Digital advertising this year surpassed television for the first time.  Surprising to some, that it hasnt already happened.    Look at a google's numbers yesterday...  Google and FB, i think, own 80% of digital advertising..   a few years ago, at $155, I had FB at worth $230. Now, i think its $390... 

Its fair to say the company is stupid strong when half the country, being polarized last election, to some calling it 'being silenced', the company follows this up with a massive quarter. Hate FB all you want, it has a strong moat. 

I hate writing this post because Im feeding my Bias Confirmation.. Now, i have to read counter arguments for the next month trying to sell FB...  

[n.r98]

4 hours ago, decko said:

Fb is now 20% of mine (after today)...  I started at $155 a few years ago.. Some people say FB is at risk of new entrants, but did we not hear the same thing about google from 2005-2014.. or Apple 2004 to now...  FB/instagram/whatsapp are so far ahead its ridicules (myspace, snapchat, etc): CEO, management, balance sheet, scale, and so forth.  Mark and Sheryl might be the most underrated duo in a long time.   If there is any new entrants FB will either buy them out or copy them; FB is 10 times larger than Snap.  Might be 13x in a year.   FB is now a mature company in an industry that is now 2 decades old..  It makes over 30% net profit (stupid strong)...and it just recently doubled its users in the past 4 and a half years.  doubled!     Revenue is still growing double digits, and just recently, removing cash, was a 21x...  They just now increased their ad. cost for the first time in two years(because they can), increasing arpu by 40% the past year (this quarter shows it). North American is fairly stagnant on users, but the juice of the squeeze is still growing.. immensely.     The rest of the world is still a long runway..   (my numbers are estimates, could be off some)  

No debt.  Havent Monetized whatsapp yet.. If you are an apple person then you dont understand whatsapp.. most used app in the world..  Might benefit from the digital currency somehow. Marketplace..  and lets talk about the behemoth Instagram is.... Its google of anything social media; It dominates and its not even close.     Im rambling, let me get to the point,  social media and internet advertising will continue to be a waterfall of cash flow.. Digital advertising this year surpassed television for the first time.  Surprising to some, that it hasnt already happened.    Look at a google's numbers yesterday...  Google and FB, i think, own 80% of digital advertising..   a few years ago, at $155, I had FB at worth $230. Now, i think its $390... 

Its fair to say the company is stupid strong when half the country, being polarized last election, to some calling it 'being silenced', the company follows this up with a massive quarter. Hate FB all you want, it has a strong moat. 

I hate writing this post because Im feeding my Bias Confirmation.. Now, i have to read counter arguments for the next month trying to sell FB...  

$FB makes up a large chunk of my portfolio as well so conf bias alert. I think that it'll be difficult for FB to acquire smaller competitors due to anti-trust issues so I would rule out any "insta/WA- like acquisitions" we witnessed the last decade. If I'm not wrong, the ads are auctioned based on supply/demand dynamics. The increase in ad revenue due to price surges must be due to the influx of more online businesses and the relatively higher demand for a smaller ad inventory supply on Insta. 

People worry about the long history of privacy concerns which were definitely a real issue ; e.g. Cambridge Analytica. However, with recent news on privacy issues with Clubhouse and Twitter last year, one can only conclude that every social media app will face privacy issues more or less.  Bouncing back from various mistakes in the past definitely lends credence to the strength of the founder and the resilience of the business; the company has grown rapidly despite the intermittent #deletefb trend the last decade and Joe Rogan pleading Zuck to "shut down and retire".

People are afraid of eyeball switch citing MySpace and Friendster; those apps were poorly designed according to Sean Parker and were not large enough to gain a critical mass of network effects. Moreover, why must someone give up Instagram to use TikTok? The competition is not other apps but time. Use more instagram instead of reading a book/watching a Netflix show/going for a run. Many have also built a network on these apps which is simply too difficult to displace; ask a young person to delete their instagram account(1000 followers accumulated through schooling years, 100s of memories encapsulated in pictures and stories). 

[LC]

On 3/18/2021 at 9:45 AM, LC said:

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.

So I finally started an Instagram account and this is essentially the original facebook, just image-centric. And it is great. I bought some stock a few days ago and like others here, wish I bought more.

To add color here, I think my original premise is still true: FB's core competency is migrating users from social platform to social platform. To add to that, each migration should (1) add some value and (2) remove unwanted features.

A month ago when I posted that, I was unsure whether FB had successfully done so. Now I see that they have. Instagram is essentially the de-facto social network a la Facebook of 5-10 years ago, and actually the advertising is done much better.

Also there is a sticky effect. It's easier to migrate platforms under the same umbrella, you can import friends, contact information, media, etc. 

Future platforms can be purchased (regulatory risk of course) or a copycat platform can be created. I don't think it's a bad bet...

Edited April 29, 2021 by LC

[Pistachio_Lawyer]

On 4/28/2021 at 8:59 PM, Nomad said:

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. 

I read somewhere that sometimes stock of companies forced to break apart due to regulatory concerns (i.e. Standard Oil) becomes more valuable. As in both the underlying security and its spinoffs.

Is this true? It would be awesome to get some insights

[Jurgis]

1 minute ago, Pistachio_Lawyer said:

I read somewhere that sometimes stock of companies forced to break apart due to regulatory concerns (i.e. Standard Oil) becomes more valuable. As in both the underlying security and its spinoffs.

Is this true? It would be awesome to get some insights

There's not enough data IMO. There have been only couple break ups. Most famous are Standard Oil and Ma Bell. In both of these the children did well for some time AFAIK. I don't have data comparing to indexes though.

Still 2 breakups does not data make.

[LearningMachine]

I think it would depend on how you do the split, and whether you create mini-monopolies/oligopolies in smaller areas.

If you split Facebook into Facebook, What's App and Instagram, and all three had to compete with each other, the sum of all those three companies will be worth a lot less than them as one company. 

If you split Amazon into three retailers, and all three got all the customer, review and other data to start with, and had to then compete with each other, the total sum of all those three entities could again be worth orders of magnitude less than one whole entity.

 However, if you split AWS from the Retail side, not that much degradation in extraction power, other than some sharing of resources and know-how lost between the two. 

Edited April 30, 2021 by LearningMachine

[CorpRaider]

FB more and more reminds me of AOL.  Like a walled garden internet, emulating all these other discrete sites/functions.  I guess that doesn't tell you anything about how this plays out unless they go and buy $T.  

Edited April 30, 2021 by CorpRaider

[ourkid8]

Very slow start to WhatsApp pay in India. As they integrate jio across the country, that should help accelerate growth. 

[Pistachio_Lawyer]

6 hours ago, ourkid8 said:

Very slow start to WhatsApp pay in India. As they integrate jio across the country, that should help accelerate growth. 

I was curious about this. Thank you for the update

[n.r98]

Expected the WhatsApp uptake to be much quicker....assumed there wasn't much friction since most are already using Whatsapp. Has the payment restrictions by the state eased over time?

[ourkid8]

3 hours ago, n.r98 said:

Expected the WhatsApp uptake to be much quicker....assumed there wasn't much friction since most are already using Whatsapp. Has the payment restrictions by the state eased over time?

It has been slowly easing. During the pilot phase they were allowed 1 million users, now it has moved up to 20 million.  In comparison, PhonePe has 250 million users. 

Regulations are in their benefit as they also announced that third party apps like these will be capped to a maximum of 30 percent of all transactions in the future, stating from January 2021. That means google Pay and PhonePe will need to reduce their volumes to fall within that threshold. 

Edited May 23, 2021 by ourkid8