FB - Facebook

[manuelbean]

15x what? Pre Virus guesses?

 

I also think it is cheap but we should forecast a couple yrs out imo.

 

I think the past month has demonstrated that Facebook is an absolutely irreplaceable utility for most first world citizens. Honestly, imagine somebody who makes $40,000 a year, and try estimating their consumer surplus from Facebook use. If you could enforce an agreement for them not to use the Facebook family of products for one year, what do you think is the minimum amount of money they'd demand? I think this number is easily in the thousands.

 

I've been a long-time Apple owner (though off and on) since 2012, and I recently realized that at roughly the same valuation, Facebook is easily the better buy. Again, similar thought experiment. Imagine telling a dual iPhone/Facebook user that they could choose: Either an iPhone but no FB products, or a Samsung Galaxy with FB. What do you think that split is like in America? I'd guess 10 to 1. One of these companies is monetizing at pretty close to their customers willingness-to-pay, and the other is capturing maybe 10% of the surplus via advertising. Whose long-term prospects excite you more?

 

A few years ago, in this thread, I was skeptical of Facebook's monetization; the ads I saw were all cash-burning startups and I was convinced that too much of the ad inventory was being irrationally purchased with hot money. This may turn out to be true--CPM is certain to go down. On the other hand, impressions are going to go up enormously. Of course, this is sort of the worst time for more impressions, narrowly speaking--they're not likely to price super well. But those impressions are not a one-time bounce, in my view. Sure, when the economy/health situation normalizes, people will not be loading up Facebook quite as much. But I suspect their base utilization will be higher.

 

Facebook is strategically digging its way down to the base layers of Maslow's hierarchy. They are very deliberately making themselves -the- source for COVID-19 information; not just globally/nationally, but more important locally. If you want to know what is happening in your particular hood of BFE, Facebook is the only way to get it. MSNBC isn't going to tell you what's going on in northern Wyoming. When things get back to normal, the average users idea of what Facebook is for is going to broaden--that breadth will create new opportunities for more product extensions and monetization potential.

 

But what if things don't normalize soon enough? Well, the longer and worse this crisis is, the better for Facebook. It'll give them even more time to validate their platform as the go-to source for anything important, the go-to source for connecting with family and friends and broadly sharing information/news. And unlike many other companies, they have no debt and ample cash--they can ride out an advertising recession for -years-. In the most nightmarish scenario (>1% of the entire population dying), certain aspects of high-stakes real-life socialization that we take for granted will simply have to be replaced. There will not be sufficient processing capacity for funerals/memorials, and even if there were, it simply will not be safe to do them in the normal way. As morbid as it is, these will be massive opportunities to create products that "shift" these incredibly important personal experiences to the internet.

 

Finally, you'd better believe the regulatory heat is gone now. There are simply bigger issues in society than litigating this stupid culture war battle and trying to figure out if Facebook is helping the libs or the MAGAs. Facebook is behaving in a way that will retrospectively validate their existence. They will be correctly perceived as an asset to the state, and probably treated more appropriately going forward.

 

15x is a bargain. As is 20x. If you came from the future and told me that 10 years from now Facebook was monetizing US/Canadian users at $300/year, I wouldn't flinch. There are just an overwhelming number of ways that number could double, but fewer and fewer plausible ways for me to imagine that number getting cut in half.

 

We'll see in a few quarters how right or wrong this is.

 

Very sound thinking.

 

Although I like FB a lot, I've been seeing a lot of other apps like Zoom, Houseparty, Tik Tok and others getting prime time recently.

I know I am talking about different things here, but this "stay at home" period will lead to the discovery of new apps and new ways to talk with friends and family. It's so easy to just download another app and start talking. I know that when it comes to messaging or social peacocking, people will go to WhatsApp or Instagram, but why is Facebook even allowing for these apps to gain ground when it could be the default video conversation tool for everyone? Why does it only allow 4 people at a time? (I know, more than 4 is a mess... why would anyone want to speak to more than 4 people online?) It just seems the company moves soooo slooowww.

 

And by the way, the regulatory thing and the premise that smaller players won't be able to compete, what will the definition of social platform or social media be? Is a videogame a social platform? People gather and chat over there. Is CornerofBerkshireandFairfax a social platform? Is Discord App a social platform? I think the boundaries of software are starting to get too diffuse. I'm not sure how to think about it though.

 

 

 

 

 

 

 

 

 

[elliott]

blaineholder, but what of what spekulatius mentions about advertisers?

it may be as you say, that facebook has become an integral part of many people lifes, but, for all the joy facebook brings to their lifes, they are not giving facebook a penny.

 

[hardcorevalue]

A huge part of instagram stories are just repostings from tiktok now.

[HalfMeasure]

Anyone with a strong view/take on the Reliance deal? Interesting to see FB playing offense right now.

[valueinvestor]

Anyone with a strong view/take on the Reliance deal? Interesting to see FB playing offense right now.

 

It's a smart deal. Jio is effectively a legal monopoly, and Zuckerberg gets to piggyback and monetize on the back of Mukesh Ambani. Jio Mart can easily be a business worth more than $50B+, while allowing Zuckerberg increasing revenues per user in India by a considerable margin.

 

However all this is conjecture at this point, and I have no evidence to support this - as opposed to their track record and learning something from Mukesh's and Zuckerberg's business journey.

 

With that being said, the margin of safety presented, I think many can get great returns from at this entry point on a valuation basis alone.

 

I think it's trading around 15-20x fcf net cash.

[griezeman23]

Anyone with a strong view/take on the Reliance deal? Interesting to see FB playing offense right now.

 

It's a smart deal. Jio is effectively a legal monopoly, and Zuckerberg gets to piggyback and monetize on the back of Mukesh Ambani. Jio Mart can easily be a business worth more than $50B+, while allowing Zuckerberg increasing revenues per user in India by a considerable margin.

 

However all this is conjecture at this point, and I have no evidence to support this - as opposed to their track record and learning something from Mukesh's and Zuckerberg's business journey.

 

With that being said, the margin of safety presented, I think many can get great returns from at this entry point on a valuation basis alone.

 

I think it's trading around 15-20x fcf net cash.

 

Putting the valuation to the side (which is of course an important part of the deal), the deal strikes me as very Malone-y.... but in reverse. Malone owned the rails and moved into the content space via minority purchases because he realized the power of the "rails" (cable) working in conjunction with what's being transported (content). FB owns the content (well, they own the space the content is created in) and lack the rails... Jio gives them the rails.

 

In the Social Network, Mark was portrayed as adamant that the service "cannot fail". Most developed markets don't have too many issues with network reliability and FB has purposefully pushed to lighter-weight apps (the blue to white FB conversion last year, Messenger rewrite) so that they need not worry about these networks failing to provide FB users with the highest quality XP i.e. they eat up minimal bandwidth to reduce likelihood of slow loading / failure to load. FB used to go down far more often ten years ago.... I think I can count on my hands it has been down in the last five.

 

That being said, in India, the country is huge, and networks are likely much, much worse. Many users don't have smartphones. Jio Reliance provides the cheapest cellphone plans. I think this means that even FB's lightweight apps will likely given preference in the network in the future - after FB organizes some sort of favorable deal with Jio.

 

I also imagine this is a way for FB via WhatsApp / FB / Messenger to penetrate the next billion users (1.3bn pop, 300mn smartphone users) to assure these network effects. While FB has probably failed with payments and other ventures domestically, they have chance to capture that in India. Thus, the deal allows them to become THE app for Indian consumers and ride the tailwinds of this quickly growing country.

[griezeman23]

[Liberty]

New group video chat product:

 

https://about.fb.com/news/2020/04/introducing-messenger-rooms/

[Casey]

https://investor.fb.com/investor-news/press-release-details/2020/Facebook-Reports-First-Quarter-2020-Results/default.aspx

 

"After the initial steep decrease in advertising revenue in March, we have seen signs of stability reflected in the first three weeks of April, where advertising revenue has been approximately flat compared to the same period a year ago"

[nspo]

Happy I bought at $146. In hindsight, even though I backed up the truck (12%) I should've made it a bigger position. It was trading at nearly an 8% forward FCF yield and growing 25%, incremental returns of 22% on capital, and has created some of the most addictive social products in history with unmonetized options on WhatsApp, Libra etc.... was an absolute no brainer

[fareastwarriors]

Big tech seems to be just chugging along nicely...

[BG2008]

Been a very humbling experience for traditional value folks to see "Teflo Tech"deflect everything that gets thrown its way.  That auto manufacturer?  Yeah, it's really on life support.  Same goes for airlines. 

[fareastwarriors]

Anyone with a strong view/take on the Reliance deal? Interesting to see FB playing offense right now.

 

It's a smart deal. Jio is effectively a legal monopoly, and Zuckerberg gets to piggyback and monetize on the back of Mukesh Ambani. Jio Mart can easily be a business worth more than $50B+, while allowing Zuckerberg increasing revenues per user in India by a considerable margin.

 

However all this is conjecture at this point, and I have no evidence to support this - as opposed to their track record and learning something from Mukesh's and Zuckerberg's business journey.

 

With that being said, the margin of safety presented, I think many can get great returns from at this entry point on a valuation basis alone.

 

I think it's trading around 15-20x fcf net cash.

 

Vista Equity Partners to invest $1.5B in India’s Reliance Jio Platforms

https://techcrunch.com/2020/05/07/reliance-jio-platforms-vista-equity-partners/

 

 

The planned announcement, which would give the U.S.-headquartered software-focused buyout firm Vista Equity Partners a 2.32% stake in Reliance Jio Platforms, values India’s top telecom operator at $65 billion (equity valuation) — the same valuation implied by the Silver Lake investment and a 12.5% premium over Facebook’s deal, the Indian firm said.

 

In the last three weeks, Reliance Jio Platforms has announced plans to sell about 13.4% stake in the firm to Facebook,  private equity firm Silver Lake, and Vista Equity Partners for about $8 billion.

[fareastwarriors]

Anyone with a strong view/take on the Reliance deal? Interesting to see FB playing offense right now.

 

It's a smart deal. Jio is effectively a legal monopoly, and Zuckerberg gets to piggyback and monetize on the back of Mukesh Ambani. Jio Mart can easily be a business worth more than $50B+, while allowing Zuckerberg increasing revenues per user in India by a considerable margin.

 

However all this is conjecture at this point, and I have no evidence to support this - as opposed to their track record and learning something from Mukesh's and Zuckerberg's business journey.

 

With that being said, the margin of safety presented, I think many can get great returns from at this entry point on a valuation basis alone.

 

I think it's trading around 15-20x fcf net cash.

 

Vista Equity Partners to invest $1.5B in India’s Reliance Jio Platforms

https://techcrunch.com/2020/05/07/reliance-jio-platforms-vista-equity-partners/

 

 

The planned announcement, which would give the U.S.-headquartered software-focused buyout firm Vista Equity Partners a 2.32% stake in Reliance Jio Platforms, values India’s top telecom operator at $65 billion (equity valuation) — the same valuation implied by the Silver Lake investment and a 12.5% premium over Facebook’s deal, the Indian firm said.

 

In the last three weeks, Reliance Jio Platforms has announced plans to sell about 13.4% stake in the firm to Facebook,  private equity firm Silver Lake, and Vista Equity Partners for about $8 billion.

 

Everyone is clamoring for a piece of Jio.

 

 

 

https://www.reuters.com/article/us-reliance-jio-saudi-pif/saudi-u-s-firms-eye-stakes-in-reliances-jio-bloomberg-idUSKBN22K2YL

 

U.S. private equity firm General Atlantic is considering investing about $850 million to $950 million in the Mumbai-based company, a Bloomberg report here said, citing people with knowledge of the matter.

 

The deal could be completed as soon as this month, though no agreement has been finalized and plans may change, it added.

 

Saudi Arabia’s Public Investment Fund (PIF) is also considering to buy a minority stake in Jio, Bloomberg said in a separate report.

[Liberty]

Podcast interview with Steven Levy about his book on FB:

 

https://www.jimruttshow.com/steven-levy/

[Liberty]

https://www.protocol.com/oculus-vr-interview

 

Interview with Jason Rubin, Facebook's vice president for special gaming initiatives

[Liberty]

https://www.cnbc.com/2020/07/16/zuckerberg-says-hes-been-disappointed-by-trumps-handling-of-covid-19.html

[Guest longinvestor]

https://www.washingtonpost.com/technology/2020/08/28/facebook-apple-ios14/

 

What's this mean to FB? Toast?

[johnny]

Actually, killing these sort of networks, and this larger "anti-cookie" movement just make it that much harder for independent publishers/developers/advertisers to cope. Both Google and Facebook have done studies on the effects of this sort of crippling, and it basically means something like 50-60% revenue losses for "out of network" publishers.

 

So what does that mean in the long-term? Well, it means the monetization potential for content will be much higher in a distribution context where those identity revenue boosts can be obtained. In other words, content delivered within the Facebook app itself.

 

It's an immediate hit, of course, to Facebook's revenue. But it's one of those types of things that does survivable harm to the Big Players and is possibly an extinction level event for all the losers who have been trying to make a somewhat arm's length model work.

[Liberty]

https://www.washingtonpost.com/technology/2020/08/28/facebook-apple-ios14/

 

What's this mean to FB? Toast?

 

The impact will be big of the FB Audience Network. I wrote about it a little here, first item after the intro:

 

https://libertyrpf.substack.com/p/18-my-thoughts-on-spotify-and-podcasting

[Guest longinvestor]

Is then the next step for AAPL to prevent targeting by FB, Instagram et al?

[johnny]

No. There’s no way to do/enforce that with anything that could be remotely described/defended as a “general rule” or principle—it would be such a direct assault on how Facebook operates the business that it’s not worth seriously considering.

 

Apple already gives Facebook a much wider-than-normal berth to do what Facebook wants, even when the rules of the App Store are essentially not being followed. This is because, as I mentioned before, Facebook is the sort of product that, if they were to announce they were moving off the platform in two years, could absolutely decimate Apple’s financials and stock price. The asymmetry there is significant—Apple can’t really do the same to Facebook, and in any case, Facebook’s CEO is a lot more entrenched and secure in his position than Apple’s. Everybody is singing Tim’s praises now, but that’s solely because of the stock price performance. If he loses that, he is naked.

[Guest longinvestor]

I’ll be singing Apple’s praises the day this iOS 14 with the opt-in option is released! Won’t shed a tear for the publishing network.

 

What’ll be interesting to see is just how many choose to opt out. If it’s “virtually all”, that’ll be a widely watched movie trailer.

 

This is not about Apple versus FB. It’s about consumers privacy and a reset. FB surely hates the sunshine right now!

[Jurgis]

OT

 

I don't buy Apple devices, but I saw a friend with iPad with screen full of ads in Safari.

So I'm gonna be quite skeptical about Apple's fight for privacy.

[Castanza]

OT

 

I don't buy Apple devices, but I saw a friend with iPad with screen full of ads in Safari.

So I'm gonna be quite skeptical about Apple's fight for privacy.

 

Exactly, it seems more like Apple is just trying to gatekeeper data at the OS level. What’s stopping them from adding some clause into the user agreement allowing them to sell this data or advertising channel out to other companies like FB?