FB - Facebook

[DooDiligence]

Needham Insights

The Future of Media: An Epic Battle

https://www.allaccess.com/assets/img/content/pollack-media/2018/010618-FOM-AEP.pdf

 

Do you think it's necessary for aggregators to own content production?

 

I'd include Disney as a physical human aggregator and a nice fit for Apple.

 

BTW, thanks for that link (I've only read the first 5 pages & will hit the rest of it this afternoon.)

[MrB]

Needham Insights

The Future of Media: An Epic Battle

https://www.allaccess.com/assets/img/content/pollack-media/2018/010618-FOM-AEP.pdf

 

Do you think it's necessary for aggregators to own content production?

 

I'd include Disney as a physical human aggregator and a nice fit for Apple.

 

BTW, thanks for that link (I've only read the first 5 pages & will hit the rest of it this afternoon.)

No, but mainly because I don't think aggregators will do a good job of owning content production. Netflix is not doing a good job of it and content is a tough business to begin with.

[Mungerish]

Not sure if this was posted here already or not, but its equally fascinating on the media landscape and money being spent on content to try and keep up.

FB references start on page 10

http://ir.libertymedia.com/static-files/157df3fe-41ed-4663-b945-a1f249103f2d

 

FWIW, my facebook feed ads are larger companies or obviously very specific to my recent purchases and searches.

[gfp]

One thing I was surprised to see this week was that Facebook has opened up Facebook Messenger to advertisers.  I was directly messaged by Mott & Bow, a company that sells blue jeans / denim, through Facebook messenger.  I do not "follow" or "like" Mott & Bow on Facebook - but I have purchased Mott & Bow pants in the past.  I was able to block them - but this is the first time I have seen the separate app "Messenger" allow someone to push notification message me for unsolicited spam.

[Mungerish]

One thing I was surprised to see this week was that Facebook has opened up Facebook Messenger to advertisers.  I was directly messaged by Mott & Bow, a company that sells blue jeans / denim, through Facebook messenger.  I do not "follow" or "like" Mott & Bow on Facebook - but I have purchased Mott & Bow pants in the past.  I was able to block them - but this is the first time I have seen the separate app "Messenger" allow someone to push notification message me for unsolicited spam.

 

I find myself using messenger more and more for various reasons, but usually video or photo related.  For instance this past weekend I was in the White Mountains of NH and trying to send photos of a wifi thermostat I was installing to an electrician buddy. The bandwidth of the regular cell service wouldn't do it do FB messenger to the rescue and he got right back to me.

Just checked messenger after reading your post and there was my first ad for Toyota SUV's ( I just passed on a Toyota product to one of my daughters and bought a German crossover)

 

Maybe because I have a position in FB ....( in case I have not made that clear previously)...This does not bother me particularly. Car shopping sucked and was like a science project I didn't really have the time for but had to do to help out my kid.

I'd much rather see relevant stuff as opposed to feminine products or soft drink ads for products I'll never buy.

[nkp007]

I think tracking the sales of Facebook Portal (which seems to be a solid hardware product aside from the FB name) can give us some good insight into whether privacy issues are affecting FB's core customers. If we see adoption increasing here drastically, that will be a very promising sign.

 

Something to watch over the next couple months.

[mcliu]

Facebook Portal seems kind of redundant since you can video call people on your phone/laptop..?

[Spekulatius]

Facebook Portal seems kind of redundant since you can video call people on your phone/laptop..?

 

The device is a flop. Price is too high and besides video calling, there seems to be little use for this thing. They did some interesting things with the camera, but that’s about it. The Amazon and Google devices have a much better ecosystem. I guess they had to bring it out in the Xmas shopping season, but this isn’t a well rounded offering.

[Jurgis]

Chamath Palihapitiya discusses this in his recent annual letter, dispute the criticisms of him I thought the letter was well thought out.

 

"Nicholas Sibley has a great quote about banking: “Giving capital to a bank is like giving a gallon of beer to a drunk. You know what will come of it; you just don’t know which wall he will choose.” We’ve reached a point today with ad spend in tech that feels metaphorically similar. Startups spend almost 40 cents of every VC dollar on Google, Facebook, and Amazon."

 

https://techcrunch.com/2018/10/31/social-capitals-chamath-palihapitiya-says-we-need-to-return-to-the-roots-of-venture-investing/

 

Despite some cringe-worthy parts, this is definitely a letter worth reading. Very much so.  8)

[DanielGMask]

Facebook: The Ultimate Attention Merchant by Sullimar Capital Group.

https://sullimarcapital.group/2018/11/22/facebook-the-ultimate-attention-merchant-pt-1/

[nkp007]

Another data dump / opportunity for the media  / far left / far right to dump on Facebook for normal business practices.

 

https://seekingalpha.com/news/3414661-uk-releases-facebook-mails-addressing-prospect-selling-data#comments

 

A few years ago, FB had internal deliberations on how to make money. Blasphemy.

 

Similar point in the media cycle to Bank of America in 2011, WFC scandals, etc.

[MrB]

Anyone has a good recent short writeup on FB please?

[PLynchJr]

http://basehitinvesting.com/facebook-is-undervalued/

[Liberty]

Anyone has a good recent short writeup on FB please?

 

Do you want it to be short, or a short?

[MrB]

Anyone has a good recent short writeup on FB please?

 

Do you want it to be short, or a short?

Ah fair enough Liberty. Shorts writeup. Any good detailed one from someone shorting FB please.

[nkp007]

Short-case:

 

1) Regulation / anti-trust / fines all unknown, but potentially huge and devastating.

 

2) Ads are very economically sensitive, so in downturn, revenue will evaporate quickly

 

3) While 18x earnings and growing 20% a year doesn't seem that expensive, the business model has shifted dramatically as past 50% profit margins likely to be 25% or lower given increasing security / regulatory costs so you're overpaying even here.

 

4) Engagement on FB blue app going down.

 

5) Inability to monetize whatsapp, instagram stories, messenger meaning growth cannot be sustained.

[SHDL]

Short-case:

 

1) Regulation / anti-trust / fines all unknown, but potentially huge and devastating.

 

2) Ads are very economically sensitive, so in downturn, revenue will evaporate quickly

 

3) While 18x earnings and growing 20% a year doesn't seem that expensive, the business model has shifted dramatically as past 50% profit margins likely to be 25% or lower given increasing security / regulatory costs so you're overpaying even here.

 

4) Engagement on FB blue app going down.

 

5) Inability to monetize whatsapp, instagram stories, messenger meaning growth cannot be sustained.

 

Good list.  One other thing that I might add is deteriorating employee morale.  There are quite a few signs of that reported in the media, which I find worrisome because I don’t see how a tech company like this can continue to do well without the ability to attract great talent.  Happy to hear any counterarguments though. 

[Jurgis]

I don’t see how a tech company like this can continue to do well without the ability to attract great talent.

 

Exhibit 1: Microsoft. MSFT has been a whipping boy of all talented nerds for over 20 years now. Did not make much difference for their hiring or results.

 

 

Anecdotally, I think caring about social issues is way lower for most employees than it is projected in the media. So the narrative of talented people not joining "evil" FB is mostly a story.

 

The other issue of talented people not joining FB because its share price going down and their options being underwater is somewhat more true, but I'd say Microsoft again. And it's really IMO not that big. And they can give out RSUs if they don't do it yet. Also see third issue.

 

The third issue is people leaving FB because it's huge company and they'd rather make their millions in startups is also somewhat true, but really true for any big Silly Valley company and has been going for ages. Did not kill Google or any other big company really. And assuming we get a recession and startup funding drop, this will reverse.

 

Overall though, I can't claim I have the hand directly on the pulse of Silly Valley. I know some people who left X and went to FB or are thinking of leaving Y and going to FB. I know some people who sang praises about ZZZ and then left for QQQ after a month. It's all a circle of life. So FWIW.

[SHDL]

Exhibit 1: Microsoft.

 

That is an interesting counterexample.  My gut instinct is that Facebook probably won’t have the same kind of resilience, though it’s not like I have a particularly good explanation as to why… 

[johnny]

Short-case:

 

5) Inability to monetize whatsapp, instagram stories, messenger meaning growth cannot be sustained.

 

Is there any analysis/visibility into this or are we just assuming (reasonably) that the monetization on the secondary properties is very weak?

[pbi]

Short-case:

 

1) Regulation / anti-trust / fines all unknown, but potentially huge and devastating.

 

2) Ads are very economically sensitive, so in downturn, revenue will evaporate quickly

 

3) While 18x earnings and growing 20% a year doesn't seem that expensive, the business model has shifted dramatically as past 50% profit margins likely to be 25% or lower given increasing security / regulatory costs so you're overpaying even here.

 

4) Engagement on FB blue app going down.

 

5) Inability to monetize whatsapp, instagram stories, messenger meaning growth cannot be sustained.

 

Is FB not at risk of running out of advertising 'real estate' also?

 

It could eventually lead to marketing cost inflation and smaller entities in particular pulling their advertising off the platform for redeployment into areas where they get better bang for their buck. I think Instagram is already capturing a good portion of this. Just a hunch though.

 

The only way around it seems to be highly targeted ads, however then 1) comes into play due to privacy issues.

[Spekulatius]

The only way around it seems to be highly targeted ads, however then 1) comes into play due to privacy issues.

 

Or creating more real estate - marketplaces, video, Whatsup etc. Marketplaces is one where they created a better mousetrap than competitor Craigslist imo.the advantage is two fold - less fraud (because you are not anonymous due to your FB profile ) and ease of communication ( using Messenger). They don’t quit have the depth in listing yet, but they are getting there.

[BG2008]

No one has really mentioned groups.  I think groups is huge.  The ones that I belong to are for products, Instant Pots and Peloton bike.  There are no ads in those groups right now.  But with the data analytics, I can see that they can mine those data quickly.  Relevant ads would be accessories for the Instant Pots, accessories for the Peloton Bikes such as padded biking shorts, etc.  I'm surprised that Mark and Co have not monetized the groups yet. 

[nkp007]

No one has really mentioned groups.  I think groups is huge.  The ones that I belong to are for products, Instant Pots and Peloton bike.  There are no ads in those groups right now.  But with the data analytics, I can see that they can mine those data quickly.  Relevant ads would be accessories for the Instant Pots, accessories for the Peloton Bikes such as padded biking shorts, etc.  I'm surprised that Mark and Co have not monetized the groups yet.

 

They monetize groups by allowing you to target group members when you buy ads.

[Spekulatius]

No one has really mentioned groups.  I think groups is huge.  The ones that I belong to are for products, Instant Pots and Peloton bike.  There are no ads in those groups right now.  But with the data analytics, I can see that they can mine those data quickly.  Relevant ads would be accessories for the Instant Pots, accessories for the Peloton Bikes such as padded biking shorts, etc.  I'm surprised that Mark and Co have not monetized the groups yet.

 

Yes, I started to use groups too. I joined a local group for the town I moved too and some value investing groups. For local groups, there is Nextdoor out there as a competing offering.