- Facebook has impressive user engagement statistics which should hold them in good stead going forward.
- Mark Zuckerberg and company have a forward-thinking strategy.
- The acquisitions Facebook has made show significant promise and could add a lot to their topline as well as bottom-line growth.
With 968 million daily active users, Facebook (NASDAQ:FB) is the biggest social network on the planet. And this success reflects in the Facebook stock price, which is up 29% in the year-to-date, as compared to 14.8% gains in the Nasdaq Composite (INDEX:COMPX).
To give you an idea of the market's confidence in Facebook, their IPO was priced at $38, and at time of writing Facebook stock price stood at $94.26 (closing price on Oct 12), a whopping 36% average annual gain over the last 3 years. There are a multitude of factors for this, and we will be discussing them in this article. However, Facebook is still well-placed to grow in the future.
Before we delve into the longterm opportunities for Facebook and its investors, let's examine what have they done so well.
Do you remember when Myspace was the biggest social network on the planet. It seemed as if no one could ever topple the giant. However, they failed to decide on the kind of social network they wanted to be, and the user experience suffered as a result. As a result, Facebook were able to come in with a streamlined and clean interface, and take the crown.
Additionally, on the mobile-front, Mark Zuckerberg and company were able to foresee that with rising internet speeds, and increased smartphone uptake; mobile networking would be huge. As a result, Facebook made sure that they had an app on every mobile platform and had a simple low-bandwith mobile version, which has helped Facebook's penetration.
It is this forward-thinking and user driven approach which has stood this company in good stead.
Moreover, Mark Zuckerberg recently announced plans to provide remote areas of Africa with satellite internet. As philanthropic as this sounds, this will allow Facebook to acquire more users. Plus, he hasn't mentioned how much this would cost to the end-user so this could be an extra revenue stream. And if they are able to do it in remote parts of Africa, there is nothing stopping a rollout to other parts of the world. This announcement potentially highlights plans to not just be an internet company but to be an integral part of its distribution as well.
Facebook has an enviable portfolio of social networking products in comparison to other social networking companies like Twitter (NYSE:TWTR) or LinkedIn (NYSE:LNKD). For instance, Instagram is the world's biggest photography-based social networking website. Additionally, Whatsapp has 900 million monthly active users.
Interestingly, Instagram and Whatsapp are yet to be fully monetized. Instagram self-serve ads are yet to be rolled out globally, and ads don't exist on Whatsapp. If Facebook monetizes these sites in a manner which doesn't significantly affect the user experience, a lot of revenue can be added to their bottomline.
However, the acquisition that investors should be most hopeful about is Occulus VR. This is a virtual reality company which Facebook bought at great expense ($2,000,000,000). It has a similar features to Microsoft's Holo Lens. With Facebook's large userbase implementation with the platform could be a game-changer for online interaction. Imagine putting a headset on and having a face-to-face conversation with a loved one in a hyper-realistic environment.
The technology also has applications in the gaming industry.
But the areas in which Facebook could use it to add considerable revenue is in the avenues of education, science, and technology as VR offers a platform for innovative training solutions in these areas.
In conclusion, Facebook's revenue continues to increase, partly due to a commitment to staying ahead of the curve. And with a well-executed strategy to take on Youtube in the video ads arena, this is a social network built for the long-term. The question therefore isn't whether Facebook's stock will continue to grow, but when and how can it be stopped? The Facebook stock could see huge upside potential, driven by the untapped potential of its attractive product portfolio.