FB - Facebook

[ICUMD]

Thanks for sharing this.

 

A few observations:

 

- MAU's for NA and Europe are pretty flat over the last several quarters. Increasing in other parts of the world.

 

- Revenue per region is increasing across the board, although the trend line across the last 4 quarters is not quite as distinct.  Could be just quarter to quarter variability though.

 

This is clearly an Ad revenue generating machine, and overall seems to be improving.

 

Forward risks that I see:

- one trick monkey - will have to compete with Alphabet (more diversified which I think offers more safety)

- NA ad revenue (which is the lions share) may flatten out over time as the subscriber base has done.

- foreign competition.

- economic downturn - may adversely affect ad income.

 

Having said all this, I own some FB and it is certainly a dominant player in the ad income space.  I'm not confident enough to make this a core holding in my portfolio though due to the above mentioned risks.

 

 

[Liberty]

One thing to keep in mind is that we're just talking about Facebook users. How's the MAUs been going for Instagram, Whatsapp, and Messenger, and how monetized are these things?

[JayGatsby]

Based on my own analysis it looks like some chunk of revenue growth has been increasing ad volume. I did a quick count and it looks like currently ~20% of posts are ads. They also added the ad on the right back (I think it was gone for a while?). I thought in the past when I'd done a count it came to closer to 10% ad load.

 

I also noticed that a lot of these are startup / venture capital funded. I think Facebook is incredibly valuable for driving awareness of something new. I'm less convinced it drives value when that awareness already exists. It's been discussed before, but one risk is that the venture market slows.

 

Maybe risk / rewards are fairly weighted. They do seem to be driving international growth incredibly well recently. Having said that, outside of pricing growth I don't see how they can keep driving US growth without any new product extensions (TV type stuff, etc). Ad load can only be pushed so far if baseline engagement isn't increasing (and potentially decreasing).

[Liberty]

Based on my own analysis it looks like some chunk of revenue growth has been increasing ad volume. I did a quick count and it looks like currently ~20% of posts are ads. They also added the ad on the right back (I think it was gone for a while?). I thought in the past when I'd done a count it came to closer to 10% ad load.

 

I also noticed that a lot of these are startup / venture capital funded. I think Facebook is incredibly valuable for driving awareness of something new. I'm less convinced it drives value when that awareness already exists. It's been discussed before, but one risk is that the venture market slows.

 

Maybe risk / rewards are fairly weighted. They do seem to be driving international growth incredibly well recently. Having said that, outside of pricing growth I don't see how they can keep driving US growth without any new product extensions (TV type stuff, etc). Ad load can only be pushed so far if baseline engagement isn't increasing (and potentially decreasing).

 

FB talks about ad load a lot. They increased it last year, not this year.

 

The ads you're seeing are not necessarily the ads someone else is seeing. The whole point is these are targeted.

 

The ad pricing is determined by automated auction. So when supply goes down, or grows slower than demand, pricing tends to go up (and vice versa). Pricing going up as supply growth slowed down is a good sign that they have pricing power, ie, advertisers are still getting good ROIs and aren't switching to other ad networks when prices go up.

[Jerry Capital]

I am curious to hear from anyone who is long both Google and Facebook in their portfolio.

 

Can anyone foresee a situation where one of these materially outperforms the other?

 

I view my Mastercard/Visa position as just "one", would you view Google and Facebook in the same way?

 

 

 

[ICUMD]

I view Google as a superior company to Facebook.  Far better diversification in varying industries, the defacto search tool. New in roads into AI, mobile services and media (Youtube).  Has a far wider moat than Facebook.  I don't see this company dying in my lifetime.

 

Facebook is an Ad revenue generator only.  If it turns out to be a 'fad' and is displaced by a competitor, it may fall from its throne.  Having said that, I think it will continue to be a dominant player for many years to come, but perhaps not a lifetime.

[rkbabang]

I am curious to hear from anyone who is long both Google and Facebook in their portfolio.

 

Can anyone foresee a situation where one of these materially outperforms the other?

 

I view my Mastercard/Visa position as just "one", would you view Google and Facebook in the same way?

 

I don't view Google and Facebook as the same (i.e. Coke/Pepsi or VISA/MC).  With those other examples the product is almost exactly the same.  But with GOOG/FB their products are different and complementary.  FB is a social network, where Google is everything BUT a social network.  Social networking is the one thing Google could never figure out.  Yes they both have revenue from advertising, but so does CBS, you wouldn't say that CBS is the same as Google.

 

 

[walkie518]

I don't understand why this is ok? 

 

Nov 2016, Zuckerberg says "99 per cent of what people see is authentic."

 

Apr 2017, Facebook's Chief Security Officer and a couple security colleagues write a whitepaper saying that there is rampant abuse of the platform

https://fbnewsroomus.files.wordpress.com/2017/04/facebook-and-information-operations-v1.pdf[\url]

 

In the latest 10-Q, Facebook reported 1.37B daily active users worldwide

https://www.sec.gov/Archives/edgar/data/1326801/000132680117000053/fb-09302017x10q.htm]https://www.facebook.com/zuck/posts/10103253901916271[\url]

 

Apr 2017, Facebook's Chief Security Officer and a couple security colleagues write a whitepaper saying that there is rampant abuse of the platform

https://fbnewsroomus.files.wordpress.com/2017/04/facebook-and-information-operations-v1.pdf[\url]

 

In the latest 10-Q, Facebook reported 1.37B daily active users worldwide

https://www.sec.gov/Archives/edgar/data/1326801/000132680117000053/fb-09302017x10q.htm

 

A day ago, Facebook admits there are 270m fake and duplicate users

https://www.msn.com/en-nz/news/world/facebook-admits-up-to-270m-users-are-fake-and-duplicate-accounts/ar-AAumrEH?li=BBqdmGRrs

 

How does Facebook get away selling advertising when 10-20% of users are known to be fake or duplicate?

[JayGatsby]

How does Facebook get away selling advertising when 10-20% of users are known to be fake or duplicate?

The ROIs they're generating for advertisers are still good. If I spend $100 on advertising and I know that $10 - $20 of that is totally wasted, I just have to get an even better ROI on the remaining $80.

 

Surprisingly I've found facebook fairly unaggressive about eliminating fake accounts. There's some people in my friend request list that are clearly fake, but fb never gets rid of them. I guess they don't count as MAUs once they go dormant.

 

Liberty, what sort of ads do you see? I think their advertising is most conducive to new businesses to build awareness. It's very good for that.  I'm skeptical that they haven't increased load.

[Liberty]

I don't understand why this is ok? 

 

Nov 2016, Zuckerberg says "99 per cent of what people see is authentic."

 

Apr 2017, Facebook's Chief Security Officer and a couple security colleagues write a whitepaper saying that there is rampant abuse of the platform

 

In the latest 10-Q, Facebook reported 1.37B daily active users worldwide

https://www.sec.gov/Archives/edgar/data/1326801/000132680117000053/fb-09302017x10q.htm]https://www.facebook.com/zuck/posts/10103253901916271[\url]

 

Apr 2017, Facebook's Chief Security Officer and a couple security colleagues write a whitepaper saying that there is rampant abuse of the platform

https://fbnewsroomus.files.wordpress.com/2017/04/facebook-and-information-operations-v1.pdf[\url]

 

In the latest 10-Q, Facebook reported 1.37B daily active users worldwide

https://www.sec.gov/Archives/edgar/data/1326801/000132680117000053/fb-09302017x10q.htm]https://fbnewsroomus.files.wordpress.com/2017/04/facebook-and-information-operations-v1.pdf[\url]

 

In the latest 10-Q, Facebook reported 1.37B daily active users worldwide

https://www.sec.gov/Archives/edgar/data/1326801/000132680117000053/fb-09302017x10q.htm]https://www.facebook.com/zuck/posts/10103253901916271[\url]

 

Apr 2017, Facebook's Chief Security Officer and a couple security colleagues write a whitepaper saying that there is rampant abuse of the platform

https://fbnewsroomus.files.wordpress.com/2017/04/facebook-and-information-operations-v1.pdf[\url]

 

In the latest 10-Q, Facebook reported 1.37B daily active users worldwide

https://www.sec.gov/Archives/edgar/data/1326801/000132680117000053/fb-09302017x10q.htm

 

A day ago, Facebook admits there are 270m fake and duplicate users

https://www.msn.com/en-nz/news/world/facebook-admits-up-to-270m-users-are-fake-and-duplicate-accounts/ar-AAumrEH?li=BBqdmGRrs

 

How does Facebook get away selling advertising when 10-20% of users are known to be fake or duplicate?

 

Many of those duplicate accounts are not frauds. But this is a problem everywhere online. Google has a lot of click fraud, SEO spammers and bot farms trying to game the system too. Twitter has spam bots...

 

As long as the advertisers are seeing the sales coming in, this is a cost of doing business, and arms race between the platforms and spammers. It's easier to discover very active spam accounts than inactive ones, so I suspect a lot of those don't do much.

[Jurgis]

I don't use FB often. Can't remember recent ads much, but will post when I go on FB next time (sometime in next couple weeks  8) ).

 

At the beginning of the year, they had NYT and WP sales ads and I subscribed to one of them through FB sale/ad. From what I remember it was a better deal than what the newspaper had on their site (which was also a "sale" price).

 

I'm sure the ad was paid by Russians.  ;D

 

 

[SlowAppreciation]

Good read: https://www.nytimes.com/2017/11/02/magazine/how-facebooks-oracular-algorithm-determines-the-fates-of-start-ups.html?hpw&rref=magazine&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well

[Jurgis]

FB ads from today's browsing (on PC):

 

Netflix

PetMD

Fios

Xbox X

Lovepop Cards ???

Cat Lovers

MIT Sloan Executive Education

Shopiflyzon ???

 

I wasn't interested in any of these, though potentially I could be. So not very bad targeting.

 

This https://www.facebook.com/ads/preferences/?entry_product=ad_settings_screen allows you to see and edit your FB ad categories/etc. Found some real fun there for myself. Including a category that Russians definitely target.  8)

 

I'm sure Russians bought the Cat Lovers ad.  ;D

[LongTermView]

Does anyone have references that give clues as to the replacement vs growth capex for the data centers?

[Liberty]

I wasn't interested in any of these, though potentially I could be. So not very bad targeting.

 

You seem to be saying above that you almost never go on FB, so I suspect targeting is better when they have a lot of signal to use (lots of likes, pages followed, active with friends, following brand pages, etc)

[rishig]

James Hamilton is a VP at AWS. He writes a blog on various topics. Here's one on costs:

http://perspectives.mvdirona.com/2010/09/overall-data-center-costs/

[LongTermView]

James Hamilton is a VP at AWS. He writes a blog on various topics. Here's one on costs:

http://perspectives.mvdirona.com/2010/09/overall-data-center-costs/

 

Thanks, Rishi!

 

This is very insightful.

[rkbabang]

FB ads from today's browsing (on PC):

 

Netflix

PetMD

Fios

Xbox X

Lovepop Cards ???

Cat Lovers

MIT Sloan Executive Education

Shopiflyzon ???

 

I wasn't interested in any of these, though potentially I could be. So not very bad targeting.

 

This https://www.facebook.com/ads/preferences/?entry_product=ad_settings_screen allows you to see and edit your FB ad categories/etc. Found some real fun there for myself. Including a category that Russians definitely target.  8)

 

I'm sure Russians bought the Cat Lovers ad.  ;D

 

I've been using FB for a long time 8-10 years or so I think (I'm too lazy to go look it up).  As far as I know in all that time I've clicked on one FB add.  It was for a 30oz RTIC tumbler for $8.99 with free shipping.  That was over a year ago and I still use it every day for my coffee.  It makes a great mug.  I ended up buying a 2nd one a few months later for more money just so I'd always have one available if the other was in the dishwasher.  I usually try to ignore ads online, but every once in a great while a deal is too good.

 

[Astrea]

I don't think I've ever clicked on a FB ad. Perhaps once by mistake. Interesting comments by Glenn Fogel (Priceline CEO) at the RBC conference the other day:

 

"I was recently at FB talking with the team there that we deal with to try and see what we can do to improve our ad spend there because at the end of the day we want to spend more money with FB - we want to spend more money with anybody who fits our long term goals - and that includes making an investment in any type of channel that gives us the right ROIs... FB does not yet, yet produce the returns that we get with Google. They continue to work on different types of ways that we will be able to achieve a better return but it's still early. And it's interesting because other advertisers and other verticals seem to be achieving nice returns or else why would FB's revenue be where it is? But we have not yet found it to be - and we ask them, are there other people in the travel industry who are doing significantly better than us on this, and the answer is "no... no you guys are doing fine compared to everybody else". So it really is perhaps the way people use FB and it just doesn't have that intent that when people go on Google [...]"

 

Does anyone know who records great ROIs from FB ad spend?   

[giofranchi]

Does anyone know who records great ROIs from FB ad spend? 

 

I surely do. Not as good as with Google, I agree. (Far from it!) But definitely better than with any other advertising channel.

 

My experience of course is limited to the higher education (civil and infrastructural engineering) field.

 

Cheers,

 

Gio

[Guest Schwab711]

Does anyone know who records great ROIs from FB ad spend? 

 

Local Mom n' Pops crush it. My friend opened a barber shop last year. He spends $100-$200 a month on FB and says it's the most important advertising he does. It's roughly the same price or cheaper than buying ad space in a single local weekly paper and it sounds like it's a magnitude more effective.

 

As Jay mentioned earlier, I also wonder if engagement declines going forward. I think a core audience will always be extremely active, but how big will that core be?

[giofranchi]

As Jay mentioned earlier, I also wonder if engagement declines going forward. I think a core audience will always be extremely active, but how big will that core be?

 

Well, of course you must have a strategy for that to happen on a social platform like FB (or any other social platform). To simply “pay for advertising” is not enough.

For instance, we try to keep engaged those who like our FB page posting interesting articles and sharing our blog over there on a daily basis. Posts that are meaningful to our audience and free make them check out our FB page more frequently.

If you share something valuable for free, chances increase they will come back willing to pay for more.

 

Cheers,

 

Gio

[Guest Schwab711]

As Jay mentioned earlier, I also wonder if engagement declines going forward. I think a core audience will always be extremely active, but how big will that core be?

 

Well, of course you must have a strategy for that to happen on a social platform like FB (or any other social platform). To simply “pay for advertising” is not enough.

For instance, we try to keep engaged those who like our FB page posting interesting articles and sharing our blog over there on a daily basis. Posts that are meaningful to our audience and free make them check out our FB page more frequently.

If you share something valuable for free, chances increase they will come back willing to pay for more.

 

Cheers,

 

Gio

 

It's funny you say this because I spoke to a CEO of an OTC company a couple weeks ago that decided against building out a corporate website for the holdco and put all their effort into their FB page. He had a lot of similar sentiment that they want to increase FB engagement anyways and posting more and more relevant content will increase engagement (from job opportunities or recruitment purposes). He talked about the upfront + maintenance cost of a separate holdco website and they eventually realized they needed to get over the FB stigma because it was the best business decision for them. It was a really interesting discussion about their management thought process.

[ZenaidaMacroura]

Does anyone know who records great ROIs from FB ad spend? 

 

Local Mom n' Pops crush it. My friend opened a barber shop last year. He spends $100-$200 a month on FB and says it's the most important advertising he does. It's roughly the same price or cheaper than buying ad space in a single local weekly paper and it sounds like it's a magnitude more effective.

 

As Jay mentioned earlier, I also wonder if engagement declines going forward. I think a core audience will always be extremely active, but how big will that core be?

I spend $1-2k per month on Facebook ads.  It is quite simply the best Roi available no contest.  If you use copywriting taught in “tested advertising methods” and combine it with Fb targeting you can go from cubicle warrior to financial independence in a single calendar year

[ZenaidaMacroura]

A lot of people seem to be saying “the ads don’t appeal to me”

 

I think that if your are reasonable, of moderate political opinions and not particularly impulsive (the typical reader of this board) then Facebook doesn’t have a strong read on you/you’re not inclined to do much impulse buying anyways.  There are people who can’t distinguish which google results are ads (or they don’t care).  Facebook is an shockingly effective way to target and reach THOSE people.