Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: biaggio on August 16, 2012, 07:55:46 AM

Title: FB - Facebook
Post by: biaggio on August 16, 2012, 07:55:46 AM
Not a fan myself (Too old probably. My teenage kids, and older family members use it)

Not a shareholder, but with stock price tumbling and folks perhaps indiscriminently selling (selling just because price is down)recently I thought I would have a peak at their 10Q.

http://sec.gov/Archives/edgar/data/1326801/000119312512325997/d371464d10q.htm

Positives:

Have net cash of $8.4 b with 377 million shares or $22 per share but shares selling for $19 and change this am.

Negative- did not make any money this quarter + it looks like the employees are enriching themselves (share based compensation of $1.2 billion, significantly increased R&D expense of $700m+ that I am sure some goes to their employees/management)

I don t know that I like the character of the leadership, just the little bit that i have seen. Nothing concrete just a general feeling.

Posting because  I was surprised that it is selling for less than net cash.

EDIT: Sorry guys, I figured I screwed something up- forgot to add the B shares..that's 1.9billion shares or $4.42 per share.  That makes more sense
Title: Re: FB-Facebook
Post by: NormR on August 16, 2012, 08:00:30 AM
Be sure to tally up the share count (& dilution) carefully.  Some of the major data providers aren't really counting everything yet ...
Title: Re: FB-Facebook
Post by: biaggio on August 16, 2012, 08:01:47 AM
Be sure to tally up the share count (& dilution) carefully.  Some of the major data providers aren't really counting everything yet ...

thanks ,I caught that right after I posted

Total shares more like 1.9 billion
Title: Re: FB-Facebook
Post by: racemize on August 16, 2012, 08:04:13 AM
yeah, I was about to say, if FB is a net net something has gone horribly wrong.
Title: Re: FB-Facebook
Post by: Kraven on August 16, 2012, 08:40:35 AM
FB is one of those spectacular investments that makes people a lot of money.  Spectacular in the sense that it operates to transfer a lot of money from Joe Retail Public to the good folks at FB and their bankers and other advisors.  FB may or may not end up being a long lasting company, but it has a long way to go until it's stock is worth looking into.
Title: Re: FB-Facebook
Post by: LC on August 16, 2012, 09:38:41 AM
FB is one of those spectacular investments that makes people a lot of money.  Spectacular in the sense that it operates to transfer a lot of money from Joe Retail Public to the good folks at FB and their bankers and other advisors.  FB may or may not end up being a long lasting company, but it has a long way to go until it's stock is worth looking into.
Agreed. From what I remember when I looked at their financials upon IPO, most of their profit is going straight to employee stock options. And if I recall this fact didn't look like it would change for at least a year or so. Same story with Zynga as well.
Title: Re: FB-Facebook
Post by: Uccmal on August 16, 2012, 10:55:39 AM
I looked briefly at it.  They have enormous reach and if executed properly could be extremely profitable.  That said, they are probably approaching a steady state of users, so how to monetize.

Impossible to value.  Maybe another Google, or Msft, maybe not.
Title: Re: FB-Facebook
Post by: Liberty on August 16, 2012, 11:20:59 AM
Social networks remind me a bit of webmail back in its heyday. Microsoft paid hundreds of millions for Hotmail only to realize that it was hard to monetize because people go there to look at emails, not ads.

If you search for "luxury car" on google and see ads for BMW and Mercedes, that's useful to you because that's what you were looking for. But ads on the side of your social feed on facebook?

Some will argue that they can be very targeted because of all the info that Facebook has on you, but it still doesn't change the fact that you're not looking to buy stuff, and even if you are, there's no clear way to signal that intention like with search. Then that leaves more "branding" type of ads, but those are a lot less valuable and effective, and can easily be ignore because they're not showing something you are looking for at that moment.

Then they'll probably try to keep pushing further the whole "your company needs a strong presence on FB with a brand page", but how valuable is that? Good way to communicate with your customers and remind them about you, but if I'm looking for info on a BMW, will I go to BMW's FB page or to their official website? And even if I go to the FB page, will any info be there? Is the company going to re-build their whole website on a platform they don't control, or just throw you to the existing site with a link? So how much can FB charge for these brand pages?

Then maybe they'd decide to pull a Google and go into search and syndicated ads via an exchange, but what are the chances of success there? Even partnering with Microsoft - who has only lost billions on search and ads so far - would what FB has really be some secret sauce to take search to the next level? Is all the crap that people post on FB really the way to make search better for users or will it just clutter up results with junk? I'm sure advertisers would love better demographics info, but it's the user experience that makes web tools succeed or not.. We'll see.

/thinking out loud

I don't have a horse in this race anymore, though. I made about 25% in GOOG in a month and then sold it to buy something more undervalued... It was luck that it turned out that way, but I still believe GOOG should do well over time, though it isn't nearly as cheap now as it was at 475.
Title: Re: FB-Facebook
Post by: racemize on August 16, 2012, 11:24:48 AM
Social networks remind me a bit of webmail back in its heyday. Microsoft paid hundreds of millions for Hotmail only to realize that it was hard to monetize because people go there to look at emails, not ads.

If you search for "luxury car" on google and see ads for BMW and Mercedes, that's useful to you because that's what you were looking for. But ads on the side of your social feed on facebook?

Some will argue that they can be very targeted because of all the info that Facebook has on you, but it still doesn't change the fact that you're not looking to buy stuff, and even if you are, there's no clear way to signal that intention like with search. Then that leaves more "branding" type of ads, but those are a lot less valuable and effective, and can easily be ignore because they're not showing something you are looking for at that moment.


This has always been my thought on the Google/FB debate.  It seems like there was consensus behind it for a while a year or so ago, but then everyone went crazy for targeting.  I still think intent is the important aspect.
Title: Re: FB-Facebook
Post by: valueInv on August 16, 2012, 11:45:27 AM
Social networks remind me a bit of webmail back in its heyday. Microsoft paid hundreds of millions for Hotmail only to realize that it was hard to monetize because people go there to look at emails, not ads.

If you search for "luxury car" on google and see ads for BMW and Mercedes, that's useful to you because that's what you were looking for. But ads on the side of your social feed on facebook?

Some will argue that they can be very targeted because of all the info that Facebook has on you, but it still doesn't change the fact that you're not looking to buy stuff, and even if you are, there's no clear way to signal that intention like with search. Then that leaves more "branding" type of ads, but those are a lot less valuable and effective, and can easily be ignore because they're not showing something you are looking for at that moment.

Then they'll probably try to keep pushing further the whole "your company needs a strong presence on FB with a brand page", but how valuable is that? Good way to communicate with your customers and remind them about you, but if I'm looking for info on a BMW, will I go to BMW's FB page or to their official website? And even if I go to the FB page, will any info be there? Is the company going to re-build their whole website on a platform they don't control, or just throw you to the existing site with a link? So how much can FB charge for these brand pages?

Then maybe they'd decide to pull a Google and go into search and syndicated ads via an exchange, but what are the chances of success there? Even partnering with Microsoft - who has only lost billions on search and ads so far - would what FB has really be some secret sauce to take search to the next level? Is all the crap that people post on FB really the way to make search better for users or will it just clutter up results with junk? I'm sure advertisers would love better demographics info, but it's the user experience that makes web tools succeed or not.. We'll see.

/thinking out loud

I don't have a horse in this race anymore, though. I made about 25% in GOOG in a month and then sold it to buy something more undervalue...

See, I'm a rock climber but I never have to search on Google for anything regarding rock climbing. However, its listed in my FB profile. When a new gym opened up in my neighborhood, I saw an ad from Facebook and clicked on it.

I'm also a Pink Floyd fan but I don't ever search for anything related to Pink Floyd on Google. Don't have a need to. When Roger Waters was playing in my town, I learned about it through an FB ad. I bought tickets by clicking on the link.

In both cases, my intent was latent.

There's a reason why Google is betting the farm on Google+. If they felt it was not monetizable, they wouldn't be diluting their search results with links from Google+ and risking their core business.
Title: Re: FB-Facebook
Post by: Liberty on August 16, 2012, 11:54:35 AM
See, I'm a rock climber but I never have to search on Google for anything regarding rock climbing. However, its listed in my FB profile. When a new gym opened up in my neighborhood, I saw an ad from Facebook and clicked on it.

I'm also a Pink Floyd fan but I don't ever search for anything related to Pink Floyd on Google. Don't have a need to. When Roger Waters was playing in my town, I learned about it through an FB ad. I bought tickets by clicking on the link.

In both cases, my intent was latent.

There's a reason why Google is betting the farm on Google+. If they felt it was not monetizable, they wouldn't be diluting their search results with links from Google+ and risking their core business.

I never said it's not monetizable, just that it's a lot harder. Neither did I say that demographic info isn't valuable (hence Google+), just that it's only one piece of a very complex puzzle.

Your anecdotal evidence can be countered with other anecdotal evidence (all I see is spammy ads that remind me of Geocities-era banners, and big ad buyers have said recently that they were not satisfied with FB ads). What will matter in the end is how much money FB makes. Maybe they'll figure it out and hit jackpot, we'll see.
Title: Re: FB-Facebook
Post by: valueInv on August 16, 2012, 01:29:15 PM
See, I'm a rock climber but I never have to search on Google for anything regarding rock climbing. However, its listed in my FB profile. When a new gym opened up in my neighborhood, I saw an ad from Facebook and clicked on it.

I'm also a Pink Floyd fan but I don't ever search for anything related to Pink Floyd on Google. Don't have a need to. When Roger Waters was playing in my town, I learned about it through an FB ad. I bought tickets by clicking on the link.

In both cases, my intent was latent.

There's a reason why Google is betting the farm on Google+. If they felt it was not monetizable, they wouldn't be diluting their search results with links from Google+ and risking their core business.

I never said it's not monetizable, just that it's a lot harder. Neither did I say that demographic info isn't valuable (hence Google+), just that it's only one piece of a very complex puzzle.

Your anecdotal evidence can be countered with other anecdotal evidence (all I see is spammy ads that remind me of Geocities-era banners, and big ad buyers have said recently that they were not satisfied with FB ads). What will matter in the end is how much money FB makes. Maybe they'll figure it out and hit jackpot, we'll see.

http://www.inc.com/issie-lapowsky/facebook-ad-campaign-actually-works.html
Title: Re: FB-Facebook
Post by: Liberty on August 16, 2012, 01:38:39 PM
http://www.inc.com/issie-lapowsky/facebook-ad-campaign-actually-works.html

No doubt Facebook's PR people can find a bunch of success stories and point them out to journalists for their PR counter-attack to the bad publicity that was recently generated, but it doesn't change the fundamental difference between social network ads and search ads. What will matter in the end is dollars, and we'll have to wait and see for those.
Title: Re: FB-Facebook
Post by: valueInv on August 16, 2012, 01:54:32 PM
http://www.inc.com/issie-lapowsky/facebook-ad-campaign-actually-works.html

No doubt Facebook's PR people can find a bunch of success stories and point them out to journalists for their PR counter-attack to the bad publicity that was recently generated, but it doesn't change the fundamental difference between social network ads and search ads. What will matter in the end is dollars, and we'll have to wait and see for those.

If you read the article, that what they saying - social ads are different from search ads.

Title: Re: FB-Facebook
Post by: Liberty on August 16, 2012, 02:15:33 PM
If you read the article, that what they saying - social ads are different from search ads.

Which is what I've been saying all along.
Title: Re: FB-Facebook
Post by: VAL9000 on August 16, 2012, 02:28:48 PM
I'm going to suggest that Facebook's ad potential is probably higher than the current capabilities of AdSense, which are a huge moneymaker for Google.  Facebook has the technology, data, and reach to push out ads that are better than Google's AdSense ads because they will be user-oriented instead of content-oriented.  My belief is that media sites are far more likely to generate clicks from Facebook driven ads because the content of those sites is generally uncorrelated with "intent".  Like how candied cereal commercials are aired during children's cartoons.  Nothing in the context of a cartoon indicates that Froot Loops should be advertised (unless the cartoon stars an enthusiastic toucan), but everyone knows that it's a really good idea.

Now I have noticed that many AdSense ads are starting to "follow me around".  e.g. I was evaluating some software and for the next there days I kept seeing banner ads for that software, even here on CoBF.  Pretty cool.  A little creepy but I have accepted it as a fact of the future. 

No position in Facebook but I love when a stock gets hammered for this reason.  I might dip my toe in if it gets really ugly.
Title: Re: FB-Facebook
Post by: Liberty on August 16, 2012, 02:47:43 PM
I'm going to suggest that Facebook's ad potential is probably higher than the current capabilities of AdSense, which are a huge moneymaker for Google.  Facebook has the technology, data, and reach to push out ads that are better than Google's AdSense ads because they will be user-oriented instead of content-oriented.  My belief is that media sites are far more likely to generate clicks from Facebook driven ads because the content of those sites is generally uncorrelated with "intent".  Like how candied cereal commercials are aired during children's cartoons.  Nothing in the context of a cartoon indicates that Froot Loops should be advertised (unless the cartoon stars an enthusiastic toucan), but everyone knows that it's a really good idea.

Now I have noticed that many AdSense ads are starting to "follow me around".  e.g. I was evaluating some software and for the next there days I kept seeing banner ads for that software, even here on CoBF.  Pretty cool.  A little creepy but I have accepted it as a fact of the future. 

No position in Facebook but I love when a stock gets hammered for this reason.  I might dip my toe in if it gets really ugly.

That's pretty much what I think too. Facebook ads will be closer to Adsense than search ads. While Google uses content on the site where you are plus cookies and google profiles to target those ads, Facebook will use its profile info + social graph + cookies from facebook connect and syndicated like buttons.

But IMO, ceteris paribus, both those types of ads provide less value to the user and advertiser than search ads (or adsense ads on more obviously commercial/niche websites, which can attract more 'primed' potential buyers). I never said facebook can't make money or that its ads don't have value, just that they're harder to monetize, in the same way that CTR and conversion on adsense must be lower than on search ads. Facebook has ginormous reach, so they'll obviously make lots of money even if they get less per ad, but how much money that will be, how fast income will grow, and how satisfied its customers will be from their ad buys remains to be seen.
Title: Re: FB-Facebook
Post by: valueInv on August 16, 2012, 04:22:31 PM
If you read the article, that what they saying - social ads are different from search ads.

Which is what I've been saying all along.

Then I assume Facebook PR got to you too  ;)
Title: Re: FB-Facebook
Post by: Liberty on August 16, 2012, 04:45:13 PM
If you read the article, that what they saying - social ads are different from search ads.

Which is what I've been saying all along.

Then I assume Facebook PR got to you too  ;)

You tell me, you seem to know them well ;)
Title: Re: FB - Facebook
Post by: hellsten on August 22, 2012, 06:57:15 AM
http://aswathdamodaran.blogspot.com/2012/08/facebook-face-plant-time-to-friend.html

Quote
In my first post on Facebook this year, right after Facebook filed its financials (S1) with the SEC, I valued Facebook at $28/share (or $70 billion).

With these changes,  my intrinsic value for Facebook with the updated information is $23.94, a drop of just over 10% from my May 2012 estimate.

My conclusion is that Facebook is not quite at the threshold of being a buy yet, but it is getting close. I have a limit buy order for the stock at a price of $18.
Title: Re: FB - Facebook
Post by: rimm_never_sleeps on August 22, 2012, 07:18:55 AM
the professor gets an "incomplete" from Buffett for even attempting to value fb.
Title: Re: FB - Facebook
Post by: zarley on August 22, 2012, 10:03:44 AM
Valuation aside, the parade of share lock-up expirations through the end of the year will probably keep FB down for a while.  I may start looking at it if it's in the mid-low teens in late December (near the tail-end of the lock-up schedule).

Although, with the imbalanced share structure and a management team that seems to resent going/being public and has repeatedly expressed the interest in user experience over profitability, it may not be worth owning at any price.
Title: Re: FB-Facebook
Post by: valueInv on August 30, 2012, 09:57:17 AM
I'm going to suggest that Facebook's ad potential is probably higher than the current capabilities of AdSense, which are a huge moneymaker for Google.  Facebook has the technology, data, and reach to push out ads that are better than Google's AdSense ads because they will be user-oriented instead of content-oriented.  My belief is that media sites are far more likely to generate clicks from Facebook driven ads because the content of those sites is generally uncorrelated with "intent".  Like how candied cereal commercials are aired during children's cartoons.  Nothing in the context of a cartoon indicates that Froot Loops should be advertised (unless the cartoon stars an enthusiastic toucan), but everyone knows that it's a really good idea.

Now I have noticed that many AdSense ads are starting to "follow me around".  e.g. I was evaluating some software and for the next there days I kept seeing banner ads for that software, even here on CoBF.  Pretty cool.  A little creepy but I have accepted it as a fact of the future. 

No position in Facebook but I love when a stock gets hammered for this reason.  I might dip my toe in if it gets really ugly.

That's pretty much what I think too. Facebook ads will be closer to Adsense than search ads. While Google uses content on the site where you are plus cookies and google profiles to target those ads, Facebook will use its profile info + social graph + cookies from facebook connect and syndicated like buttons.

But IMO, ceteris paribus, both those types of ads provide less value to the user and advertiser than search ads (or adsense ads on more obviously commercial/niche websites, which can attract more 'primed' potential buyers). I never said facebook can't make money or that its ads don't have value, just that they're harder to monetize, in the same way that CTR and conversion on adsense must be lower than on search ads. Facebook has ginormous reach, so they'll obviously make lots of money even if they get less per ad, but how much money that will be, how fast income will grow, and how satisfied its customers will be from their ad buys remains to be seen.

http://techcrunch.com/2012/08/30/party-like-its-1990-some-ctrs-on-facebook-sponsored-results-ads-exceeding-3/
Title: Re: FB - Facebook
Post by: Shane on September 04, 2012, 10:20:47 AM
I find the focus on user experience vs profitability a big draw actually.  If FB loses their user base they won't be able to add much value, so in my mind that is the moat and they must do everything to protect it... I don't see anything wrong with sacrificing short term profits to keep their position strong.
Title: Re: FB - Facebook
Post by: Olmsted on September 04, 2012, 02:44:38 PM
An interesting opinion article about the quality of Facebook network connections vs. Twitter network connections:

http://onescotchthreecubes.tumblr.com/post/30841255782/why-twitter-won



Title: Re: FB-Facebook
Post by: valueInv on September 13, 2012, 05:25:02 PM
I'm going to suggest that Facebook's ad potential is probably higher than the current capabilities of AdSense, which are a huge moneymaker for Google.  Facebook has the technology, data, and reach to push out ads that are better than Google's AdSense ads because they will be user-oriented instead of content-oriented.  My belief is that media sites are far more likely to generate clicks from Facebook driven ads because the content of those sites is generally uncorrelated with "intent".  Like how candied cereal commercials are aired during children's cartoons.  Nothing in the context of a cartoon indicates that Froot Loops should be advertised (unless the cartoon stars an enthusiastic toucan), but everyone knows that it's a really good idea.

Now I have noticed that many AdSense ads are starting to "follow me around".  e.g. I was evaluating some software and for the next there days I kept seeing banner ads for that software, even here on CoBF.  Pretty cool.  A little creepy but I have accepted it as a fact of the future. 

No position in Facebook but I love when a stock gets hammered for this reason.  I might dip my toe in if it gets really ugly.

That's pretty much what I think too. Facebook ads will be closer to Adsense than search ads. While Google uses content on the site where you are plus cookies and google profiles to target those ads, Facebook will use its profile info + social graph + cookies from facebook connect and syndicated like buttons.

But IMO, ceteris paribus, both those types of ads provide less value to the user and advertiser than search ads (or adsense ads on more obviously commercial/niche websites, which can attract more 'primed' potential buyers). I never said facebook can't make money or that its ads don't have value, just that they're harder to monetize, in the same way that CTR and conversion on adsense must be lower than on search ads. Facebook has ginormous reach, so they'll obviously make lots of money even if they get less per ad, but how much money that will be, how fast income will grow, and how satisfied its customers will be from their ad buys remains to be seen.

Some new data:

http://techcrunch.com/2012/09/13/facebook-exchange-results/

If you remember from the Google thread, I have long maintained that FB is going to put pressure on Google's ad rates and its growth once it goes IPO and ramps up monetization. I have argued that Google does not have the moat that people think it has.

Well, we are just beginning to test my hypothesis. The next two years will tell if I am right.
Title: Re: FB-Facebook
Post by: moore_capital54 on September 13, 2012, 05:56:46 PM
I'm going to suggest that Facebook's ad potential is probably higher than the current capabilities of AdSense, which are a huge moneymaker for Google.  Facebook has the technology, data, and reach to push out ads that are better than Google's AdSense ads because they will be user-oriented instead of content-oriented.  My belief is that media sites are far more likely to generate clicks from Facebook driven ads because the content of those sites is generally uncorrelated with "intent".  Like how candied cereal commercials are aired during children's cartoons.  Nothing in the context of a cartoon indicates that Froot Loops should be advertised (unless the cartoon stars an enthusiastic toucan), but everyone knows that it's a really good idea.

Now I have noticed that many AdSense ads are starting to "follow me around".  e.g. I was evaluating some software and for the next there days I kept seeing banner ads for that software, even here on CoBF.  Pretty cool.  A little creepy but I have accepted it as a fact of the future. 

No position in Facebook but I love when a stock gets hammered for this reason.  I might dip my toe in if it gets really ugly.

That's pretty much what I think too. Facebook ads will be closer to Adsense than search ads. While Google uses content on the site where you are plus cookies and google profiles to target those ads, Facebook will use its profile info + social graph + cookies from facebook connect and syndicated like buttons.

But IMO, ceteris paribus, both those types of ads provide less value to the user and advertiser than search ads (or adsense ads on more obviously commercial/niche websites, which can attract more 'primed' potential buyers). I never said facebook can't make money or that its ads don't have value, just that they're harder to monetize, in the same way that CTR and conversion on adsense must be lower than on search ads. Facebook has ginormous reach, so they'll obviously make lots of money even if they get less per ad, but how much money that will be, how fast income will grow, and how satisfied its customers will be from their ad buys remains to be seen.

Some new data:

http://techcrunch.com/2012/09/13/facebook-exchange-results/

If you remember from the Google thread, I have long maintained that FB is going to put pressure on Google's ad rates and its growth once it goes IPO and ramps up monetization. I have argued that Google does not have the moat that people think it has.

Well, we are just beginning to test my hypothesis. The next two years will tell if I am right.

I will gladly take the other side of that bet. Being short these frothy social networks has been a saving grace for us this year and has contributed over 12% of our net gain this year. As I said before on this board people don't go on facebook to be served with ads. They go on google to find stuff and quench their knowledge hence ads are relevant and are served to a targeted audience. I am surprised no analysts have mentioned this. People go on facebook to self promote themselves or see what other people are doing with their life.

No matter how efficient this new facebook gimmick is the ad market for facebook will always be much smaller due to the dynamics of the facebook userbase. They are simply disinterested in being served with ads when they are on facebook.
Title: Re: FB-Facebook
Post by: valueInv on September 13, 2012, 10:23:54 PM
As I said before on this board people don't go on facebook to be served with ads. They go on google to find stuff and quench their knowledge hence ads are relevant and are served to a targeted audience. I am surprised no analysts have mentioned this. People go on facebook to self promote themselves or see what other people are doing with their life.

No matter how efficient this new facebook gimmick is the ad market for facebook will always be much smaller due to the dynamics of the facebook userbase. They are simply disinterested in being served with ads when they are on facebook.
I would love to see your research on FB user behavior if you guys are willing to share.

 Also, how do you explain the results of the pilot?
Title: Re: FB-Facebook
Post by: DCG on September 14, 2012, 12:19:03 PM
As I said before on this board people don't go on facebook to be served with ads. They go on google to find stuff and quench their knowledge hence ads are relevant and are served to a targeted audience. I am surprised no analysts have mentioned this. People go on facebook to self promote themselves or see what other people are doing with their life.

What you're not taking into account is the potential for Facebook to greatly increase it's Search functionality and stealing a large amount of traffic away from Google.
Title: Re: FB-Facebook
Post by: LC on September 14, 2012, 12:56:41 PM
As I said before on this board people don't go on facebook to be served with ads. They go on google to find stuff and quench their knowledge hence ads are relevant and are served to a targeted audience. I am surprised no analysts have mentioned this. People go on facebook to self promote themselves or see what other people are doing with their life.

What you're not taking into account is the potential for Facebook to greatly increase it's Search functionality and stealing a large amount of traffic away from Google.
Yes but that is unproven potential which is simply conjecture at this point.

Has facebook WOWed you with their search function, ever?
Title: Re: FB-Facebook
Post by: Liberty on September 14, 2012, 01:11:56 PM
Yes but that is unproven potential which is simply conjecture at this point.

Has facebook WOWed you with their search function, ever?

That's kind of my position too. If they can do it, great for them, but I'll believe it when I see it.

Microsoft has been trying to do search in one form or another for as long as Google (since 1998, MSN search, and then all the rebranded successors) and what they've got for their trouble is billions in losses.

It's kind of like saying that Facebook can just make a smartphone and compete with Apple. Well, if they can, great for them, but I'll believe it when I see it because it's not quite that easy...
Title: Re: FB-Facebook
Post by: valueInv on September 14, 2012, 01:22:38 PM
Yes but that is unproven potential which is simply conjecture at this point.

Has facebook WOWed you with their search function, ever?

That's kind of my position too. If they can do it, great for them, but I'll believe it when I see it.

Microsoft has been trying to do search in one form or another for as long as Google (since 1998, MSN search, and then all the rebranded successors) and what they've got for their trouble is billions in losses.

It's kind of like saying that Facebook can just make a smartphone and compete with Apple. Well, if they can, great for them, but I'll believe it when I see it because it's not quite that easy...

We'll see soon enough:

http://www.wired.com/business/2012/09/mark-zuckerberg-at-disrupt/

It would be next to impossible to out-Google Google or out-Apple Apple. FB is not trying either. They will come out with a different kind of search. Their advantage is not the algorithmic intelligence or the scaled infrastructure. Their advantage is that they have one of the biggest
walled-off datastores in the world.
Title: Re: FB-Facebook
Post by: moore_capital54 on September 14, 2012, 03:04:55 PM
Yes but that is unproven potential which is simply conjecture at this point.

Has facebook WOWed you with their search function, ever?

That's kind of my position too. If they can do it, great for them, but I'll believe it when I see it.

Microsoft has been trying to do search in one form or another for as long as Google (since 1998, MSN search, and then all the rebranded successors) and what they've got for their trouble is billions in losses.

It's kind of like saying that Facebook can just make a smartphone and compete with Apple. Well, if they can, great for them, but I'll believe it when I see it because it's not quite that easy...

We'll see soon enough:

http://www.wired.com/business/2012/09/mark-zuckerberg-at-disrupt/

It would be next to impossible to out-Google Google or out-Apple Apple. FB is not trying either. They will come out with a different kind of search. Their advantage is not the algorithmic intelligence or the scaled infrastructure. Their advantage is that they have one of the biggest
walled-off datastores in the world.

Their repository of data is crap. My daughter likes to post every single thing she does on her FB page, that data is useless as it provides no utility to anybody - at best it brings eyeballs to her profile page. Those eyeballs are served with irrelevant ads. This post here will be indexed and crawled by google, the wealth of knowledge I have just disposed upon the world will be codified and uncovered by a googler a few years from now who will be served with relevant ads likely to be clicked.

That is the difference, the behavior of a facebook user vs. google user will never change.
Title: Re: FB-Facebook
Post by: valueInv on September 14, 2012, 04:25:06 PM
Yes but that is unproven potential which is simply conjecture at this point.

Has facebook WOWed you with their search function, ever?

That's kind of my position too. If they can do it, great for them, but I'll believe it when I see it.

Microsoft has been trying to do search in one form or another for as long as Google (since 1998, MSN search, and then all the rebranded successors) and what they've got for their trouble is billions in losses.

It's kind of like saying that Facebook can just make a smartphone and compete with Apple. Well, if they can, great for them, but I'll believe it when I see it because it's not quite that easy...

We'll see soon enough:

http://www.wired.com/business/2012/09/mark-zuckerberg-at-disrupt/

It would be next to impossible to out-Google Google or out-Apple Apple. FB is not trying either. They will come out with a different kind of search. Their advantage is not the algorithmic intelligence or the scaled infrastructure. Their advantage is that they have one of the biggest
walled-off datastores in the world.

Their repository of data is crap. My daughter likes to post every single thing she does on her FB page, that data is useless as it provides no utility to anybody - at best it brings eyeballs to her profile page. Those eyeballs are served with irrelevant ads. This post here will be indexed and crawled by google, the wealth of knowledge I have just disposed upon the world will be codified and uncovered by a googler a few years from now who will be served with relevant ads likely to be clicked.

That is the difference, the behavior of a facebook user vs. google user will never change.
moore_capital54, don't know if you saw my query - are you willing to share the research on user behavior that you guys did?
Title: Re: FB-Facebook
Post by: moore_capital54 on September 14, 2012, 04:29:13 PM
Yes but that is unproven potential which is simply conjecture at this point.

Has facebook WOWed you with their search function, ever?

That's kind of my position too. If they can do it, great for them, but I'll believe it when I see it.

Microsoft has been trying to do search in one form or another for as long as Google (since 1998, MSN search, and then all the rebranded successors) and what they've got for their trouble is billions in losses.

It's kind of like saying that Facebook can just make a smartphone and compete with Apple. Well, if they can, great for them, but I'll believe it when I see it because it's not quite that easy...

We'll see soon enough:

http://www.wired.com/business/2012/09/mark-zuckerberg-at-disrupt/

It would be next to impossible to out-Google Google or out-Apple Apple. FB is not trying either. They will come out with a different kind of search. Their advantage is not the algorithmic intelligence or the scaled infrastructure. Their advantage is that they have one of the biggest
walled-off datastores in the world.

Their repository of data is crap. My daughter likes to post every single thing she does on her FB page, that data is useless as it provides no utility to anybody - at best it brings eyeballs to her profile page. Those eyeballs are served with irrelevant ads. This post here will be indexed and crawled by google, the wealth of knowledge I have just disposed upon the world will be codified and uncovered by a googler a few years from now who will be served with relevant ads likely to be clicked.

That is the difference, the behavior of a facebook user vs. google user will never change.
moore_capital54, don't know if you saw my query - are you willing to share the research on user behavior that you guys did?

Sorry but no.. most of it is scuttlebutt anyways.
Title: Re: FB - Facebook
Post by: valueInv on September 17, 2012, 09:46:00 PM
More on FB's potential search direction:

http://techcrunch.com/2012/09/16/faceboogle/
Title: Re: FB - Facebook
Post by: DCG on September 18, 2012, 10:03:05 AM
More on FB's potential search direction:

http://techcrunch.com/2012/09/16/faceboogle/

Good article, and that's what I was getting at with my post in the last page.

Facebook has the most valuable collection of consumer data ever collected. If they are able to do so slowly, and in a way that doesn't annoy users, they have enormous potential to further monetize this info.


-I currently have no position in FB.
Title: Re: FB - Facebook
Post by: valueInv on October 10, 2012, 09:26:30 AM
The games that people play:

http://www.bloomberg.com/news/2012-10-10/facebook-fought-sec-to-keep-mobile-risks-hidden-before-ipo-crash.html
Title: Re: FB - Facebook
Post by: kevin4u2 on October 10, 2012, 11:05:44 AM
More on FB's potential search direction:

http://techcrunch.com/2012/09/16/faceboogle/

Good article, and that's what I was getting at with my post in the last page.

Facebook has the most valuable collection of consumer data ever collected. If they are able to do so slowly, and in a way that doesn't annoy users, they have enormous potential to further monetize this info.


-I currently have no position in FB.

More than that, they have 2 billion eye balls to sell advertising to.  Ask any newspaper if they could sell advertising with that kind of exposure levels.
Title: Re: FB - Facebook
Post by: LC on October 10, 2012, 11:28:12 AM
More on FB's potential search direction:

http://techcrunch.com/2012/09/16/faceboogle/

Good article, and that's what I was getting at with my post in the last page.

Facebook has the most valuable collection of consumer data ever collected. If they are able to do so slowly, and in a way that doesn't annoy users, they have enormous potential to further monetize this info.


-I currently have no position in FB.

More than that, they have 2 billion eye balls to sell advertising to.  Ask any newspaper if they could sell advertising with that kind of exposure levels.

Facebook has been in business for over 7 years now, and everything I've heard is that the effectiveness of their advertising is hit-or-miss, at best. I think seven years with little competition is plenty of time to develop and monetize a successful advertising business if it were possible.
Title: Re: FB - Facebook
Post by: valueInv on October 10, 2012, 01:48:15 PM
More on FB's potential search direction:

http://techcrunch.com/2012/09/16/faceboogle/

Good article, and that's what I was getting at with my post in the last page.

Facebook has the most valuable collection of consumer data ever collected. If they are able to do so slowly, and in a way that doesn't annoy users, they have enormous potential to further monetize this info.


-I currently have no position in FB.

More than that, they have 2 billion eye balls to sell advertising to.  Ask any newspaper if they could sell advertising with that kind of exposure levels.

Facebook has been in business for over 7 years now, and everything I've heard is that the effectiveness of their advertising is hit-or-miss, at best. I think seven years with little competition is plenty of time to develop and monetize a successful advertising business if it were possible.

They have focused on user growth and not monetization. Even though more than 40&% of usage is on mobile, they barely started mobile advertising recently
Title: Re: FB - Facebook
Post by: jeffmori7 on October 10, 2012, 02:11:23 PM
And now they are focusing on monetization, because we see a lot more ads using Facebook..and it is really really annoying...it could really deteriorate the product they are offering in my opinion..just saying!
Title: Re: FB - Facebook
Post by: ItsAValueTrap on October 10, 2012, 03:03:34 PM
Facebook has been trying to monetize its product better for a long, long time.  Remember Facebook gifts???

The advertising business model will probably work fine for them.  Right now they are cash flow positive.  Advertisers can track the results of their FB campaigns and know what return on investment they are getting because users can be tracked through cookies (just like Google advertising).

If you look around on affiliate marketing websites (all these guys track their ads and have positive ROI), you can get information on what they think about FB and other sites:
http://justindupre.com/dating-ads-facebook-vs-pof-where-should-i-run/

--------------
On the other hand...
http://www.forbes.com/sites/ryanholiday/2012/05/17/why-i-lost-my-faith-in-facebook-advertising/

Quote
it could really deteriorate the product they are offering in my opinion..just saying!
Facebook does put effort into making sure that its ads are ok.  Many advertisers/marketers bitch about their ad getting rejected.

A lot of scammy things tend to eventually get banned on Facebook.  If Facebook was out to make a quick buck they would not do this.
Title: Re: FB - Facebook
Post by: ItsAValueTrap on October 10, 2012, 03:28:35 PM
Quote
I will gladly take the other side of that bet. Being short these frothy social networks has been a saving grace for us this year and has contributed over 12% of our net gain this year. As I said before on this board people don't go on facebook to be served with ads. They go on google to find stuff and quench their knowledge hence ads are relevant and are served to a targeted audience. I am surprised no analysts have mentioned this. People go on facebook to self promote themselves or see what other people are doing with their life.
I definitely agree with you that these dom-bomb 2.0 stocks should be shorted.  But Facebook is a little different and it may do well in the long run (as long as it doesn't become the next Myspace, Friendster, or ICQ).

- It generates positive free cash flow
- There are advertisers on there with positive ROI.
- Even valueless advertisers make money.  Newspapers, magazines, phone directories, and TV all have advertisers who are wasting their money.  Facebook has a blend between the positive ROI guys and negative ROI guys.  (Google tilts strongly towards positive ROI, Facebook is somewhere in between, traditional media tilts towards negative ROI.)
- Facebook has scale.  This is important because advertisers will spend more time optimizing their ads for sites that drive high-volume.  Some affiliate marketers ONLY deal with Google Adwords for this reason- they just can't be bothered with the smaller fish (Bing, Yahoo, Facebook, Myspace in the past, etc.).  Optimized ad campaigns means that the advertiser has higher ROI --> they can bid more for the same clicks --> more competition --> the biggest sites get more per click than the smaller sites.
You have this very odd dynamic where scale gives a huge boost to profitability.
- In the future, they may monetize traffic better.

Facebook is a great business with a ridiculous valuation.  (IMO, it definitely deserves a lower PE than Google.  Google has a stronger moat and has upside in monetizing gmail, android, and youtube alongside adsense and adwords.)  Whereas many of its dot-bomb 2.0 brethren are not good businesses and do not have positive cash flow or profitability.
Title: Re: FB - Facebook
Post by: valueInv on October 10, 2012, 03:38:19 PM
Quote
I will gladly take the other side of that bet. Being short these frothy social networks has been a saving grace for us this year and has contributed over 12% of our net gain this year. As I said before on this board people don't go on facebook to be served with ads. They go on google to find stuff and quench their knowledge hence ads are relevant and are served to a targeted audience. I am surprised no analysts have mentioned this. People go on facebook to self promote themselves or see what other people are doing with their life.
I definitely agree with you that these dom-bomb 2.0 stocks should be shorted.  But Facebook is a little different and it may do well in the long run (as long as it doesn't become the next Myspace, Friendster, or ICQ).

- It generates positive free cash flow
- There are advertisers on there with positive ROI.
- Even valueless advertisers make money.  Newspapers, magazines, phone directories, and TV all have advertisers who are wasting their money.  Facebook has a blend between the positive ROI guys and negative ROI guys.  (Google tilts strongly towards positive ROI, Facebook is somewhere in between, traditional media tilts towards negative ROI.)
- Facebook has scale.  This is important because advertisers will spend more time optimizing their ads for sites that drive high-volume.  Some affiliate marketers ONLY deal with Google Adwords for this reason- they just can't be bothered with the smaller fish (Bing, Yahoo, Facebook, Myspace in the past, etc.).  Optimized ad campaigns means that the advertiser has higher ROI --> they can bid more for the same clicks --> more competition --> the biggest sites get more per click than the smaller sites.
You have this very odd dynamic where scale gives a huge boost to profitability.
- In the future, they may monetize traffic better.

Facebook is a great business with a ridiculous valuation.  Whereas many of its dot-bomb 2.0 brethren are not good businesses and do not have positive cash flow or profitability.

I would change that slightly. FB has the potential to be a great business. While they have had advertising for a while, most of their ad infrastructure is only now being put into place. They have just launched their ad exchange, retargeting, etc. The early numbers look good but it is far from a proven business. Their old advertising business is going to decline with the switch to mobile. To be successful, they are going to have to evolve new advertising techniques and formats that don't exist today. The problem is so far, they just did what Google did. But what is good for search in not good for social. I think they are learning that and are adapting. They have a lot of data and they have a lot of options. People forget the options part. User do many things on FB - post status, view photos, visit profiles, send messages, like things, play games, so on and on. All these different activities offer different channels of advertising. And Facebook is expanding its options with "verbs".

Now that the stock has tanked, they feel the urgency of monetization. They have to act quickly or they will bleed employees. I'm still waiting for the news that they are expanding their ad sales team in a big way.

Title: Re: FB - Facebook
Post by: ItsAValueTrap on October 10, 2012, 04:15:18 PM
Quote
Their old advertising business is going to decline with the switch to mobile.
I honestly don't think it's that big of a deal.

Smartphone owners will still likely use Facebook on the desktop because the desktop experience is better (larger screen, faster typing, easier to add new friends, etc.).  And there will be ads.  The smartphone experience is complementary. 

The problem with smartphones is that people probably won't buy things on a smartphone.

*I do not own a smartphone and probably won't for a few years.  So I could be talking out of my ass.

Quote
The problem is so far, they just did what Google did.
The monetization is very different between Adsense and Facebook ads.

In Facebook ads you target based on location, age, likes, interests, etc.  Targeting is not very good.

Whereas Google Adsense is doing something new and interesting.  Previously, ads were based on the content of the website.  For some websites that is amazing because sites about web hosting and weight loss will display relevant ads with very high cost-per-click.  But Google is adding a new element.  It is showing you ads based on websites that you have visited before and things that you search.  This may be a FAR better way of targeting ads.  In the past some sites would only display ads with very low cost-per-click... but now these sites may display ads with higher CPC that are actually more relevant to the user.  If Google knows that you're interested in web hosting, then it will display high CPC web hosting ads on sites that have nothing to do with web hosting (e.g. your gmail account).

*I could be wrong though.  This new thing that Google is doing may not be that huge of an improvement over their previous approach.

**At the end of the day, from the perspective of the advertiser/marketing, Facebook and Adwords and Adsense are completely different beasts.  Even Adwords and Bing/Yahoo are different enough that some affiliate marketers don't bother with Bing/Yahoo (the other reason is because Google drives so much more traffic than Bing/Yahoo).  Yes they could copy their ads from Google but sometimes it's not worth the effort for them as the bidding algorithms are different on Bing/Yahoo than Google.  The demographics are also different... Bing/Yahoo has people who are less savvy computer users, many of whom are too lazy to switch their default search or was tricked into installing a toolbar.
Title: Re: FB - Facebook
Post by: ItsAValueTrap on October 10, 2012, 04:37:06 PM
If you really want to understand this stuff, you could go get a $100 Google / Facebook coupon and start advertising yourself.

Start here:
uberaffiliate.com/affiliate-marketing-guide/uber-affiliate-marketing-guide/

*I should point out that the type of affiliate marketing advocated in that guide is morally bankrupt.
Title: Re: FB-Facebook
Post by: valueInv on October 22, 2012, 01:40:31 PM
I'm going to suggest that Facebook's ad potential is probably higher than the current capabilities of AdSense, which are a huge moneymaker for Google.  Facebook has the technology, data, and reach to push out ads that are better than Google's AdSense ads because they will be user-oriented instead of content-oriented.  My belief is that media sites are far more likely to generate clicks from Facebook driven ads because the content of those sites is generally uncorrelated with "intent".  Like how candied cereal commercials are aired during children's cartoons.  Nothing in the context of a cartoon indicates that Froot Loops should be advertised (unless the cartoon stars an enthusiastic toucan), but everyone knows that it's a really good idea.

Now I have noticed that many AdSense ads are starting to "follow me around".  e.g. I was evaluating some software and for the next there days I kept seeing banner ads for that software, even here on CoBF.  Pretty cool.  A little creepy but I have accepted it as a fact of the future. 

No position in Facebook but I love when a stock gets hammered for this reason.  I might dip my toe in if it gets really ugly.

That's pretty much what I think too. Facebook ads will be closer to Adsense than search ads. While Google uses content on the site where you are plus cookies and google profiles to target those ads, Facebook will use its profile info + social graph + cookies from facebook connect and syndicated like buttons.

But IMO, ceteris paribus, both those types of ads provide less value to the user and advertiser than search ads (or adsense ads on more obviously commercial/niche websites, which can attract more 'primed' potential buyers). I never said facebook can't make money or that its ads don't have value, just that they're harder to monetize, in the same way that CTR and conversion on adsense must be lower than on search ads. Facebook has ginormous reach, so they'll obviously make lots of money even if they get less per ad, but how much money that will be, how fast income will grow, and how satisfied its customers will be from their ad buys remains to be seen.

Some new data:

http://techcrunch.com/2012/09/13/facebook-exchange-results/

If you remember from the Google thread, I have long maintained that FB is going to put pressure on Google's ad rates and its growth once it goes IPO and ramps up monetization. I have argued that Google does not have the moat that people think it has.

Well, we are just beginning to test my hypothesis. The next two years will tell if I am right.

http://techcrunch.com/2012/10/22/adobe-online-ad-report-google-cpcs-decline-10-as-facebook-brand-engagement-surges-896-ios-conversion-rates-2x-androids/
Title: Re: FB - Facebook
Post by: ItsAValueTrap on October 22, 2012, 06:42:25 PM
I don't think it makes too much sense to pay attention to cost per click unless you normalize it for other factors.  If Google reported same-keyword CPC then it would be a little more meaningful I would think.

Factors that affect CPC:
- If Google relaxes its ad policies and lets more ads show on search, then CPC will go down.
- mobile versus desktop
etc. etc.

2- Honestly I think that your thesis about Facebook taking away Google's ad customers is so obviously wrong.

a- Clearly Facebook and Google are used for different purposes!!!

b- Most of Google's advertisers measure their ROI.  They can track user clicks to a sale.  As long as their ROI is positive, they will keep advertising.  Sometimes Google makes fundamental changes to how ad bidding works and what ads are allowed/disallowed... this can cause temporary disruptions to advertising (it did one quarter where Google missed estimates).
To a lesser degree, most of Facebook's advertisers measure their ROI.  Though there are a lot of branding campaigns that are likely a waste of money.  This market could theoretically wash away once the social networking hoopla gets tired.  Note that almost all traditional advertising is like this... they often do not/cannot measure ROI.

If you advertise based on ROI, why would you care what Facebook's market share is?  The only time you start to care about Facebook is when you factor your own time into your ROI calculations.  It takes your time to setup ad campaigns.  Right now, many affiliate advertisers completely ignore Facebook because it isn't worth their time.  If Facebook advertising can somehow generate 10-20X the ROI of a Google ad campaign, then this could cut the other way.

c- You do not seem to have any domain knowledge and I would encourage you to learn about online advertising.  $100 Google and FB advertising coupons are easy to get.  Sign up for an account, read online marketing tutorials, etc. etc.

*Long 1 share of Google, not shorting Facebook.
Title: Re: FB - Facebook
Post by: valueInv on October 22, 2012, 11:03:45 PM
I don't think it makes too much sense to pay attention to cost per click unless you normalize it for other factors.  If Google reported same-keyword CPC then it would be a little more meaningful I would think.

Factors that affect CPC:
- If Google relaxes its ad policies and lets more ads show on search, then CPC will go down.
- mobile versus desktop
etc. etc.

2- Honestly I think that your thesis about Facebook taking away Google's ad customers is so obviously wrong.

a- Clearly Facebook and Google are used for different purposes!!!

b- Most of Google's advertisers measure their ROI.  They can track user clicks to a sale.  As long as their ROI is positive, they will keep advertising.  Sometimes Google makes fundamental changes to how ad bidding works and what ads are allowed/disallowed... this can cause temporary disruptions to advertising (it did one quarter where Google missed estimates).
To a lesser degree, most of Facebook's advertisers measure their ROI.  Though there are a lot of branding campaigns that are likely a waste of money.  This market could theoretically wash away once the social networking hoopla gets tired.  Note that almost all traditional advertising is like this... they often do not/cannot measure ROI.

If you advertise based on ROI, why would you care what Facebook's market share is?  The only time you start to care about Facebook is when you factor your own time into your ROI calculations.  It takes your time to setup ad campaigns.  Right now, many affiliate advertisers completely ignore Facebook because it isn't worth their time.  If Facebook advertising can somehow generate 10-20X the ROI of a Google ad campaign, then this could cut the other way.

c- You do not seem to have any domain knowledge and I would encourage you to learn about online advertising.  $100 Google and FB advertising coupons are easy to get.  Sign up for an account, read online marketing tutorials, etc. etc.

*Long 1 share of Google, not shorting Facebook.

1, You assume I don't have domain knowledge
2, You assume that Google does not generate revenues from display advertising.
3, You assume that because ROI is hard to measure, a form of advertising is not valuable. (Take a look at the share of TV advertising for the last 5 years)
4, You assume a difficulty in ROI measurement for FBs future products.
5, You assume that FB's advertising need to generate 10x to 20x ROI of Google for advertisers to switch.
Title: Re: FB - Facebook
Post by: valueInv on October 23, 2012, 01:56:06 PM
Here ya go:

http://techcrunch.com/2012/10/23/wall-streets-happy-facebook-climbs-nearly-10-in-after-hours-trading/
Title: Re: FB - Facebook
Post by: valueInv on October 23, 2012, 01:59:00 PM
BTW, ROI is measured on FB:

"Return on investment for advertisers buying through FBX is so good, that if all of Facebook’s ad inventory were sold with re-targeting, instead of user data targeting, Facebook would be able to charge 3X the price it charges for ads right now.” CPA on FBX is 3x – 6.5x lower compared to other exchanges (Triggit – FBX ad agency)."
Title: Re: FB - Facebook
Post by: ItsAValueTrap on October 23, 2012, 03:53:53 PM
Of course you can measure ROI on any online advertising platform.  You've clearly never advertised online.
Title: Re: FB - Facebook
Post by: valueInv on October 23, 2012, 11:19:32 PM
Well, whaddayya know, ad prices increased 7%:

http://www.bloomberg.com/news/2012-10-24/facebook-shares-soar-after-beating-estimates-on-mobile-gains.html
Title: Broken on Purpose
Post by: tengen on October 26, 2012, 10:04:24 AM
http://observer.com/2012/09/broken-on-purpose/

Author claims that social media deliberately create "broken user experiences" to extract more revenue. In the case of Facebook, it's forcing people with fan pages to pay to reach their fans using "sponsored posts".

Some people are okay with it (http://online.wsj.com/article/SB10001424052702303567704577517673444378762.html)

Some people are not (http://online.wsj.com/article/SB10001424052702303740704577521072755665762.html)
Title: Re: FB - Facebook
Post by: Palantir on November 19, 2012, 07:14:19 AM
I think this deserves a re-look. It seems that they've changed their business model to focus more on retail...
Title: Re: FB - Facebook
Post by: valueInv on November 28, 2012, 04:14:01 PM
Different CPC trend than Google, huh?

http://techcrunch.com/2012/11/28/new-facebook-mobile-ads/
Title: Re: FB - Facebook
Post by: cmattporter on November 28, 2012, 10:36:03 PM
Why is Facebook on COBAF? Isn't this a value forum?

bush-league...
Title: Re: FB - Facebook
Post by: Olmsted on November 29, 2012, 06:20:00 AM
Why is Facebook on COBAF? Isn't this a value forum?

bush-league...

COBAF?
Title: Re: FB - Facebook
Post by: DCG on November 29, 2012, 06:25:00 AM
Why is Facebook on COBAF? Isn't this a value forum?

bush-league...

COBAF?

corner of berkshire and fairfax.

-I think there could be some great long-term value of FB. Don't understand what's wrong with discussing it here. If you think it's overvalued, you can discus it here as a short.
Title: Re: FB - Facebook
Post by: Dazel on November 29, 2012, 06:32:28 AM

I am looking at this....I have looked at the space as I posted a short arguement against Groupon at $20.

For all that are bashing and running...I will give you a real life lesson for me with regards to Google. I am a value investor and immediately dismissed the Google ipo and everything about the company. I had computer genius friends plead with me on the value of the company and it's growth. The numbers were mind boggling. No one could grow that fast! They would be a fad...deflationary etc. Since then they have out $50 billion in cash in the company! I bought Google at $270 during the crash and sold it too early of course...ipo price was $80... now at $670 or somewhere around there. I used it I knew it and I dismissed because I was too lazy to see if it was a value investment...guess what it was.  Munger has said that it has one of the biggest moats around....

Keep in mind I bought Fairfax at $80 and sold at $400... That was value! But it was a gut wrenching hell of a ride!

Why did I not buy the best company in the world and watch it grow? Buffett does this and has for 35 years....

He was buying tv stations and abc etc...when radio was moving to tv...he was paying 4 times revenues...that is what Google trades at now...

Face book's numbers are staggering... I will post on that soon...

The question is...Does Facebook have a lasting moat?

Dazel.
Title: Re: FB - Facebook
Post by: Palantir on November 29, 2012, 07:07:08 AM
Why is Facebook on COBAF? Isn't this a value forum?

bush-league...

Things that aren't traditional "value" plays can also be good investments.
Title: Re: FB - Facebook
Post by: LC on November 29, 2012, 07:35:37 AM
Why is Facebook on COBAF? Isn't this a value forum?

bush-league...

COBAF?

corner of berkshire and fairfax.

-I think there could be some great long-term value of FB. Don't understand what's wrong with discussing it here. If you think it's overvalued, you can discus it here as a short.

It seemed undervalued when it was sub $20/sh, but I (along with presumably many other investors) thought it was too much of a crapshoot. Lesson learned: when everyone has a preconceived notion of a certain business but isn't spilling out facts to back it up, it can be a profitable endeavor to re-evaluate that notion.
Title: Re: FB - Facebook
Post by: racemize on November 29, 2012, 07:43:29 AM
Why is Facebook on COBAF? Isn't this a value forum?

bush-league...

COBAF?

I think it is way too early to make that call.  Let's see where it is in a few years to see if 20 was a good deal.

corner of berkshire and fairfax.

-I think there could be some great long-term value of FB. Don't understand what's wrong with discussing it here. If you think it's overvalued, you can discus it here as a short.

It seemed undervalued when it was sub $20/sh, but I (along with presumably many other investors) thought it was too much of a crapshoot. Lesson learned: when everyone has a preconceived notion of a certain business but isn't spilling out facts to back it up, it can be a profitable endeavor to re-evaluate that notion.

I think it is way too early to make that call.  Let's see if $20/share was a good deal in a few years.
Title: Re: FB - Facebook
Post by: valueInv on November 29, 2012, 07:46:04 AM
Lesson learned: when everyone has a preconceived notion of a certain business but isn't spilling out facts to back it up, it can be a profitable endeavor to re-evaluate that notion.

+1000!!!
Title: Re: FB - Facebook
Post by: Dazel on November 29, 2012, 08:28:18 AM


How much does it cost to get a billion people to put their personal information on your website  and have 40% chance to go on the website today on their desktop...a 70% chance of going on it if they are mobile.

Title: Re: FB - Facebook
Post by: rkbabang on November 29, 2012, 09:22:03 AM
How much does it cost to get a billion people to put their personal information on your website  and have 40% chance to go on the website today on their desktop...a 70% chance of going on it if they are mobile.

It isn't about creating a website or spending money.  Facebook has a moat in the same way Coke does.  After all anyone can create a sugary carbonated beverage, with KO it is about the brand, not the product.  How much money would it take to unseat Coke and build your own soda brand to replace it.  It is almost incalculable.  Facebook's moat is based somewhat on its brand, but more on its user base.  Google created a social network in Google+, which in my opinion is more functional, easier to use and is better in almost every way.  Why then do I still use Facebook and my g+ account sits there unused for months on end?  Because all of my friends and family are on Facebook and can't be bothered to change. As long as "everyone" is there, the moat remains and the more users they accumulate the moat deepens.   You will not lure people away with a website that is a little better.  They would need an overwhelming reason to change. This gives Facebook some room for trying different ways to monetize its users without fear that it will tick them off so much they will leave...within limits, of course.     I haven't looked into FB too much as an investment idea.  Maybe I should have.
Title: Re: FB - Facebook
Post by: Dazel on November 29, 2012, 09:43:20 AM

I think the same thing....family and friends...are you really going to take the effort to move all
Your information? For what?
I like the coke analogy...but I think the more prominent comparisons is Microsoft. We heard for ever that their products sucked...yet they dominated for decades...they would be gone etc...Google would then lose to Microsoft..
Google is trying to on seed Facebook as is myspace etc...my question again is can Facebook be unseeded.
If you are buying now...it is the intrinsic value of the brand you are buying...

I would never have imagined Google being a $225 b market cap....I can imagine Facebook being there...because their size and reach is unmatched by anything I have seen. They have $10b in cash in the bank as well...that helps.

Our culture is now used to being monetized...it is not like it used to be...if the moat remains a 10 year old could monetize it.

The moat is the key.
Dazel.
Title: Re: FB - Facebook
Post by: rkbabang on November 29, 2012, 09:50:47 AM
I like the coke analogy...but I think the more prominent comparisons is Microsoft.
 

Yes Microsoft is a good analogy.  They dominated PC operating systems (because everyone used it, not because the product was all that great) and that continues to this day.  They haven't been able (yet?) to dominate what came next however (tablets, smart phones, etc) and may end up only a minor player in that space.  I think FB will dominate social media, maybe for decades.  They will be a powerhouse until social media is replaced by whatever comes next. 

The moat is the key.

Agreed.
Title: Re: FB - Facebook
Post by: hyten1 on November 29, 2012, 09:59:42 AM
Dazel,

hmmm, monetization is no a trivial thing. i think its harder and harder to monetize.

hy


I think the same thing....family and friends...are you really going to take the effort to move all
Your information? For what?
I like the coke analogy...but I think the more prominent comparisons is Microsoft. We heard for ever that their products sucked...yet they dominated for decades...they would be gone etc...Google would then lose to Microsoft..
Google is trying to on seed Facebook as is myspace etc...my question again is can Facebook be unseeded.
If you are buying now...it is the intrinsic value of the brand you are buying...

I would never have imagined Google being a $225 b market cap....I can imagine Facebook being there...because their size and reach is unmatched by anything I have seen. They have $10b in cash in the bank as well...that helps.

Our culture is now used to being monetized...it is not like it used to be...if the moat remains a 10 year old could monetize it.

The moat is the key.
Dazel.
Title: Re: FB - Facebook
Post by: valueInv on November 29, 2012, 10:28:41 AM
I like the coke analogy...but I think the more prominent comparisons is Microsoft.
 

Yes Microsoft is a good analogy.  They dominated PC operating systems (because everyone used it, not because the product was all that great) and that continues to this day.  They haven't been able (yet?) to dominate what came next however (tablets, smart phones, etc) and may end up only a minor player in that space.  I think FB will dominate social media, maybe for decades.  They will be a powerhouse until social media is replaced by whatever comes next. 

The moat is the key.

Agreed.
FB is a network effects business - the value of the network increases with the square of its size. It would be incredibly difficult to create another social network to displace FB. Take a look at G+'s performance.
Title: Re: FB - Facebook
Post by: king888 on November 29, 2012, 10:56:35 AM
Facebook has very strong moat. No doubt about that.   
But what do you guys think about the new threats ?  The social platform in mobile phone such as Tencent's WeChat (~200 million users)  , NHN's LINE  (~80 million users) .   They might looks like just a mobile chat application at a first glance .But there are a lot more functions resemble to social networking (games , timeline ,etc. )

  I noticed that I spend more time using LINE  than Facebook a few month back. And almost 95% of my friends using it now.  And unlike Facebook, mobile platform is easier to monetize  .

"Our first goal is to exceed Facebook,” said NHN Japan CEO Akira Morikawa. In April, " 

http://emisare.visibli.com/share/f5B8al

http://techcrunch.com/2012/11/19/nhn-line/

http://www.nytimes.com/2012/11/05/technology/chinese-messaging-app-gains-ground-elsewhere.html
Title: Re: FB - Facebook
Post by: Olmsted on November 29, 2012, 11:07:22 AM
I find twitter infinitely more valuable, even LinkedIn.  But I'm just one datapoint.  And it is not clear to me that these services would or could supplant Facebook for most users.

Monetization is what matters.  To make an investment decision here involves 1) estimating growth/atrophy of the user base and then 2) estimating the relative likelihood of several monetization scenarios and seeing what that means to the bottom line.  Number 2 - monetization - is the main driver, the key unknown, and therefore the place to expend the most effort.  Anyone care to start?
Title: Re: FB - Facebook
Post by: Dazel on November 29, 2012, 12:08:35 PM
Search.
They have 1 billion search's a day on their own website...Without a search engine set up. Zuckerberg has pointed this out...I would expect one soon.

Disclosure: we have bought some recently....speculative.
Dazel.
Title: Re: FB - Facebook
Post by: Palantir on November 29, 2012, 01:47:03 PM
I'm long a small position in Facebook. A little less than 5%, with a stop 10% below today's close.
Title: Re: FB - Facebook
Post by: ItsAValueTrap on November 29, 2012, 02:02:34 PM
I don't think Facebook has a strong moat at all.  Look at ICQ and Myspace... they had network effects until they didn't.  Napster is another example, though its downfall is probably related to its legality.  Switching products is really easy.

In regards to Facebook versus Google Search, I think that Google Search has a stronger moat.  I think that with search it is less likely for a disruptive change to occur.  There have been a lot of venture capital and other capital thrown at different approaches to search... I think that what we've figured out that search works best as a combination of techniques:
-Ranking based on links
-Anti-spam/Anti-SEO (this is a very difficult problem as there are several ways to game search engines and anti-spam is far from perfect)
-User behaviour/clickstream
-Spelling corrections, understanding alternate spellings (e.g. if you search for flavour, the search results will also include the alternate spellings, e.g. flavor)
-Refinements to the UI (e.g. highlighting your search term in the results)
etc.

This benefits Google as any search startup will have to duplicate/innovate in ALL of those areas.  It's not like the early days when you were able to dethrone other leading search providers by doing things differently (e.g. Yahoo innovated the directory, Google innovated using links to rank searches).

Facebook on the other hand is not a mature problem.  And to me it's utility is somewhat marginal as some people intentionally delete their Facebook accounts or never start one.  It's not as useful as search, which everybody uses.
Title: Re: FB - Facebook
Post by: ItsAValueTrap on November 29, 2012, 02:05:44 PM
Here is some background information on how online advertising works:
http://glennchan.wordpress.com/2012/09/23/online-advertising-goog-fb-etc/

I don't cover ad retargeting but it may be a huge boon to Google's Adsense network and Facebook's ad network.  Historically, display advertising did not monetize very well.  Ad retargeting could change that dramatically.  (Though I haven't really done my research on that.)
Title: Re: FB - Facebook
Post by: DCG on November 29, 2012, 02:39:41 PM
I don't think Facebook has a strong moat at all.  Look at ICQ and Myspace... they had network effects until they didn't.  Napster is another example, though its downfall is probably related to its legality.  Switching products is really easy.

In regards to Facebook versus Google Search, I think that Google Search has a stronger moat.  I think that with search it is less likely for a disruptive change to occur.  There have been a lot of venture capital and other capital thrown at different approaches to search... I think that what we've figured out that search works best as a combination of techniques:
-Ranking based on links
-Anti-spam/Anti-SEO (this is a very difficult problem as there are several ways to game search engines and anti-spam is far from perfect)
-User behaviour/clickstream
-Spelling corrections, understanding alternate spellings (e.g. if you search for flavour, the search results will also include the alternate spellings, e.g. flavor)
-Refinements to the UI (e.g. highlighting your search term in the results)
etc.

This benefits Google as any search startup will have to duplicate/innovate in ALL of those areas.  It's not like the early days when you were able to dethrone other leading search providers by doing things differently (e.g. Yahoo innovated the directory, Google innovated using links to rank searches).

Facebook on the other hand is not a mature problem.  And to me it's utility is somewhat marginal as some people intentionally delete their Facebook accounts or never start one.  It's not as useful as search, which everybody uses.

Facebook has the ability to build search around people's interests, things people's friends like, and things a lot of people like. This is huge. Google built Goole + specifically for this, but nobody uses it. I recommend reading the first few chapters of the book 'Likable Social Media' for a much more detailed explanation on this.
Title: Re: FB - Facebook
Post by: valueInv on November 29, 2012, 02:44:47 PM
I don't think Facebook has a strong moat at all.  Look at ICQ and Myspace... they had network effects until they didn't.  Napster is another example, though its downfall is probably related to its legality.  Switching products is really easy.

In regards to Facebook versus Google Search, I think that Google Search has a stronger moat.  I think that with search it is less likely for a disruptive change to occur.  There have been a lot of venture capital and other capital thrown at different approaches to search... I think that what we've figured out that search works best as a combination of techniques:
-Ranking based on links
-Anti-spam/Anti-SEO (this is a very difficult problem as there are several ways to game search engines and anti-spam is far from perfect)
-User behaviour/clickstream
-Spelling corrections, understanding alternate spellings (e.g. if you search for flavour, the search results will also include the alternate spellings, e.g. flavor)
-Refinements to the UI (e.g. highlighting your search term in the results)
etc.

This benefits Google as any search startup will have to duplicate/innovate in ALL of those areas.  It's not like the early days when you were able to dethrone other leading search providers by doing things differently (e.g. Yahoo innovated the directory, Google innovated using links to rank searches).

Facebook on the other hand is not a mature problem.  And to me it's utility is somewhat marginal as some people intentionally delete their Facebook accounts or never start one.  It's not as useful as search, which everybody uses.
If you want to "reason by comparison" you should conclude that Google has no moat by looking at Yahoo and Alta Vista.  ;)
Title: Re: FB - Facebook
Post by: Palantir on November 29, 2012, 04:15:49 PM
I disagree with the comments posted above. Facebook is a great product IMO, and I like using it. G+ on the other hand is awkward and weird.
Title: Re: FB - Facebook
Post by: Dazel on November 30, 2012, 06:44:29 AM
http://www.forbes.com/sites/darcytravlos/2012/05/16/facebook-and-the-google-ipo/

Here is comparison of the two companies early days...you can see to my horror what happened at Google when I did not buy it.

I would really like some criticism of it's over valuation etc from the board...I would like to learn more here...even if it is for a pullback years from now. Get as negative as you can please.

 It is a small position and we may exit if it continues to go up so quickly " lucky timing".

Dazel.
Title: Re: FB - Facebook
Post by: Palantir on January 07, 2013, 08:23:01 AM
I bought this at 27.34, primarily as a "momentum" play. Yeah yeah, I know this is a value investing board and that sort of stuff is frowned upon. But I think it is showing strong momentum now, and I think given the quality of the product, the huge user base and subsequent opportunities for synergistic product development, (Facebook retail, facebook phone, facebook search), this could very well become a huge threat to Google.
Title: Re: FB - Facebook
Post by: ItsAValueTrap on January 07, 2013, 09:17:00 AM
Why chase these high multiple growth stocks when there are low multiple growth stocks?

Google, Apple (it may have historically grown faster than Facebook), IBM are some stocks you could look at.  Google and Facebook share a lot of the some advertising base: people (e.g. affiliate marketers... many of them have blogs) who advertise on Google might mess around with Facebook and vice versa.  They are really similar in some ways.

I think that Google's dominance is more durable than Facebook's.  The search engine world is more mature and it's harder to get started and the shakeout has mostly occurred.

Quote
I bought this at 27.34, primarily as a "momentum" play.
The borrow on the Facebook shares could be expensive.  There may be an arbitrage opportunity for you in options or single stock futures.

Quote
Here is comparison of the two companies early days...you can see to my horror what happened at Google when I did not buy it.
In my opinion, hot IPOs are generally a bad place to look for longs... especially if VCs are selling the company.

Secondly, you should ask yourself if it's in your circle of competence.  Have you ever advertised on Google or Facebook?  Get yourself some ad coupons (companies give them away like candy...), an affiliate account, and figure stuff out.  Or read marketers' blogs.

2- Ad retargeting may be a huge boon for Facebook.  It's a much more effective way of delivering relevant ads... it serves you ads based on websites that you've visited before.

Ad retargeting would also be a huge boon for Google's Adsense network (roughly a quarter of Google's revenues) and Youtube.

In the long run, I think that online advertising will be FAR more effective than TV advertising.  An ad served on Youtube will eventually get a higher rate than an ad on TV.  The ability of TV advertisers to target their ads is in the stone age.

*Long 1 share of GOOG, I think Android will kill Apple, I don't have any position in IBM or Berkshire.
Title: Re: FB - Facebook
Post by: Dazel on January 07, 2013, 10:35:26 AM
Sold on the run up...quick profit.

Did not feel right owning it....need to study more...I do not like small positions.

Dazel.
Title: Re: FB - Facebook
Post by: Palantir on January 09, 2013, 10:49:50 AM
Facebook has an event on Jan 15th. I'm hoping for a Facebook phone or new web app/service, to continue my thesis as Facebook becoming a Google Rival.
Title: Re: FB - Facebook
Post by: Palantir on January 15, 2013, 11:03:56 AM
Some kind of Graph Search....I really have no idea what to make of this.
Title: Re: FB - Facebook
Post by: txlaw on January 15, 2013, 11:37:42 AM
http://www.forbes.com/sites/tomiogeron/2013/01/15/live-facebook-announces-graph-search/

And the MSFT/FB love fest continues.
Title: Re: FB - Facebook
Post by: wellmont on January 15, 2013, 12:52:36 PM
I bought this at 27.34, primarily as a "momentum" play. Yeah yeah, I know this is a value investing board and that sort of stuff is frowned upon. But I think it is showing strong momentum now, and I think given the quality of the product, the huge user base and subsequent opportunities for synergistic product development, (Facebook retail, facebook phone, facebook search), this could very well become a huge threat to Google.


and what is the intrinsic value of fb? :)  would definitely not get in the habit of "momentum investing".
Title: Re: FB - Facebook
Post by: Palantir on January 15, 2013, 12:54:33 PM
and what is the intrinsic value of fb? :)  would definitely not get in the habit of "momentum investing".

What does intrinsic value have to do with investing? :)


EDIT: You might be right, I just lost 10% on a different position that I initiated based on "momentum".
Title: Re: FB-Facebook
Post by: valueInv on January 15, 2013, 11:53:08 PM
Yes but that is unproven potential which is simply conjecture at this point.

Has facebook WOWed you with their search function, ever?

That's kind of my position too. If they can do it, great for them, but I'll believe it when I see it.

Microsoft has been trying to do search in one form or another for as long as Google (since 1998, MSN search, and then all the rebranded successors) and what they've got for their trouble is billions in losses.

It's kind of like saying that Facebook can just make a smartphone and compete with Apple. Well, if they can, great for them, but I'll believe it when I see it because it's not quite that easy...

 http://www.wired.com/business/2013/01/the-inside-story-of-graph-search-facebooks-weapon-to-challenge-google/all/

Believing it now? 
Title: Re: FB - Facebook
Post by: valueInv on January 16, 2013, 07:41:18 AM
Finally, WSJ starts to catch on:

http://online.wsj.com/article/SB10001424127887323596204578243552054369798.html
Title: Re: FB - Facebook
Post by: valueInv on January 30, 2013, 01:34:12 PM
I get the game now. You have to do badly to push actually your stock price up:

http://techcrunch.com/2013/01/30/facebooks-q4-revenue-rises-40-to-1-59b-shares-decline-7-percent-in-after-hours/
Title: Re: FB - Facebook
Post by: valueInv on January 30, 2013, 03:33:06 PM
Mobile seems to be gaining momentum:

http://techcrunch.com/2013/01/30/facebook-mobile-app-ad/
Title: Re: FB - Facebook
Post by: Palantir on January 30, 2013, 04:03:39 PM
I'm going to stick with my thesis that there is no way to value this accurately, so just buy it on relative mins. Because it is arguably worth something substantial and with ridiculous potential.

I am long a small position (5%) of my small portfolio.
Title: Re: FB - Facebook
Post by: Palantir on February 05, 2013, 05:23:10 PM
Facebook Doesn't Need A Phone. It Wants Them All

http://www.fastcompany.com/3005329/facebook-doesnt-need-phone-it-wants-them-all

Quote
That's because your phone already is a Facebook phone. Android, Apple, whatever--with a strategy to make Facebook tools the go-to apps for everyday mobile living, the device type doesn't matter.

This strategy is very much in line with what Joel Osteen proposed.

Quote
Smart companies try to commoditize their products' complements.


If you can do this, demand for your product will increase and you will be able to charge more and make more.

When IBM designed the PC architecture, they used off-the-shelf parts instead of custom parts, and they carefully documented the interfaces between the parts in the (revolutionary) IBM-PC Technical Reference Manual. Why? So that other manufacturers could join the party. As long as you match the interface, you can be used in PCs. IBM's goal was to commoditize the add-in market, which is a complement of the PC market, and they did this quite successfully. Within a short time scrillions of companies sprung up offering memory cards, hard drives, graphics cards, printers, etc. Cheap add-ins meant more demand for PCs.

http://www.joelonsoftware.com/articles/StrategyLetterV.html



The goal is to have facebook on every phone, so in the end, the operating system and the browser are no longer as relevant, they are commoditized. Now if FB can find a way to commoditize search, GOOG is going to be hurt.
Title: Re: FB - Facebook
Post by: valueInv on February 05, 2013, 10:01:15 PM
Facebook Doesn't Need A Phone. It Wants Them All

http://www.fastcompany.com/3005329/facebook-doesnt-need-phone-it-wants-them-all

Quote
That's because your phone already is a Facebook phone. Android, Apple, whatever--with a strategy to make Facebook tools the go-to apps for everyday mobile living, the device type doesn't matter.

This strategy is very much in line with what Joel Osteen proposed.

Quote
Smart companies try to commoditize their products' complements.


If you can do this, demand for your product will increase and you will be able to charge more and make more.

When IBM designed the PC architecture, they used off-the-shelf parts instead of custom parts, and they carefully documented the interfaces between the parts in the (revolutionary) IBM-PC Technical Reference Manual. Why? So that other manufacturers could join the party. As long as you match the interface, you can be used in PCs. IBM's goal was to commoditize the add-in market, which is a complement of the PC market, and they did this quite successfully. Within a short time scrillions of companies sprung up offering memory cards, hard drives, graphics cards, printers, etc. Cheap add-ins meant more demand for PCs.

http://www.joelonsoftware.com/articles/StrategyLetterV.html



The goal is to have facebook on every phone, so in the end, the operating system and the browser are no longer as relevant, they are commoditized. Now if FB can find a way to commoditize search, GOOG is going to be hurt.
And they don't need to build operating systems, subsidize devices, build networks, subsidize newspapers, invent driverless cars or map coral reefs to do that. Think about the difference in cost structure.
Title: Re: FB - Facebook
Post by: LC on February 06, 2013, 06:52:46 AM

And they don't need to build operating systems, subsidize devices, build networks, subsidize newspapers, invent driverless cars or map coral reefs to do that. Think about the difference in cost structure.
Yes but Google has generated SO MUCH customer goodwill by doing all this that customers continue to repay them by using Google search.
Title: Re: FB - Facebook
Post by: valueInv on February 06, 2013, 08:06:25 AM

And they don't need to build operating systems, subsidize devices, build networks, subsidize newspapers, invent driverless cars or map coral reefs to do that. Think about the difference in cost structure.
Yes but Google has generated SO MUCH customer goodwill by doing all this that customers continue to repay them by using Google search.
;D
Title: Re: FB - Facebook
Post by: valueInv on March 03, 2013, 11:33:35 PM
FB is slowly building out its ad products:

http://venturebeat.com/2013/02/27/facebooks-new-custom-audiences-tools-for-advertisers-better-package-its-product-thats-you/

Title: Re: FB - Facebook
Post by: bobp on March 04, 2013, 07:03:28 AM
I'm wondering if FB could offer groupon like deals based on your location. Say a restaurant is slow, it could put out a discount offer for the next couple hours or something. As a user I don't want the ads but I might want that. I don't know if most people enable the gps but they might for discounts.
Title: Re: FB - Facebook
Post by: king888 on March 21, 2013, 10:03:20 AM
Facebook Targeted in U.S. as Asian Chat App Line Invades

http://www.bloomberg.com/news/2013-03-21/facebook-targeted-in-u-s-as-asian-chat-app-line-invades.html
Title: Re: FB - Facebook
Post by: valueInv on March 26, 2013, 10:51:31 AM
Piece by piece they're rolling out their ad infrastructure:

http://techcrunch.com/2013/03/26/facebook-exchange-news-fee
Title: Re: FB - Facebook
Post by: valueInv on April 04, 2013, 12:40:30 PM
Another piece:

http://venturebeat.com/2013/04/04/facebook-home-advertisements/
http://pandodaily.com/2013/04/04/facebook-dares-google-to-take-control-of-android-with-home/
Title: Re: FB - Facebook
Post by: Palantir on April 11, 2013, 09:22:18 AM
I'm curious, how many of you own this?

It is 5% of my admittedly small portfolio. Basic thesis-people spend most of their time inside apps, and this is one app that can really be profitable, and become a platform that is layered on top of an operating system. Possibilities are endless here, and my maximum loss is 5%. Can't complain.
Title: Re: FB - Facebook
Post by: Carvel46 on April 11, 2013, 09:38:47 AM
How do you value facebook?
Seems like a story stock to me.
Title: Re: FB - Facebook
Post by: Palantir on April 11, 2013, 09:40:05 AM
I didn't. I'm buying on the expectation that I can sell it to another guy for a higher price. I don't believe it is a story stock, I think the fundamentals are incredible, been using the site since it started.


Title: Re: FB - Facebook
Post by: oddballstocks on April 11, 2013, 09:41:10 AM
I didn't. I'm buying on the expectation that I can sell it to another guy for a higher price. I don't believe it is a story stock, I think the fundamentals are incredible, been using the site since it started.

At least you're honest about it….for your sake I hope a greater fool comes along.
Title: Re: FB - Facebook
Post by: enoch01 on April 11, 2013, 09:45:34 AM
I didn't. I'm buying on the expectation that I can sell it to another guy for a higher price. I don't believe it is a story stock, I think the fundamentals are incredible, been using the site since it started.

I'm sorry, I have to ask: are you serious?
Title: Re: FB - Facebook
Post by: Palantir on April 11, 2013, 09:57:41 AM
Very much so. Why else would someone buy this stock? Intrinsic value?

If you really drill down, Facebook has 8-10B intrinsic value (their cash), every single other asset is totally intangible. It does not make much money, so the business value is pretty minimal. So is the world's most popular websites worth absolutely nothing? I really doubt it.

It doesn't make money, but it's obviously very valuable, but there is no way to value it without making a large set of arbitrary assumptions. I can't see any other rationale than waiting for a greater fool. (my max downside is 5%, which I think is reasonable)
Title: Re: FB - Facebook
Post by: rranjan on April 11, 2013, 09:59:42 AM
I didn't. I'm buying on the expectation that I can sell it to another guy for a higher price. I don't believe it is a story stock, I think the fundamentals are incredible, been using the site since it started.

Unless, I am mistaken, two views in bold seems contradictory to me. Did you mean it has strong user base and real business? That's true for Facebook for sure. To me it seems overpriced based on the fundamental ( current status + conservative future growth). It might do lot better than my expectations and then my current valuations might seem too conservative but I will pass.

Added Later: You typed up last post when I was putting this reply. It clarifies what you meant.
Title: Re: FB - Facebook
Post by: enoch01 on April 11, 2013, 10:02:47 AM
Very much so. Why else would someone buy this stock? Intrinsic value?

If you really drill down, Facebook has 8-10B intrinsic value (their cash), every single other asset is totally intangible. It does not make much money, so the business value is pretty minimal. So is the world's most popular websites worth absolutely nothing? I really doubt it.

It doesn't make money, but it's obviously very valuable, but there is no way to value it without making a large set of arbitrary assumptions. I can't see any other rationale than waiting for a greater fool. (my max downside is 5%, which I think is reasonable)

OK.  Thanks for the explanation.
Title: Re: FB - Facebook
Post by: Palantir on April 11, 2013, 10:39:53 AM
Ok fine, I admit I was exaggerating, it's not only based on selling to a greater fool. I think FB will exceed its expectations. Basically the EV = 40B, I don't think it's unrealistic for this firm's OCF to reach at least 4B in the next few years.


Unless, I am mistaken, two views in bold seems contradictory to me. Did you mean it has strong user base and real business? That's true for Facebook for sure. To me it seems overpriced based on the fundamental ( current status + conservative future growth). It might do lot better than my expectations and then my current valuations might seem too conservative but I will pass.

Added Later: You typed up last post when I was putting this reply. It clarifies what you meant.

I think Facebook occupies really important strategic real estate in mobile (I think Zuck gets that), they're commoditizing operating systems and I think they will start eating into Google's business. I believe it's highly realistic that OCF will expand dramatically.
Title: Re: FB - Facebook
Post by: ItsAValueTrap on April 11, 2013, 10:49:29 AM
Quote
I think they will start eating into Google's business
On the advertising side, Facebook doesn't really compete with Google.

Go learn something about affiliate marketing (just Google it there's lots of blogs with good information), get some Facebook/Google coupons, and you can educate yourself about online advertising.  Of course there are nuances to this.  Some marketers find that Facebook isn't worth their time at all and only run Google ad campaigns... in that sense Facebook "competes".  That is a structural thing where the #1 player gets to make more money per ad than everybody else.

On the content side, Facebook does compete with Google+/Google a little.
Title: Re: FB - Facebook
Post by: DCG on April 11, 2013, 11:19:15 AM
Very much so. Why else would someone buy this stock? Intrinsic value?

If you really drill down, Facebook has 8-10B intrinsic value (their cash), every single other asset is totally intangible.

I disagree. Their value is their users. They have over a billions active monthly users, and have the most valuable set of data for advertisers ever complied.
Title: Re: FB - Facebook
Post by: ItsAValueTrap on April 11, 2013, 11:47:59 AM
I don't think that data is actually all that useful.

Facebook's ad targeting is very mediocre.  Search engine advertising is typically extremely well targeted.  The mesothelioma lawyers can advertise effectively on Google whereas it would be difficult for them to advertise on Facebook (abestos lawsuit-related services generate insane cost per click... apparently you can get several dollars for a single click).  In general, some of Google's searches monetize extremely well because people use Google to research purchasing decisions.  When they search, the ads that are displayed are extremely relevant.  Also, the effectiveness of these ads can be easily tracked since people often buy something the same day they read an ad.  Therefore, advertisers can get very aggressive about bidding a higher CPC for their Google search ads.  Ad display networks like Adsense don't have the same dynamics going for them, so display networks tend to have a much lower CPC and CPM.

Ad retargeting will help Facebook and other display advertisers get more money per ad.

2- A lot of the information on Facebook is wrong.  People will jokingly say that their friends are married to them or related (e.g. their grandchild).  Some people will put in fake ages, etc. etc.
A person's interests/likes and their geographical location can be reliably used to deliver ads though.  It doesn't quite monetize as well as Google's traffic though as far as I can tell.

3- There are a lot of affiliate marketers who blogs on their advertising experiences with Facebook and Google.  You can learn a lot from them.
Title: Re: FB - Facebook
Post by: hyten1 on April 11, 2013, 11:54:25 AM
what FB is banking on (this is also the promise of facebook, this is also one of the promise of the internet since it began), is they can use their data to target better and get better return for (compare to all the other advertising channel other there) advertiser

however this has not been shown to be true yet

i use to work for yahoo's ad tech division (yahoo HAD TONS of data on users from ALL different channel/sites)

having ALL those data is one thing, using them effectively is another

i have not read anything (doesn't mean it doesn't exist) that FB is doing that will translate those data to something that will provide better targeting and generate better return. they recently acquired atlas from msft's. I can be pretty sure atlas doesn't hold an advantage against many other ad tech other there.

so far the  best has been search ad

the promise is:

lots of and better (is it better?, whats better than credit card transaction data, i always wonder why don't the V/MA/DFS do something with those) data --> better return for advertiser

this has not been shown to be true yet, and this is not a trivial task to solve. all the big boys are trying to shove it (yahoo, google, msft, etc)

if FB cannot achieve this, they are not much different than many LARGE website on the internet. of course maybe there are other rev stream they can build/tap/create, but that has not been shown to be the case either.

its a wait and see
Title: Re: FB - Facebook
Post by: ItsAValueTrap on April 11, 2013, 12:05:21 PM
Isn't Facebook highly profitable as it currently stands?  Once you take out the stock-based compensation (which was "paid" in the past but only expensed now)... Facebook has nice profits.

I don't think that Facebook will monetize as well as search.  But it doesn't have to.  And if it ever does monetize as well as search... the Facebook longs will make a killing.
Title: Re: FB - Facebook
Post by: hyten1 on April 11, 2013, 12:08:35 PM
highly profitable is relative

i think they are over value considering what they "currently" earn

but then again, look at amzn :)

its all the potential promise of the future
Title: Re: FB - Facebook
Post by: hyten1 on April 11, 2013, 12:13:57 PM
i remember back when FB ipo

at that time the number was 100bil

also at that time BAC was like 50bil

some people i knew were very excited about the FB ipo at the time.

i ask them which would you pick

BAC + 50bil

or

FB (which the rumor was valuation was 100bil)

which would you take? i took BAC

some people i knew didn't
Title: Re: FB - Facebook
Post by: ItsAValueTrap on April 11, 2013, 12:18:47 PM
Sorry I wasn't clear.

I meant highly profitable relative to their revenue and relative to invested capital.  I'm sure a lot of folks understand that return on invested capital is very important and I believe Facebook does very well in that regard.

I do agree that the valuation is a little high.  A great business can still be overvalued... or turn into the next Myspace.
Title: Re: FB - Facebook
Post by: PlanMaestro on April 19, 2013, 03:06:54 PM
http://www.vanityfair.com/business/2013/05/facebook-future-mark-zuckerberg-sheryl-sandberg
Title: Re: FB - Facebook
Post by: wellmont on May 06, 2013, 08:29:12 AM
why are facebook commercials so un-watchable?

http://www.dailymail.co.uk/news/article-2310257/Mark-Zuckerberg-stars-cringe-worthy-Facebook-Home-ads--lambasted-awful-critics.html
Title: Re: FB - Facebook
Post by: wellmont on May 13, 2013, 03:54:37 PM
Is this the next Microsoft Kin?

Jon Erlichman ‏@JonErlichman 5m
Will AT&T stop selling the HTC 'Facebook Phone'? http://www.bloomberg.com/news/2013-05-13/at-t-considers-dropping-htc-facebook-phone-on-tepid-sales.html … via @BloombergNews
 View summary   Reply  Retweet  Favorite   More
Title: Re: FB - Facebook
Post by: valueInv on May 17, 2013, 11:09:08 AM
As I have been saying:

http://online.wsj.com/article/SB10001424127887323582904578487103239166448.html
Title: Re: FB - Facebook
Post by: wellmont on May 20, 2013, 07:37:18 AM
Facebook is "crappy"?

http://www.telegraph.co.uk/finance/markets/10063498/Rupert-Murdoch-warns-Facebook-faces-same-fate-as-MySpace.html
Title: Re: FB - Facebook
Post by: Liberty on June 03, 2013, 06:26:31 PM
https://medium.com/a-programmers-tale/f7b8c66109ea

https://news.ycombinator.com/item?id=5811564

Posting this because it's good food for thought, not saying I necessarily agree or disagree with it all.
Title: Re: FB - Facebook
Post by: no_free_lunch on June 03, 2013, 06:37:34 PM
Liberty,

Quote
If I scrolled down I can find 4 stories I actually care about, from a list of about 30.

That is pretty good signal to noise in my opinion.  :)   More importantly, I think that most of his arguments were just as relevant 5 years ago so why now?
Title: Re: FB - Facebook
Post by: HJ on June 03, 2013, 07:13:56 PM
Liberty,

Quote
If I scrolled down I can find 4 stories I actually care about, from a list of about 30.

That is pretty good signal to noise in my opinion.  :)   More importantly, I think that most of his arguments were just as relevant 5 years ago so why now?

I don't have a strong view on this thing one way or another, but I think one thing different today from 5 years ago is that everybody's pretty much all experienced it today vs. 5 years ago, when there are plenty of people who have yet to enjoy the thrill of reconnecting with long lost friends, and communicating with them in a new way.  The movie did wonders to drive activities, I think.  Now we find out how "faddish" this activity really is, or not. 



Title: Re: FB - Facebook
Post by: wellmont on June 03, 2013, 09:47:59 PM
big story today on BGR: facebook is for old people.
Title: Re: FB - Facebook
Post by: valueInv on June 03, 2013, 10:42:41 PM
big story today on BGR: facebook is for old people.

You mean, the kind that have money to spend?
Title: Re: FB - Facebook
Post by: wellmont on June 04, 2013, 06:23:50 AM
big story today on BGR: facebook is for old people.

You mean, the kind that have money to spend?

they will simply move on the next cool thing, after their kids find it. :)
Title: Re: FB - Facebook
Post by: valueInv on June 04, 2013, 07:02:46 AM
big story today on BGR: facebook is for old people.

You mean, the kind that have money to spend?

they will simply move on the next cool thing, after their kids find it. :)

Yeah, I heard a lot of them are using Bang With Friends now. ;)
Title: Re: FB - Facebook
Post by: wellmont on June 04, 2013, 04:10:39 PM
this is not exactly the best capital allocation.

http://techcrunch.com/2013/06/04/zynga-shuts-down-omgpop-one-year-after-acquiring-it-for-200m/

to put this in perspective, Buffett for years bought companies in this price range that spit off $15m of fcf in year 1 that tended to grow at least as fast as inflation over the years.
Title: Re: FB - Facebook
Post by: wellmont on June 23, 2013, 05:19:06 PM
oops.

http://www.nytimes.com/2013/06/22/business/facebook-says-technical-flaw-exposed-6-million-users.html?_r=0
Title: Re: FB - Facebook
Post by: valueInv on July 02, 2013, 12:51:52 PM
Hellooooo Youtube:

http://venturebeat.com/2013/07/02/instagram-video-shows-the-right-way-to-make-a-big-product-shift/
Title: Re: FB - Facebook
Post by: valueInv on July 24, 2013, 01:26:39 PM
http://techcrunch.com/2013/07/24/facebook-q2-earnings-beats-with-1-81b-in-revenue-up-53-mobile-hits-41-of-ad-revenue/

Up 14% afterhours. Doesn't seem to be a problem monetizing mobile here.
Title: Re: FB - Facebook
Post by: Palantir on July 25, 2013, 06:47:46 AM
I. Sold. Too. early.  :'(
Title: Re: FB - Facebook
Post by: valueInv on July 25, 2013, 07:55:25 AM
Still hold mine. Hope to hold for a loooong time.
Title: Re: FB - Facebook
Post by: valueInv on July 26, 2013, 08:13:42 AM
big story today on BGR: facebook is for old people.

Big story today: Facebook is also for advertisers:

http://online.wsj.com/article/SB10001424127887323971204578628252225861688.html

Stock up almost 30% yesterday.
Title: Re: FB - Facebook
Post by: DCG on July 26, 2013, 09:17:41 AM
Now at 748x earnings.
Title: Re: FB - Facebook
Post by: ItsAValueTrap on July 26, 2013, 11:16:21 AM
They actually make a lot more money than that.  You need to get past the funky accounting.

If they make $1.4B in profit/year, then the P/E is 59.  It's high but not that high.

There are dubious Web 2.0 companies out there... I don't think that Facebook is one of them.  Facebook is a very serious advertising platform and the company generates a lot of value for its advertisers.  The ads work.
Title: Re: FB - Facebook
Post by: LC on July 26, 2013, 11:48:18 AM
There are dubious Web 2.0 companies out there... I don't think that Facebook is one of them.  Facebook is a very serious advertising platform and the company generates a lot of value for its advertisers.  The ads work.
My girlfriend (digital ad analyst) says otherwise...and that FB does not treat their clients (i.e. advertisers) well.

Regardless, I have no idea if FB is here to stay or if it will eventually go the way of myspace. Not my cup of tea!
Title: Re: FB - Facebook
Post by: wellmont on July 26, 2013, 11:53:17 AM
Regardless, I have no idea if FB is here to stay or if it will eventually go the way of myspace. Not my cup of tea!

congrats. you get an A from Buffett in his valuation classroom. Anybody trying to value this flunks. :)
Title: Re: FB - Facebook
Post by: ItsAValueTrap on July 26, 2013, 12:11:22 PM
Quote
My girlfriend (digital ad analyst) says otherwise...and that FB does not treat their clients (i.e. advertisers) well.

When I look on Facebook, I see a lot of people tracking their results.  These guys presumably measure their ROI and are making a profit from Facebook advertising.  It's not like the early days of Internet advertising and banner ads where it took a while for advertisers to figure out their ROI was negative.

Quote
Regardless, I have no idea if FB is here to stay or if it will eventually go the way of myspace.
Yeah I don't know either!
Title: Re: FB - Facebook
Post by: collegeinvestor on July 26, 2013, 12:11:39 PM
The earnings yield on this stock does not compensate for the risk taken by owning this company at current prices. Where is the book value? How much could they sell Facebook to another large tech company?
Title: Re: FB - Facebook
Post by: Palantir on July 26, 2013, 12:27:23 PM
The earnings yield on this stock does not compensate for the risk taken by owning this company at current prices. Where is the book value? How much could they sell Facebook to another large tech company?

How do you know the EY does not compensate for the risk? How do you quantify the risk? Why is book value relevant?

I think it's here to stay. Myspace and FB are apples and oranges. Then again, it's hard for me to remember what the internet was like before Facebook. :)
Title: Re: FB - Facebook
Post by: wellmont on July 26, 2013, 12:32:47 PM
I think it's here to stay. Myspace and FB are apples and oranges. Then again, it's hard for me to remember what the internet was like before Facebook. :)

ruppert murdoch bet hundreds of millions of $$ that myspace was "here to stay". Unfortunately he got involved in a business that changes rapidly and is impossible to predict more than 24mo out.
Title: Re: FB - Facebook
Post by: valueInv on July 26, 2013, 12:51:53 PM
I think it's here to stay. Myspace and FB are apples and oranges. Then again, it's hard for me to remember what the internet was like before Facebook. :)

ruppert murdoch bet hundreds of millions of $$ that myspace was "here to stay". Unfortunately he got involved in a business that changes rapidly and is impossible to predict more than 24mo out.

Or maybe News Corp mismanagement ran MySpace to the ground.
Title: Re: FB - Facebook
Post by: LC on July 26, 2013, 01:29:54 PM
The earnings yield on this stock does not compensate for the risk taken by owning this company at current prices. Where is the book value? How much could they sell Facebook to another large tech company?

How do you know the EY does not compensate for the risk? How do you quantify the risk? Why is book value relevant?

I think it's here to stay. Myspace and FB are apples and oranges. Then again, it's hard for me to remember what the internet was like before Facebook. :)

Why do you think it's here to stay? I honestly would love to be convinced. I think Facebook, as the hub for online social interaction, would be a great investment if it could be monetized without degrading quality. As long as it is the "hub", it has value. Determining whether it will remain the hub in 20 years is a very difficult question to answer, so if you have some compelling reasons I would love to hear them.
Title: Re: FB - Facebook
Post by: Palantir on July 26, 2013, 05:28:42 PM
Primarily because:

Title: Re: FB - Facebook
Post by: wellmont on July 26, 2013, 06:09:26 PM
Primarily because:

  • It is a good product that people like using, the interface is clean, smooth, and functional.
  • The content on there is interesting - staying in contact with your friends, stalking photos of gir....
  • It is useful, and a substantial upgrade in doing things, useful for everyday life, useful for advertising, etc.
  • There are strong network effects, one cannot simply start up a rival social network and expect it to work.
  • More subtly, it is a platform rather than a product, if a new, interesting product emerges, they can absorb it by plugging into the platform.
  • It is addictive. :)

how do you think about valuation? thanks.
Title: Re: FB - Facebook
Post by: valueInv on July 26, 2013, 08:08:30 PM
Primarily because:

  • It is a good product that people like using, the interface is clean, smooth, and functional.
  • The content on there is interesting - staying in contact with your friends, stalking photos of gir....
  • It is useful, and a substantial upgrade in doing things, useful for everyday life, useful for advertising, etc.
  • There are strong network effects, one cannot simply start up a rival social network and expect it to work.
  • More subtly, it is a platform rather than a product, if a new, interesting product emerges, they can absorb it by plugging into the platform.
  • It is addictive. :)

how do you think about valuation? thanks.

If you answer that question you get an F from Buffet :D
Title: Re: FB - Facebook
Post by: wellmont on July 26, 2013, 08:20:31 PM
If you answer that question you get an F from Buffet :D

 ;D
Title: Re: FB - Facebook
Post by: RichardGibbons on July 26, 2013, 09:56:13 PM
If you answer that question you get an F from Buffet :D

A more constructive way to answer, if you feel this way, is to say what you think is wrong with the answer, or perhaps give your own answer, since you own the stock.
Title: Re: FB - Facebook
Post by: oddballstocks on July 26, 2013, 10:07:49 PM
Primarily because:

  • It is a good product that people like using, the interface is clean, smooth, and functional.
  • The content on there is interesting - staying in contact with your friends, stalking photos of gir....
  • It is useful, and a substantial upgrade in doing things, useful for everyday life, useful for advertising, etc.
  • There are strong network effects, one cannot simply start up a rival social network and expect it to work.
  • More subtly, it is a platform rather than a product, if a new, interesting product emerges, they can absorb it by plugging into the platform.
  • It is addictive. :)

I'm not convinced.  I remember MySpace being the panacea, that was the *new* thing and it was huge, before that was Friendster.

MySpace proved that you don't need a great interface to get users, that site was ugly, and it let users make it uglier, and they did!

Facebook has two things going for it:
1) The network effect
2) The platform

The Facebook platform is mostly dead, I'd HIGHLY suggest you read this: http://pandodaily.com/2013/07/23/move-fast-break-things-the-sad-story-of-platform-facebooks-gigantic-missed-opportunity/

The last thing developers want is an API that's in constant flux, and the last thing a business wants that's attached to Facebook is a company that's constantly shifting direction and going back on their word.

The network effect appears to be strong still going off numbers.  Personally Facebook was interesting when I joined in 2007, there was a novelty to finding high school friends and seeing what they were doing at the time.  The novelty wore off, and suddenly I was reading status updates from people who apparently had no filters on what they said and shared deep/odd thoughts with the world.

I also started seeing a TON of kid pictures.  Now I have my own kids, and I believe my wife posts a lot of pictures of them, but that's a wife/grandma thing, relatives eat those up.  The kids I care about are friends kids that I see in person.  I'm not that interested in seeing pictures of kids who's parents I haven't seen for 15 years.  A family picture is nice to see they're doing well, but daily updates with pictures is too much.

In short I just stopped using the site, I go on maybe once every few months to look at some pictures a cousin posted.  I've noticed something, that most of the guys I was friends with stopped posting as well, it's mainly become a women/kids site.  A lot of people I knew on there quit altogether.

Maybe Facebook is a stage of life thing, I can see teenagers and college age students enjoying it, but as one ages it becomes less relevant unless they're a mother or grandmother.

As someone who's been on the internet WAY too long starting with Gopher and then Mosaic, I can say that these mega sites come and go.  Back in the 1990s it was unfathomable to think that AOL would be an after thought, or Altavista, or Lycos, or....
Title: Re: FB - Facebook
Post by: valueInv on July 26, 2013, 10:27:38 PM
If you answer that question you get an F from Buffet :D

A more constructive way to answer, if you feel this way, is to say what you think is wrong with the answer, or perhaps give your own answer, since you own the stock.

I would be have to give a constructive answer if people are willing to have a constructive conversation. Comparing Facebook to MySpace because they are social networks is like comparing Berkshire to Bear Stearns because they're both financials.

BTW, my comment is in response to a similar comment by Wellmont.
Title: Re: FB - Facebook
Post by: Palantir on July 26, 2013, 10:59:15 PM
- I don't think about valuation, my point was about "why facebook is here to stay".

- Have any of you ever used myspace? Friendster? I mean actually used it day to day? People keep bringing up Myspace, but I see little or no connection between the two. Full disclosure, I'm not old enough to remember Friendster. I started using FB when I went to college in 05. I have used Orkut and Xanga, but those got eaten by FB. Furthermore, Facebook is not a "new" thing anymore, it's nearing 10 years of existence and has a huge, global user base.

- That article about Facebook Platform doesn't relate to my point. When I say Facebook is a "platform", I don't mean it in the sense of a software platform for developers. I mean as a multifunctional, generalized medium that can absorb a more specific, niche product or application. Think of how iPad is a general purpose tablet that can be used for a range of different tasks whereas Nook is not.
Title: Re: FB - Facebook
Post by: LC on July 26, 2013, 11:24:57 PM
Used myspace and facebook...the main features of the platform are the same. You have your personal page, where you upload photos/videos/etc. and where people post. Facebook certainly improved upon it with a cleaner interface and additional features (poking, apps, etc.).

Remember, what initially drew people to facebook was the exclusivity. Only college kids could access it. It's not like the platform you see today is what made it widespread.

In fact, I fear they will eventually spread themselves too thin, eventually the "kids" stop using it, management kills the purity of it by "maximizing revenue", and it fades. I don't see where it will be in 10 years. I have no idea how to value it even today, or within a five-year time frame. Maybe it's a good trade, if you think earnings will grow in the next year or two. I'm not sure I define that as a sound investment, though. Definitely not within a value-investing framework in my opinion.

That does not mean it won't make you money!
Title: Re: FB - Facebook
Post by: Martian on July 27, 2013, 04:43:29 PM
I think it's here to stay. Myspace and FB are apples and oranges. Then again, it's hard for me to remember what the internet was like before Facebook. :)

ruppert murdoch bet hundreds of millions of $$ that myspace was "here to stay". Unfortunately he got involved in a business that changes rapidly and is impossible to predict more than 24mo out.

Interesting article on myspace.

http://www.lonelyvalue.com/2011/06/myspace-cautionary-tale.html

"The dirty little not-so secret is that MySpace was never much of a business.  Just because lots of people use something online doesn't mean there are profits to be had.  Hello, Pandora (P)!

But few things are as powerful as the fear of being left behind.  And this includes media executives.  I remember those bygone days when you did not exist if you were not ON MySpace.  Sound familiar?

Yes, I'm going to mention the F-word... Facebook."


Title: Re: FB - Facebook
Post by: ItsAValueTrap on July 27, 2013, 05:09:37 PM
Facebook differs from Myspace in an important way:

Facebook makes a lot of money.  Its accounting is a little weird as it hides Facebook's profits, but it has some serious cash flow.  Both Facebook and Google sells advertising that works.

Not every Web 2.0 company out there is pure hype.  Some of them have actual cash flow.....
Title: Re: FB - Facebook
Post by: wellmont on July 27, 2013, 05:33:20 PM

Interesting article on myspace.

http://www.lonelyvalue.com/2011/06/myspace-cautionary-tale.html

"The dirty little not-so secret is that MySpace was never much of a business.  Just because lots of people use something online doesn't mean there are profits to be had.  Hello, Pandora (P)!

But few things are as powerful as the fear of being left behind.  And this includes media executives.  I remember those bygone days when you did not exist if you were not ON MySpace.  Sound familiar?

Yes, I'm going to mention the F-word... Facebook."

a money making business can lose it's audience or it's customers as quickly and as a surely as a business that doesn't make money or never made money. aol made a lot of money in it's day. murdoch believed tying MS to his properties would make it profitable. So the point, in my view, really isn't that FB makes money; and MS never did. the trick is what's going to happen down the road? I maintain the answer to that is still "up in the air".
Title: Re: FB - Facebook
Post by: LC on July 27, 2013, 06:21:14 PM
I think the question you have to answer (if you want to invest in facebook) is, "what is the intrinsic value of facebook?" Haven't really seen anyone put a number on that...
Title: Re: FB - Facebook
Post by: ItsAValueTrap on July 27, 2013, 09:25:27 PM
I think that you can value Facebook relative to Google.

1- Facebook and Google have some overlap in customers.  Many of Facebook's advertisers probably also advertise on Google.  I'm seen the same ad retargeting stuff on both Facebook and Google.
*There are still some differences in their customers.
**Facebook is more like Google's Adsense than Adwords.  Most of Google's revenue derives from Adwords.  Adsense has more upside from new advances in monetization like ad retargeting.

2- Google is more likely to be around in 10/20 years, in my opinion.

For this reason, Google deserves a higher multiple.  I'm not into pair trading but it could be reasonable to short Facebook and go long Google.
Title: Re: FB - Facebook
Post by: bargainman on July 27, 2013, 11:13:47 PM
I think the question you have to answer (if you want to invest in facebook) is, "what is the intrinsic value of facebook?" Haven't really seen anyone put a number on that...

Well, you can't put a number on it.  You could put a very wide range on it though with a wide probability distribution. 
Title: Re: FB - Facebook
Post by: kevin4u2 on July 28, 2013, 08:42:37 AM
I think the question you have to answer (if you want to invest in facebook) is, "what is the intrinsic value of facebook?" Haven't really seen anyone put a number on that...

Well, you can't put a number on it.  You could put a very wide range on it though with a wide probability distribution.

I disagree that you can't put a number on it.  Every single person puts a number on it or makes the decision to ignore it (the too hard pile).  The market definitely puts a collective number on it. 

As for attempting to determine intrinsic value, here are my thoughts.  I would determine it the same way as a newspaper, TV station, or any other advertising method.  FB has 1 billion users, and that is approximately 2 billion eyeballs.  Advertisers sell based on readership and viewers.  Make some assumptions adjust for cost structure and you can determine an approximation.  I would add that the unique feature of FB is that its users create all the content so they are unique (GOOG is similar, although they pay for content).

Once the approximation is made I would discount it for a few reasons, but the most important question is the probability that FB will be around in 10 years.  Apply that probability, buy at a discount and rinse and repeat.  That is value investing. 

Where most value investors will break down on FB is on that last step, the probability of the company will be around in 10 years.  Their confidence will like be very low and thus assign a low probability, or simply avoid it all together.  The greater the confidence the more solid the investment.  I would love to apply a high probability because FB has huge potential.  No other media company can offer customized advertising to a viewership of over a billion people.  That fact keeps me an interested follower of the company. 

With that said, why are pages after pages and post after post on this forum about tech companies?  I believe the answer is two fold.  First, some investors "believe" they have special knowledge and thus can assign a high confidence probability to the success of tech companies.  Secondly, the spirited debates are a result of a wide probability range and thus making the determination of IV very difficult.  The key takeaway for me is when debates become too long it's likely time to pass on that investment and look for something easier to value.  FB included, IMO.
Title: Re: FB - Facebook
Post by: bargainman on July 28, 2013, 07:20:47 PM
I think the question you have to answer (if you want to invest in facebook) is, "what is the intrinsic value of facebook?" Haven't really seen anyone put a number on that...

Well, you can't put a number on it.  You could put a very wide range on it though with a wide probability distribution.

I disagree that you can't put a number on it.  Every single person puts a number on it or makes the decision to ignore it (the too hard pile).  The market definitely puts a collective number on it. 

...
Secondly, the spirited debates are a result of a wide probability range and thus making the determination of IV very difficult.  The key takeaway for me is when debates become too long it's likely time to pass on that investment and look for something easier to value.  FB included, IMO.

Well first you say you think you can put a number on it, then you say there's a wide probability range.  I think the two are mutually exclusive.  We can argue semantics, but some argue there's a single number with a 'likeliness that number is correct' attached to it (or a 'risk rating').  Others say there are a range of numbers each with some probability.  The fact that you can change your discount rate and get massively different numbers means there isn't a 'real number' for any intrinsic value number.  All of this is an inexact process, since by definition there are too many variables.  That's why value desires a margin of safety, since your number could be wrong.  But I agree with your second point..  There are too many unknowables in a stock like FB.  It's not a stock that can be easily valued.
Title: Re: FB - Facebook
Post by: Palantir on July 28, 2013, 07:27:13 PM
Kevin - Say you assume the firm will be here in ten years. What's your valuation? Interested in seeing what number you'd put on it.
Title: Re: FB - Facebook
Post by: valueInv on July 31, 2013, 09:17:28 AM
And they continue to roll out new ad formats:

http://www.bloomberg.com/news/2013-07-30/facebook-said-to-plan-to-sell-tv-style-ads-for-2-5m-each.html
Title: Re: FB - Facebook
Post by: APG12 on July 31, 2013, 02:02:09 PM
I think that you can value Facebook relative to Google.

1- Facebook and Google have some overlap in customers.  Many of Facebook's advertisers probably also advertise on Google.  I'm seen the same ad retargeting stuff on both Facebook and Google.
*There are still some differences in their customers.
**Facebook is more like Google's Adsense than Adwords.  Most of Google's revenue derives from Adwords.  Adsense has more upside from new advances in monetization like ad retargeting.

2- Google is more likely to be around in 10/20 years, in my opinion.

For this reason, Google deserves a higher multiple.  I'm not into pair trading but it could be reasonable to short Facebook and go long Google.

Hmmm, this seems dangerous to me for reasons other than short term price fluctuations. A multiple is an implied DCF divided by earnings meaning that the growth rate of the earnings is going to have an enormous impact on the correct multiple for a company (along with discount rate and time the company is in operation). Pair trading based primarily upon only one of the variables seems like a big no-no in this situation! Both companies are very high growth which only exacerbates the problem.
Title: Re: FB - Facebook
Post by: fareastwarriors on August 12, 2013, 01:44:47 PM
http://www.bloomberg.com/news/2013-08-12/facebook-s-sandberg-sells-91-million-in-shares-amid-stock-surge.html (http://www.bloomberg.com/news/2013-08-12/facebook-s-sandberg-sells-91-million-in-shares-amid-stock-surge.html)



.Facebook’s Sandberg Sells $91 Million in Shares After Surge
Title: Re: FB - Facebook
Post by: valueInv on August 12, 2013, 10:39:59 PM
And they keep adding, piece by piece:

http://gigaom.com/2013/08/12/with-restaurant-reservations-tv-movie-listings-facebook-wants-to-influence-offline-spending/
Title: Re: FB - Facebook
Post by: fareastwarriors on August 26, 2013, 08:28:14 AM
http://www.bloomberg.com/news/2013-08-26/facebook-market-value-tops-100-billion-amid-mobile-ad-push.html (http://www.bloomberg.com/news/2013-08-26/facebook-market-value-tops-100-billion-amid-mobile-ad-push.html)

Facebook Market Value Tops $100 Billion Amid Mobile Ad Push
Title: Re: FB - Facebook
Post by: Palantir on August 26, 2013, 09:09:24 AM
I can't believe I sold so early. I've been touting this stock to everybody. God I hate myself.

Lesson learned: Ignore volatility.
Title: Re: FB - Facebook
Post by: valueInv on September 07, 2013, 08:47:43 AM
The power of Facebook:

http://venturebeat.com/2013/08/12/pinterest-google-versus-facebook/
Title: Re: FB - Facebook
Post by: valueInv on September 09, 2013, 01:12:51 PM
And so begins the first steps towards monetizing Instagram:

http://online.wsj.com/article/SB10001424127887324577304579059230069305894.html
http://abcnews.go.com/Technology/instagram-start-experimenting-advertising/story?id=20200884
Title: Re: FB - Facebook
Post by: stylized_fact on September 21, 2013, 04:43:18 PM
Never short on valuation is an important tenet of successful investing, but is Facebook perhaps better thought of as a fad/craze similar to crocs?  I'm sure the possibility is not lost on management, hence the acquisition of Instagram.  Similar moves are bound to be part of their future.

https://twitter.com/DJRotaryRachel/status/380836251860869120
http://www.thestreet.com/story/12043406/1/the-beginning-of-the-end-for-facebook.html
Title: Re: FB - Facebook
Post by: ItsAValueTrap on September 21, 2013, 08:03:31 PM
Quote
but is Facebook perhaps better thought of as a fad/craze similar to crocs
Both Facebook and Crocs have very strong cash flow relative to their book value.  They have very high returns on capital....  with Crocs, pre-tax ROIC is somewhere around 30%.  Crocs has a lot less hype now, but they are pretty profitable now whereas in the past they were losing money or just breaking even.

Facebook has a reputation for being an overhyped stock but it actually makes a lot of money.  If you back out the odd accounting relating to stock-based compensation, you will see that Facebook has very high returns on capital.  Have you read Facebook's 10-K?  What's your opinion?

Title: Re: FB - Facebook
Post by: stylized_fact on September 21, 2013, 11:02:34 PM
Facebook has a reputation for being an overhyped stock but it actually makes a lot of money.  If you back out the odd accounting relating to stock-based compensation, you will see that Facebook has very high returns on capital.  Have you read Facebook's 10-K?  What's your opinion?

No, I haven't read their filings in detail, but would like to understand their equity compensation a bit more.

Facebook is hard for me to understand for all the reasons people bring up.  I became interested recently when my wife cut back her Facebook usage.  She has grown tired of wading through brag posts from peripheral connections, yearns for a renewal of activity from people she really cares about,
and no longer feels novelty from the process of reconnecting with old acquaintances (that ran its course a while ago).  She also tells me that the ads she gets are completely ineffective and sometimes offensive (truly wasteful campaigns).  It's just one data point, from their core North American demographic.  Like most guys, I stopped regular use a few years back.

It surprises me that Facebook hasn't done more to drive engagement by casting themselves in a similar vein to how Buffett describes community newspapers.  I feel like Twitter acts more as a community newspaper substitute.

Zuck is obviously a real gearhead.  Not who I'd want to have running a "social" company.
Title: Re: FB - Facebook
Post by: valueInv on September 22, 2013, 08:43:33 AM
Facebook has a reputation for being an overhyped stock but it actually makes a lot of money.  If you back out the odd accounting relating to stock-based compensation, you will see that Facebook has very high returns on capital.  Have you read Facebook's 10-K?  What's your opinion?

No, I haven't read their filings in detail, but would like to understand their equity compensation a bit more.

Facebook is hard for me to understand for all the reasons people bring up.  I became interested recently when my wife cut back her Facebook usage.  She has grown tired of wading through brag posts from peripheral connections, yearns for a renewal of activity from people she really cares about,
and no longer feels novelty from the process of reconnecting with old acquaintances (that ran its course a while ago).  She also tells me that the ads she gets are completely ineffective and sometimes offensive (truly wasteful campaigns).  It's just one data point, from their core North American demographic.  Like most guys, I stopped regular use a few years back.

It surprises me that Facebook hasn't done more to drive engagement by casting themselves in a similar vein to how Buffett describes community newspapers.  I feel like Twitter acts more as a community newspaper substitute.

Zuck is obviously a real gearhead.  Not who I'd want to have running a "social" company.

Think of Facebook like a telephone network. The novelty wore off a long time ago but people still use it to keep in touch with each other .
Title: Re: FB - Facebook
Post by: ItsAValueTrap on September 22, 2013, 10:49:54 AM
Quote
She also tells me that the ads she gets are completely ineffective and sometimes offensive (truly wasteful campaigns).

I don't think that their traffic monetizes very well compared to search.  With search:
a- People type in the product/service that they are looking to buy.  If somebody is looking for an abestos lawyer, Google will pick up on that and be able to show relevant ads.  (Abestos lawyers are massively profitable ads for Google... the clicks are worth 10-100X other clicks.)  Facebook has no way of doing that; it has no way of knowing that its users have that specific need.
b- Google gets the timing right.  People search for particular products/services when they need to research their purchasing decision.  Facebook can't show ads when a user is in a buying mood for a particular interest.
Facebook can track likes, so that advertisers can target ads based on a user's interests.  But it doesn't know when somebody is looking to purchase something related to that particular interest and not the other interests listed on their Facebook profile.

All this is ok.  Facebook is highly profitable anyways.  Some of this could be related to the hype around social networking.  If you look back in history, Yahoo had a lot of revenue from ad banners because of the hype surrounding the Internet.  Later on, we found out that ad banners aren't that effective.  Facebook is a little different in that many (though not all) of their advertisers run campaigns which they can track to a sale.  Any ad for a dating website will be tracked to a sale, whereas an ad for a car won't be because most people don't buy cars online.

2- There's something called ad retargeting now, where ads follow you around.  This should be more effective than the traditional approach of advertising on Facebook.  However, you won't see ads for competing companies so it's not quite as good as search.  If you are looking for the cheapest place to buy XYZ online, you want to see the ads for a wide range of companies... not just the one or two companies whose website you visited.

Anyways, advances like these will help Facebook monetize its ads better.  I have no idea what the future will hold in terms of advances in this area, but it's probably only upside for Facebook.
Title: Re: FB - Facebook
Post by: valueInv on October 01, 2013, 01:18:56 PM
Quote
She also tells me that the ads she gets are completely ineffective and sometimes offensive (truly wasteful campaigns).

I don't think that their traffic monetizes very well compared to search.  With search:
a- People type in the product/service that they are looking to buy.  If somebody is looking for an abestos lawyer, Google will pick up on that and be able to show relevant ads.  (Abestos lawyers are massively profitable ads for Google... the clicks are worth 10-100X other clicks.)  Facebook has no way of doing that; it has no way of knowing that its users have that specific need.


It does if you posted about asbestos on FB. I would also know that you're a Katy Perry fan before you even searched for her on Google.
Title: Re: FB - Facebook
Post by: valueInv on October 01, 2013, 01:20:40 PM
And the march continues:

http://techcrunch.com/2013/09/26/facebook-starts-up-its-mobile-ad-network-again-focuses-on-improved-targeting/

http://techcrunch.com/2013/09/30/graph-search-posts/

Very interesting:

http://techcrunch.com/2013/10/01/facebook-mobile-app-ads-calls-to-action/
Title: Re: FB - Facebook
Post by: valueInv on October 30, 2013, 03:20:10 PM
The earnings are out:

http://www.bloomberg.com/news/2013-10-30/facebook-sales-top-estimates-amid-mobile-ad-expansion.html

On people quitting Facebook:
http://techcrunch.com/2013/10/30/nearly-half-48-of-daily-users-of-facebook-are-now-mobile-only-says-ceo-zuckerberg/
http://techcrunch.com/2013/10/30/facebook-teens-drop/
Title: Re: FB - Facebook
Post by: valueInv on November 04, 2013, 10:39:05 PM
On the potential of Instagram:

http://gigaom.com/2013/10/28/instagram-ads-and-the-future-of-brand-advertising/
Title: Re: FB - Facebook
Post by: fareastwarriors on November 13, 2013, 12:26:00 PM
crazy...


Snapchat Spurned $3 Billion Acquisition Offer from Facebook

http://blogs.wsj.com/digits/2013/11/13/snapchat-spurned-3-billion-acquisition-offer-from-facebook/?mod=WSJ_hps_LEFTTopStories (http://blogs.wsj.com/digits/2013/11/13/snapchat-spurned-3-billion-acquisition-offer-from-facebook/?mod=WSJ_hps_LEFTTopStories)
Title: Re: FB - Facebook
Post by: wellmont on November 13, 2013, 01:03:48 PM
I guess they had a lot of success with the last zero revenue business they bought for $1b.
Title: Re: FB - Facebook
Post by: valueInv on November 13, 2013, 01:38:04 PM
I guess they had a lot of success with the last zero revenue business they bought for $1b.

They have just started monetizing. So guess what the revenues will be.
Title: Re: FB - Facebook
Post by: Myth465 on November 13, 2013, 02:39:50 PM
I dont like these billion dollar defensive acquisitions....
Title: Re: FB - Facebook
Post by: jschembs on November 13, 2013, 03:34:40 PM
Difficult to tell whether folks are sarcastic or not, but I don't see how returning a #DIV/0! in the value conclusion generates shareholder value for Facebook.

Does it not seem inevitable that each new cohort of teenagers will view Facebook as uncool, making it important for Facebook to acquire the latest and greatest teen fad every few years to maintain user growth?

On an awkwardly related note, did anyone else catch David Ebersman's comment during an earnings conference call: "We remain close to fully penetrated among teens in the U.S."?
Title: Re: FB - Facebook
Post by: Myth465 on November 13, 2013, 04:05:54 PM
"We remain close to fully penetrated among teens in the U.S."?

Man thats awkward.
Title: Re: FB - Facebook
Post by: DCG on November 13, 2013, 04:24:51 PM
FB's developers could probably replicate Snapchat in a couple months. I don't understand that offer either.
Title: Re: FB - Facebook
Post by: valueInv on November 13, 2013, 04:28:22 PM
FB's developers could probably replicate Snapchat in a couple months. I don't understand that offer either.

They tried and failed to get traction. While I don't understand the monetization model of Snapchat, Instagram seems to
be showing a lot of potential.
Title: Re: FB - Facebook
Post by: hellsten on November 26, 2013, 11:57:00 PM
FB's developers could probably replicate Snapchat in a couple months. I don't understand that offer either.

They built it in 12 days:
http://techcrunch.com/2013/03/08/facebook-snapchat/

The Snapchat and Instagram offers tell us something about Facebook's moat and what Zuckerberg thinks of it. It also tells us something about the capital allocation skills of Zuckerberg and what the participants in this game think Facebook's stock is worth. Zuckerberg must be desperate to give away $3 billion in cash instead of equity, but I'm sure the reported cash offer is incorrect. The current startup and venture capitalist religion tells them to buy users at any price. That's a bubble if you ask me. Not as bad as in the 1990s when all you needed was an idea, but still a bubble.
Title: Re: FB - Facebook
Post by: fareastwarriors on December 11, 2013, 04:51:17 PM
Facebook: Ready for Its Big S&P 500 Debut


http://www.businessweek.com/articles/2013-11-07/facebook-ready-for-its-big-s-and-p-500-debut (http://www.businessweek.com/articles/2013-11-07/facebook-ready-for-its-big-s-and-p-500-debut)
Title: Re: FB - Facebook
Post by: valueInv on December 19, 2013, 11:11:25 PM
FB will hit #2:

http://venturebeat.com/2013/12/19/facebook-becomes-the-worlds-2-online-seller-of-online-ads/
Title: Re: FB - Facebook
Post by: yadayada on December 27, 2013, 09:57:33 PM
http://www.theguardian.com/technology/2013/dec/27/facebook-dead-and-buried-to-teens-research-finds
what would be a way to profit from a falling valuation of facebook? Current valuation seems completly insane to me, but I dont like outright shorting it.
Title: Re: FB - Facebook
Post by: Orange on December 28, 2013, 12:20:52 AM
http://www.theguardian.com/technology/2013/dec/27/facebook-dead-and-buried-to-teens-research-finds
what would be a way to profit from a falling valuation of facebook? Current valuation seems completly insane to me, but I dont like outright shorting it.

Obviously there's puts, but they aren't particularly cheap, relatively speaking, considering the vix is at 12.

I'd rather buy puts right after the bubble pops-when everything is down 20% and starting to fall apart. Dat reflexivity doe.
Title: Re: FB - Facebook
Post by: valueInv on December 29, 2013, 05:19:24 PM
http://feedproxy.google.com/~r/Techcrunch/~3/i_jPc02CiM0/
Title: Re: FB - Facebook
Post by: valueInv on December 30, 2013, 09:27:22 AM
big story today on BGR: facebook is for old people.

You mean, the kind that have money to spend?

they will simply move on the next cool thing, after their kids find it. :)

Or not:
http://feedproxy.google.com/~r/Techcrunch/~3/savSjZuUY5E/
Title: Re: FB - Facebook
Post by: valueInv on December 30, 2013, 09:31:48 AM
http://www.theguardian.com/technology/2013/dec/27/facebook-dead-and-buried-to-teens-research-finds
what would be a way to profit from a falling valuation of facebook? Current valuation seems completly insane to me, but I dont like outright shorting it.

As I've said before, don't rely too much on articles you read on the Interwebs:

http://gigaom.com/2013/12/30/facebook-is-dead-and-buried-or-what-happens-when-academic-research-goes-viral/
Title: Re: FB - Facebook
Post by: wellmont on December 30, 2013, 09:37:20 AM
it's weird the stock is rising in the face of this

http://jezebel.com/teens-loathe-facebook-because-of-all-the-old-people-and-1490814972
Title: Re: FB - Facebook
Post by: valueInv on December 30, 2013, 10:40:52 AM
it's weird the stock is rising in the face of this

http://jezebel.com/teens-loathe-facebook-because-of-all-the-old-people-and-1490814972

Read before you post:
 

http://gigaom.com/2013/12/30/facebook-is-dead-and-buried-or-what-happens-when-academic-research-goes-viral/
Title: Re: FB - Facebook
Post by: valueInv on December 30, 2013, 10:43:59 AM
big story today on BGR: facebook is for old people.

You mean, the kind that have money to spend?

they will simply move on the next cool thing, after their kids find it. :)

Or not:
http://feedproxy.google.com/~r/Techcrunch/~3/savSjZuUY5E/

More info:

http://pandodaily.com.feedsportal.com/c/35141/f/650422/s/355815ce/sc/38/l/0Lpando0N0C20A130C120C30A0Cmore0Eadults0Euse0Esocial0Enetworks0Ethan0Eever0Ebefore0Eespecially0Efacebook0C/story01.htm
Title: Re: FB - Facebook
Post by: Buckeye on December 30, 2013, 12:29:43 PM
So you give a link to an article that reinforces your view of the expanding user base of Facebook, two posts after you write "As I've said before, don't rely too much on articles you read on the Interwebs"  I am confused valueInv.   Should I, or should I not rely on the articles I read on the web?
Title: Re: FB - Facebook
Post by: yadayada on December 30, 2013, 12:48:51 PM
their income still needs to go up about 100%+ to make the current valuation reasonable tho.

I supose its like disney, they will just eat up every competitor.
Title: Re: FB - Facebook
Post by: valueInv on December 30, 2013, 12:50:12 PM
So you give a link to an article that reinforces your view of the expanding user base of Facebook, two posts after you write "As I've said before, don't rely too much on articles you read on the Interwebs"  I am confused valueInv.   Should I, or should I not rely on the articles I read on the web?

I said "rely too much".   I use a meta-analysis. If multiple studies conducted by different organizations using different methods on different sample sets reach the same conclusion, there is a high probability that that conclusion reflects reality.

What do you think reflects reality more- a study from Pew or a retracted article about incomplete research?
Title: Re: FB - Facebook
Post by: valueInv on December 30, 2013, 12:55:52 PM
their income still needs to go up about 100%+ to make the current valuation reasonable tho.

I supose its like disney, they will just eat up every competitor.

I doubt they will eat up very other competitor.

Facebook still has a lot of unmonetized inventory (including all of Instagram). To monetize it, they need to switch on ad placement and then hire a sales force to go out and sell it. The former can be done quickly but the latter takes time to expand geographically.

Even if teens are leaving FB, the rate at which FB can increase monetization is likely to be much higher than the attrition of users. Further, there is little to support the conclusion that if teenagers leave FB, adults will too.
Title: Re: FB - Facebook
Post by: yadayada on December 30, 2013, 01:28:00 PM
i think adblocking will rapidly increase tho. New generations of computer savvy people. You use adblock, and you  have basicly zero adds. Would be interesting to see the stats on that.

Hmm this is interesting:
http://downloads.pagefair.com/reports/the_rise_of_adblocking.pdf

I supose tho that the target group for advertising isnt computer savvy for the most part.
Title: Re: FB - Facebook
Post by: valueInv on December 30, 2013, 01:42:02 PM
i think adblocking will rapidly increase tho. New generations of computer savvy people. You use adblock, and you  have basicly zero adds. Would be interesting to see the stats on that.

Hmm this is interesting:
http://downloads.pagefair.com/reports/the_rise_of_adblocking.pdf

I supose tho that the target group for advertising isnt computer savvy for the most part.

How do you install an adblocker into the FB mobile app?

Who does ad locking hurt the most - FB or Google?

Check their browser projections for adblocking.
Title: Re: FB - Facebook
Post by: yadayada on December 30, 2013, 02:02:30 PM
nono i was talking about their other assets like instagram.
Title: Re: FB - Facebook
Post by: valueInv on December 30, 2013, 02:17:30 PM
nono i was talking about their other assets like instagram.

Again, most of its traffic comes from a mobile app.

FB also is far along the transition to mobile apps.
Title: Re: FB - Facebook
Post by: wellmont on January 03, 2014, 09:51:56 AM
I guess "private messages" was somewhat of a misnomer?

Two Facebook users are taking the company to court over claims it mines private messages for data that is then sold to third parties.

http://money.cnn.com/2014/01/03/technology/facebook-privacy-lawsuit/
Title: Re: FB - Facebook
Post by: valueInv on January 05, 2014, 06:20:41 PM
Interesting presentation on how FB views itself:

http://www.youtube.com/watch?v=R2kkaDMAJmA
Title: Re: FB - Facebook
Post by: wellmont on January 07, 2014, 08:31:55 AM
facebook seems to even keep stuff you delete.

http://www.4-traders.com/FACEBOOK-INC-10547141/news/Facebook-Inc--Facebook-denies-collecting-users-unpublished-posts-and-comments-17752885/
Title: Re: FB - Facebook
Post by: valueInv on January 07, 2014, 08:34:36 AM
facebook seems to even keep stuff you delete.

http://www.4-traders.com/FACEBOOK-INC-10547141/news/Facebook-Inc--Facebook-denies-collecting-users-unpublished-posts-and-comments-17752885/

I guess you won't be posting selfies anymore?  :-*
Title: Re: FB - Facebook
Post by: wellmont on January 15, 2014, 06:11:16 PM
young people seem to be getting tired of facebook.

http://news.investors.com/technology/011514-686594-facebook-users-fall-with-teens-college-students.htm
Title: Re: FB - Facebook
Post by: valueInv on January 15, 2014, 06:21:25 PM
young people seem to be getting tired of facebook.

http://news.investors.com/technology/011514-686594-facebook-users-fall-with-teens-college-students.htm

But they certainly are not getting tired of you being wrong. ;)
Title: Re: FB - Facebook
Post by: DCG on January 16, 2014, 06:39:09 AM
Facebook has over 1.3 billion active monthly users, but that article is noting losing under 7 million users over the course of 3 years?


This site (http://www.statisticbrain.com/facebook-statistics/) even notes that there are likely 81 million face Facebook accounts. Not sure I understand the significance over a report over 7 million users.
Title: Re: FB - Facebook
Post by: valueInv on January 16, 2014, 10:34:07 PM
young people seem to be getting tired of facebook.

http://news.investors.com/technology/011514-686594-facebook-users-fall-with-teens-college-students.htm

Thats great news for FB! The people who don't have money are leaving and the ones who do are coming in:

http://venturebeat.com/2014/01/16/teens-abandoning-facebook-yet-the-world-survives/

This means FB now has a cherry picked audience for advertisers.

Funny that the first article left out the interesting details on the report. Maybe it was written by a teenage reporter?
Title: Re: FB - Facebook
Post by: beerbaron on January 17, 2014, 06:04:14 PM
Thats great news for FB! The people who don't have money are leaving and the ones who do are coming in:

The value of a social network comes from the network. The comment you made above is highly biased. If teens are leaving that is a horrible news because they are setting the trend, will buy more online than their counterpart and go somewhere else, hence bringing the advertisers elsewhere.

On another subject, wasn't Facebook supposed to be the advertiser of choice because of more precise advertising. Well here is an example of the ads that show up in my profile. It looks like the random crap I would find on thepiratebay.

BeerBaron
Title: Re: FB - Facebook
Post by: valueInv on January 17, 2014, 07:08:32 PM
Thats great news for FB! The people who don't have money are leaving and the ones who do are coming in:

The value of a social network comes from the network. The comment you made above is highly biased. If teens are leaving that is a horrible news because they are setting the trend, will buy more online than their counterpart and go somewhere else, hence bringing the advertisers elsewhere.

On another subject, wasn't Facebook supposed to be the advertiser of choice because of more precise advertising. Well here is an example of the ads that show up in my profile. It looks like the random crap I would find on thepiratebay.

BeerBaron

Set the trend for whom?

Who buys more - a 16 year old or a 40 year old?

On the advertising question- I never click on Google ads, can I assume that everyone else also never clicks on those ads?

There have been several studies on the efficacy of FB ads. You'll see links on this thread.

Now you can argue that they are biased - created to drum up business. But then why is advertising spend on FB increasing at 40% a year? Do you not think that advertisers measure the ROI on their FB ad spend?
Title: Re: FB - Facebook
Post by: beerbaron on January 17, 2014, 07:51:15 PM
Having half the phones connected together is not better than having all of them connected together, spin it how you want but it's quite straightforward.

As for their targeted ads, well, let's just say there lots of room for improvement.

I am agnostic to FB, if it meet's investor's expectations fine. If it does not I'm fine with it too.

I won't add to this conversation because I don't like to flame forums.

Regards
BeerBaron
Title: Re: FB - Facebook
Post by: valueInv on January 17, 2014, 09:35:37 PM
Having half the phones connected together is not better than having all of them connected together, spin it how you want but it's quite straightforward.

In that case:

http://thenextweb.com/facebook/2013/10/30/facebook-passes-1-19-billion-monthly-active-users-874-million-mobile-users-728-million-daily-users/#!sv4Ke


As for their targeted ads, well, let's just say there lots of room for improvement.

I agree. And as they improve their ads from here, so will their competitive position and earnings.
Title: Re: FB - Facebook
Post by: valueInv on January 21, 2014, 09:56:50 AM
http://gigaom.com/2014/01/21/report-teens-love-instagram-but-arent-abandoning-facebook/

they're leaving, oh no they're not, they're leaving, oh no they're not, they're leaving, oh no they're not......
Title: Re: FB - Facebook
Post by: tombgrt on January 22, 2014, 07:49:56 AM
ValueInv, what is your opinion of FB's current valuation? At $120 per user you have to wonder how they are going to get there. Would love to hear your take on this.
Title: Re: FB - Facebook
Post by: valueInv on January 22, 2014, 10:28:14 PM
ValueInv, what is your opinion of FB's current valuation? At $120 per user you have to wonder how they are going to get there. Would love to hear your take on this.

Yes, they are very expensive. I bought a small position at $27 and I doubt I'm going to lose money on this. I consider this an immature business and a speculative stock. While I will continue to hold in the short term, I wouldn't buy at $57.

They have one of the most valuable assets on the web. The key will be how they monetize this. They have a lot of options and they have the team that is capable of monetizing successfully. A big game changer will occur if they successfully use the social graph to create a big business other than advertising like social commerce, gifting,  a new form of gaming, paid content, etc. In that scenario, they can be easily worth $120 per user or more.
But with just advertising, it is going to be difficult.

Also, consider Instagram which is growing quickly and is not yet monetized.
Title: Re: FB - Facebook
Post by: valueInv on January 22, 2014, 10:30:01 PM
They continue the process of building their advertising business:

http://techcrunch.com/2014/01/22/facebook-mobile-targeting/
Title: Re: FB - Facebook
Post by: valueInv on January 23, 2014, 10:10:02 PM
Another one:

http://gigaom.com/2014/01/23/will-disease-like-facebook-lose-80-percent-of-users-by-2017-dont-make-me-laugh/
Title: Re: FB - Facebook
Post by: ItsAValueTrap on January 23, 2014, 10:29:55 PM
I think Facebook is doing a pretty good job at monetizing the platform.  Affiliate marketers love Facebook because it makes a lot of money for them.  Facebook advertising works.  Affiliate marketers love Google even more.  You can go to uberaffiliate.com and understand their clients' perspective.

Twitter is crap, Instagram is crap.

Quote
At $120 per user you have to wonder how they are going to get there.
Seems reasonable to me as long as Facebook continues to maintain or increase its traffic/popularity.  Facebook has cash flows that support the current valuation.
Title: Re: FB - Facebook
Post by: valueInv on January 29, 2014, 11:34:57 AM
Interest to compare the CPC trends at Google and Facebook:

http://venturebeat.com/2014/01/29/facebook-ads-cost-per-impression-up-186-cost-per-click-up-35-revenue-per-click-up-83/
Title: Re: FB - Facebook
Post by: valueInv on January 29, 2014, 01:19:03 PM
http://techcrunch.com/2014/01/29/facebook-beats-in-q4-with-revenue-of-2-59b-eps-of-0-31/

But.....but.......teenagers are leaving......  :o
Title: Re: FB - Facebook
Post by: DCG on January 30, 2014, 06:37:11 AM
Up 18%.
Title: Re: FB - Facebook
Post by: valueInv on January 30, 2014, 07:05:55 AM
Up 18%.

Maybe teenagers are buying the stock..... :P
Title: Re: FB - Facebook
Post by: valueInv on January 30, 2014, 11:42:58 AM
ValueInv, what is your opinion of FB's current valuation? At $120 per user you have to wonder how they are going to get there. Would love to hear your take on this.

Yes, they are very expensive. I bought a small position at $27 and I doubt I'm going to lose money on this. I consider this an immature business and a speculative stock. While I will continue to hold in the short term, I wouldn't buy at $57.

They have one of the most valuable assets on the web. The key will be how they monetize this. They have a lot of options and they have the team that is capable of monetizing successfully. A big game changer will occur if they successfully use the social graph to create a big business other than advertising like social commerce, gifting,  a new form of gaming, paid content, etc. In that scenario, they can be easily worth $120 per user or more.
But with just advertising, it is going to be difficult.

Also, consider Instagram which is growing quickly and is not yet monetized.

While I reserve judgement on Paper, this is exactly the strategy I mean:

http://techcrunch.com/2014/01/30/facebook-paper/


Standalone apps that make use of FB's social graph. Happy to see FB move in that direction.
Title: Re: FB - Facebook
Post by: valueInv on February 02, 2014, 04:14:38 PM
Impressive growth at Instagram:
http://venturebeat.com/2014/01/29/instagram-doubled-its-userbase-in-2013/

FB also have another bun in the oven, though I expect them to face a uphill battle on this one:
http://venturebeat.com/2014/01/30/facebook-and-parse-launch-bolts-a-better-way-to-develop-ios-android-apps/
Title: Re: FB - Facebook
Post by: valueInv on February 02, 2014, 04:15:32 PM
Some nice work here too:

http://gigaom.com/2014/01/31/with-open-compute-facebook-is-saving-billions-and-moving-markets/
Title: Re: FB - Facebook
Post by: valueInv on February 03, 2014, 11:33:03 AM
The Facebook killer.....from Facebook:

http://techcrunch.com/2014/02/03/paper-now-available-for-ios-in-the-us-and-it-could-be-a-facebook-replacement/
Title: Re: FB - Facebook
Post by: valueInv on February 05, 2014, 04:17:01 PM
young people seem to be getting tired of facebook.

http://news.investors.com/technology/011514-686594-facebook-users-fall-with-teens-college-students.htm

Yeah, they're heading to Twitter alright ;):

http://techcrunch.com/2014/02/05/twitter-user-growth-still-slowing/
Title: Re: FB - Facebook
Post by: infinitee00 on February 10, 2014, 10:55:06 AM
I have no position in FB, but found this interesting post on reddit today ( I have no clue how much of their revs depend on likes or if this is just a sensational and inaccurate claim)-

A demonstration on how Facebook's ad revenue is based on fake likes (http://www.reddit.com/r/videos/comments/1xiuld/a_demonstration_on_how_facebooks_ad_revenue_is/)

Facebook Fraud:

http://www.youtube.com/watch?v=oVfHeWTKjag (http://www.youtube.com/watch?v=oVfHeWTKjag)
Title: Re: FB - Facebook
Post by: Orange on February 10, 2014, 11:34:54 AM
I have no position in FB, but found this interesting post on reddit today ( I have no clue how much of their revs depend on likes or if this is just a sensational and inaccurate claim)-

A demonstration on how Facebook's ad revenue is based on fake likes (http://www.reddit.com/r/videos/comments/1xiuld/a_demonstration_on_how_facebooks_ad_revenue_is/)

Facebook Fraud:

http://www.youtube.com/watch?v=oVfHeWTKjag (http://www.youtube.com/watch?v=oVfHeWTKjag)

I also saw that on the front page of reddit. Here's a link to another video by the same guy, called the problem with facebook.

http://youtu.be/l9ZqXlHl65g
Title: Re: FB - Facebook
Post by: yadayada on February 10, 2014, 11:39:10 AM
buy some put options?
Title: Re: FB - Facebook
Post by: DCG on February 10, 2014, 01:29:57 PM
I have no position in FB, but found this interesting post on reddit today ( I have no clue how much of their revs depend on likes or if this is just a sensational and inaccurate claim)-

A demonstration on how Facebook's ad revenue is based on fake likes (http://www.reddit.com/r/videos/comments/1xiuld/a_demonstration_on_how_facebooks_ad_revenue_is/)

Facebook Fraud:

http://www.youtube.com/watch?v=oVfHeWTKjag (http://www.youtube.com/watch?v=oVfHeWTKjag)


Interesting.
Title: Re: FB - Facebook
Post by: ItsAValueTrap on February 10, 2014, 01:50:11 PM
The display advertising on Facebook works.  I think anybody shorting Facebook is making a big mistake.

(Just go read some affiliate marketing blogs.  Facebook is a very real thing... not quite as good as high volume as Google Adwords but Facebook also drives a lot of traffic.)
Title: Re: FB - Facebook
Post by: APG12 on February 10, 2014, 02:11:39 PM
The display advertising on Facebook works.

The question is, works for whom? Is this guy's experience atypical?
Title: Re: FB - Facebook
Post by: ItsAValueTrap on February 10, 2014, 03:44:39 PM
The kind of advertising that works is the direct response-style advertising.  The FB user clicks on an ad and ends up on the company's landing page.  The landing page will try to sell a product or service to the customer.  Almost all clicks can be tracked down to a sale via cookies.

The whole idea of trying to get lots of people to like your Facebook page (via Facebook advertising) and then to try to sell stuff to your Facebook fans is questionable in my opinion.  It is very difficult to track your return on investment.  And of course, fraud is a minor issue.

2- All of the advertising platforms have to deal with fraud.  With Google Adwords it's inherently low.  The only reason you'd do it is to hurt a competitor.  (Google could commit fraud on its advertisers, but that would hurt Google's reputation and it wouldn't work because advertisers will adjust their budgets down if ROI drops.)

With display platforms like Google Adsense, there is clickfraud.  Google has algorithms to try to detect this and to ban bad advertisers.

With Facebook, the fake users is a problem created by cheating advertising consultants.  The advertising consultants (I can't remember the right term) are cheating their clients by using fake Facebook users to inflate the like count on Facebook pages.  Eventually the clients may figure out their advertising doesn't have very good ROI.

I think where the real value lies in Facebook is the style of advertising where FB users are directed to a landing page.  This kind of advertising works, is easily measured, and advertisers love it because it makes them a lot of money.
Title: Re: FB - Facebook
Post by: infinitee00 on February 10, 2014, 07:35:17 PM
Could FB be using the same click farms used by sites like boostlikes.com use to sell their likes-based advertising? It seems the video is implying that they are..after explicitly asking their users not to do buy likes from those click farms.


Title: Re: FB - Facebook
Post by: valueInv on February 10, 2014, 11:03:48 PM
This is a fixable problem. Google had these problems too; they fixed it.

Title: Re: FB - Facebook
Post by: valueInv on February 10, 2014, 11:04:10 PM
FB is still building out its ad machine:

http://www.linkedin.com/today/post/article/20140210021038-59549-facebook-s-hiring-surprise
Title: Re: FB - Facebook
Post by: DCG on February 11, 2014, 07:12:49 PM
The kind of advertising that works is the direct response-style advertising.  The FB user clicks on an ad and ends up on the company's landing page.  The landing page will try to sell a product or service to the customer.  Almost all clicks can be tracked down to a sale via cookies.

The whole idea of trying to get lots of people to like your Facebook page (via Facebook advertising) and then to try to sell stuff to your Facebook fans is questionable in my opinion.


Well, this is the complete opposite from what most social media 'experts' and authors/books advise businesses to do. The general goal of advertising on Facebook isn't to directly sell products. It's to build a relationship with customers and potential customers so they buy from you down the road.

Title: Re: FB - Facebook
Post by: ItsAValueTrap on February 11, 2014, 09:35:53 PM
Well, this is the complete opposite from what most social media 'experts' and authors/books advise businesses to do. The general goal of advertising on Facebook isn't to directly sell products. It's to build a relationship with customers and potential customers so they buy from you down the road.

Facebook's advertisers are too busy making money to care.   ;D

Seriously though.  You can do direct advertising and get instant feedback on how well you're doing.  This allows advertisers to empirically split test their campaigns, landing pages, etc. etc.  They figure out what works and what doesn't.  And they know whether or not they're making money.  This type of advertising is extremely, extremely compelling.  These are the real experts.

You can even read Ogilvy's book on advertising "Confessions of an Advertising Man", published in 1963.  He was a fan of employees with a background in direct response advertising.  He was a fan of direct response before the Internet existed.
Title: Re: FB - Facebook
Post by: thepupil on February 17, 2014, 01:43:07 PM
$170B MCAP, $160B EV. Tell me why I'm insane to consider starting to short this thing at 21X trailing sales.

8 years to present days Google financials at a 30 PE ( present day google multiple) gets me to a 9.8% return. Does that say "priced in" or am I lacking vision here?

 At what Price/Sales, Price/Earnings, % of Google (which itself does not appear exceedingly cheap), nominal market cap, $ of market cap / $ of global advertising spend, whatever preferred metric do you think about shorting this.

If you shorted Cisco at 18 in November of 1998, you saw that thing go to $77 before collapsing and being dead money for sixteen years...

Who is up for sitting on some lit rockets?
Title: Re: FB - Facebook
Post by: Palantir on February 17, 2014, 01:48:55 PM
^Have fun!
Title: Re: FB - Facebook
Post by: jschembs on February 17, 2014, 01:52:56 PM
$170B MCAP, $160B EV. Tell me why I'm insane to consider starting to short this thing at 21X trailing sales.

8 years to present days Google financials at a 30 PE ( present day google multiple) gets me to a 9.8% return. Does that say "priced in" or am I lacking vision here?

 At what Price/Sales, Price/Earnings, % of Google (which itself does not appear exceedingly cheap), nominal market cap, $ of market cap / $ of global advertising spend, whatever preferred metric do you think about shorting this.

If you shorted Cisco at 18 in November of 1998, you saw that thing go to $77 before collapsing and being dead money for sixteen years...

Who is up for sitting on some lit rockets?

If your primary thesis is overvaluation, look at some of the SAAS names - WDAY (41x LTM rev), FEYE (62x), DATA (24x), SPLK (35x), for example. Simply being overvalued is a dangerous thesis upon which to short, however. One potential catalyst I could see working against FB is the growing suspicion that click farms and other illicit methods are creating false hype and woefully overestimating ROI from advertising dollars spent on FB's platform. No idea how/when this plays out.
Title: Re: FB - Facebook
Post by: valueInv on February 17, 2014, 03:13:04 PM
$170B MCAP, $160B EV. Tell me why I'm insane to consider starting to short this thing at 21X trailing sales.

8 years to present days Google financials at a 30 PE ( present day google multiple) gets me to a 9.8% return. Does that say "priced in" or am I lacking vision here?

 At what Price/Sales, Price/Earnings, % of Google (which itself does not appear exceedingly cheap), nominal market cap, $ of market cap / $ of global advertising spend, whatever preferred metric do you think about shorting this.

If you shorted Cisco at 18 in November of 1998, you saw that thing go to $77 before collapsing and being dead money for sixteen years...

Who is up for sitting on some lit rockets?

What do you think Instagram's valuation is?
Title: Re: FB - Facebook
Post by: valueInv on February 17, 2014, 03:36:49 PM
More info on the fake likes issue:

http://pando.com/2014/02/17/quantifying-facebooks-problem-with-fake-brand-likes/
Title: Re: FB - Facebook
Post by: thepupil on February 19, 2014, 02:36:24 PM
Palantir, I've yet to join the fun.

Jschemb's, I am all too aware of the dangers of valuation based shorts (see TSLA). I like that Facebook is huge and can't get taken out. For now I have no thesis, but am just starting to look at it.

ValueInv: I assume the value of instagram is captured in Facebook's earnings???? I don't understand the question.

As for Facebook, they just paid $16B for What's App, $12B is with stock. The company is clearly willing to use its stock as currency. The bear in me says that means it's expensive. The paranoid person in me says they can issue their way to growth and keep that game up for a while.
Title: Re: FB - Facebook
Post by: fareastwarriors on February 19, 2014, 02:52:51 PM
http://www.bloomberg.com/news/2014-02-19/facebook-to-buy-mobile-messaging-app-whatsapp-for-16-billion.html (http://www.bloomberg.com/news/2014-02-19/facebook-to-buy-mobile-messaging-app-whatsapp-for-16-billion.html)
Title: Re: FB - Facebook
Post by: fareastwarriors on February 19, 2014, 10:10:29 PM
Now the Message Is a Facebook Medium


WhatsApp Shows That for Facebook, Size Really Matters


http://online.wsj.com/news/articles/SB10001424052702303636404579393671576066400?mod=WSJ_HOS_LeadStory (http://online.wsj.com/news/articles/SB10001424052702303636404579393671576066400?mod=WSJ_HOS_LeadStory)
Title: Re: FB - Facebook
Post by: TorontoRaptorsFan on February 20, 2014, 11:35:34 AM
I love using Whatsapp. But paying that kind of money for it is sheer lunacy.

I think I'll continue to place my bet on Apple for the long run. They are excellent stewards of capital.
Title: Re: FB - Facebook
Post by: brker_guy on February 20, 2014, 01:06:02 PM
Don't know if you guys saw this:

http://aswathdamodaran.blogspot.com/2014/02/facebook-buys-whatsapp-for-19-billion.html?m=1

Title: Re: FB - Facebook
Post by: tombgrt on February 20, 2014, 05:54:34 PM
Thanks for the link. Isn't zuckerberg's net worth over $40b now? In 50 years he could be a trilionaire by investing it wisely in the stock market. He could then spend close to $300M a day if he lived another 10 years. :)
Title: Re: FB - Facebook
Post by: fareastwarriors on March 25, 2014, 03:29:10 PM
Facebook to Acquire Virtual Reality Company for $2 Billion

Quote
Facebook agreed to pay $400 million in cash and 23.1 million shares of the company's stock. At Tuesday's close of $64.89, the stock portion would be worth $1.5 billion.


http://online.wsj.com/news/articles/SB10001424052702303949704579461812019189626?mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303949704579461812019189626?mg=reno64-wsj)
Title: Re: FB - Facebook
Post by: Liberty on March 25, 2014, 03:47:21 PM
John Carmack now works for Facebook. What a strange world we live in  ???
Title: Re: FB - Facebook
Post by: stahleyp on March 25, 2014, 04:31:09 PM
John Carmack now works for Facebook. What a strange world we live in  ???


Doom fan I see, Liberty? ;)
Title: Re: FB - Facebook
Post by: Liberty on March 25, 2014, 04:35:52 PM
John Carmack now works for Facebook. What a strange world we live in  ???


Doom fan I see, Liberty? ;)

I still have the box of the original on the shelf next to my desk  8)

(http://i.imgur.com/GfM14st.jpg)

Spent countless nights in LANs with my friends, I even built my own DOOM and Quake maps.
Title: Re: FB - Facebook
Post by: Palantir on March 25, 2014, 04:36:35 PM
^Nice. Another Doom fan here.  ;D
Title: Re: FB - Facebook
Post by: stahleyp on March 25, 2014, 04:46:51 PM
haha. I played Doom 3 but I was more of a console guy growing up. Gotta love some Perfect Dark and Halo.


By the way, thanks for showing your artistic abilities with the alien with...braces? ;)
Title: Re: FB - Facebook
Post by: txlaw on March 26, 2014, 06:19:54 AM
Facebook to Acquire Virtual Reality Company for $2 Billion

Quote
Facebook agreed to pay $400 million in cash and 23.1 million shares of the company's stock. At Tuesday's close of $64.89, the stock portion would be worth $1.5 billion.


http://online.wsj.com/news/articles/SB10001424052702303949704579461812019189626?mg=reno64-wsj (http://online.wsj.com/news/articles/SB10001424052702303949704579461812019189626?mg=reno64-wsj)

Hmm, so assuming $0.25 on the dollar of IV, FB really paid about $800 million of IV for Oculus Rift.  Might not be such a bad deal, actually, compared to the WhatsApp purchase if FB starts going the AI/AR route a la GOOG.

It's a little creepy, though, that they are looking to buy drones at the same time.  Ender's Game, anyone? 
Title: Re: FB - Facebook
Post by: hyten1 on March 26, 2014, 07:15:17 AM
hmmm will Oculus Rift have similar fate as webtv or broadcast.com?

sure VR will prob succeed in the future but will it be Oculus Rift? will it be now? is this the time or are we too early?

hy
Title: Re: FB - Facebook
Post by: DCG on March 26, 2014, 07:49:19 AM
Facebook spends cash like they're using toy money.
Title: Re: FB - Facebook
Post by: TorontoRaptorsFan on March 26, 2014, 11:00:03 AM
Seems like a bargain compared to the Whatsapp acquisition. I think they're trying to diversify as much as possible. And doing it quickly while the stock is at a ridiculous price.
Title: Re: FB - Facebook
Post by: tombgrt on April 24, 2014, 07:13:32 AM
Well, the momentum game is f*cked if they can't please the market with those numbers.
Title: Re: FB - Facebook
Post by: Palantir on July 24, 2014, 06:40:21 AM
Anyone still holding this? Congrats, this idiot sold in the 20s.
Title: Re: FB - Facebook
Post by: Mikenhe on July 24, 2014, 10:05:53 AM
Anyone still holding this? Congrats, this idiot sold in the 20s.

Sold in the 20s?  I guess thats the price of experience!!!

I didn't buy at all!

It could be me who is the idiot.
Title: Re: FB - Facebook
Post by: ScottHall on September 05, 2014, 12:16:16 PM
I bought a small stake in FB recently.
Title: Re: FB - Facebook
Post by: Liberty on September 05, 2014, 12:25:04 PM
I bought a small stake in FB recently.

Interesting. Can you elaborate a little on your thesis, Scott? Thank you.
Title: Re: FB - Facebook
Post by: ScottHall on September 05, 2014, 03:44:19 PM
I bought a small stake in FB recently.

Interesting. Can you elaborate a little on your thesis, Scott? Thank you.

Sure. Here are some notes I took on it a while back.

EDIT: Actually, I'm going to hold on to this for a couple weeks. I'll make a new post then.
Title: Re: FB - Facebook
Post by: VAL9000 on September 17, 2014, 11:42:31 AM
Does anyone else find it remarkable that FB earns ~ 50% operating margins while also growing revenue by ~ 50% year over year ?

The company is expensive, but the earnings power is remarkable.  Last fiscal year revenue increased by 55% while operating expenses rose by just 11%.

What am I overlooking when I say these metrics are stunning?
Title: Re: FB - Facebook
Post by: meiroy on October 15, 2014, 08:06:12 PM
http://www.theonion.com/articles/facebook-offers-to-freeze-female-employees-newborn,37189/

MENLO PARK, CA—As part of their efforts to accommodate women who wish to delay parenthood, Facebook officials announced Wednesday that the company will offer financial assistance for female employees to freeze their newborn children. “We recognize the many challenges women face starting a family and balancing a career, which is why our company will provide extensive support to female employees who want to preserve their infant in a frozen state of suspended animation until they’re ready for child-rearing,” said Facebook spokesperson Mary Copperman, who added that the company would pay up to $20,000 for the cryopreservation procedure, which involves submerging a baby in a vat of supercooled liquid immediately after birth and storing the offspring in a specialized containment cylinder until the newborn is thawed. “Women deserve to have the option to postpone motherhood until they feel fully prepared, which is why Facebook will also cover the cryonic facility’s annual maintenance costs for as many years as our employees feel they need. And when the time comes, female employees can simply unfreeze their child and take advantage of our competitive four-month paid maternity leave.” Facebook also confirmed that the company would begin covering the costs of a procedure that involves freezing a female employee’s husband until he is emotionally prepared to be a father.
Title: Re: FB - Facebook
Post by: peter1234 on October 16, 2014, 02:37:14 AM
http://www.theonion.com/articles/facebook-offers-to-freeze-female-employees-newborn,37189/

MENLO PARK, CA—As part of their efforts to accommodate women who wish to delay parenthood, Facebook officials announced Wednesday that the company will offer financial assistance for female employees to freeze their newborn children. “We recognize the many challenges women face starting a family and balancing a career, which is why our company will provide extensive support to female employees who want to preserve their infant in a frozen state of suspended animation until they’re ready for child-rearing,” said Facebook spokesperson Mary Copperman, who added that the company would pay up to $20,000 for the cryopreservation procedure, which involves submerging a baby in a vat of supercooled liquid immediately after birth and storing the offspring in a specialized containment cylinder until the newborn is thawed. “Women deserve to have the option to postpone motherhood until they feel fully prepared, which is why Facebook will also cover the cryonic facility’s annual maintenance costs for as many years as our employees feel they need. And when the time comes, female employees can simply unfreeze their child and take advantage of our competitive four-month paid maternity leave.” Facebook also confirmed that the company would begin covering the costs of a procedure that involves freezing a female employee’s husband until he is emotionally prepared to be a father.

Thanks, this is a good read.
 ;)
Title: Re: FB - Facebook
Post by: JBird on October 27, 2014, 04:11:59 PM
Facebook advertising fraud and Click Farms

http://vimeo.com/86358084
Title: Re: FB - Facebook
Post by: valueinvestor82 on December 01, 2014, 04:09:43 PM
When I initially saw Facebook as an actual subject on a value investing website, I checked the web address to make sure I hadn't visited the wrong site, then assumed it was a bunch of short theses.

I was wrong...and stunned.
Title: Re: FB - Facebook
Post by: innerscorecard on February 15, 2015, 11:47:23 PM
http://qz.com/333313/milliions-of-facebook-users-have-no-idea-theyre-using-the-internet/

Fascinating stuff. I don't see this first-hand, as I live in the no-Facebook-zone that is China. Here, some of the functions of Facebook are unbundled into things like Wechat, but the way the services stack up is different than the Facebook ecosystem itself.
Title: Re: FB - Facebook
Post by: Liberty on September 30, 2015, 07:04:45 PM
Interesting piece on Facebook's positioning:

https://stratechery.com/2015/the-facebook-epoch/
Title: Re: FB - Facebook
Post by: JayGatsby on October 01, 2015, 04:48:04 AM
Interesting piece on Facebook's positioning:

https://stratechery.com/2015/the-facebook-epoch/
Few things I disagree with here:
1. I don't think Google's Android/Chrome initiatives are totally scorched earth strategies to defend web-based search. They have great market share but are constantly trying to do better. If they control the starting point, it's easy for them to direct people to their search. They have 67% marketshare on the computer and 83% market share on mobile.
2. I don't see how the acquisition of Whatsapp can be compared to Android. Google paid ~$50M for Android. Facebook paid $22B for Whatsapp.
3. In Peter Thiel's book he's very critical of the typical VC mindset that market is #1.  He discusses how the typical VC pitch is "this market is huge and if we capture 1% of it we're rich!". He looks for the exact opposite.. "we control this tiny market and..". Ironically, what he liked about Facebook when he invested was they had a tiny market (Harvard) that they completely dominated. This guy seems to classify Facebook's current market as mobile internet advertising..

I'm short Facebook. Few reasons:
1. I think it was new and cool, but people are losing interest. My newsfeed used to be constantly refilling itself, but now I can scroll for 10 minutes and be back at yesterday's news. I think a lot of this is people shifting to other platforms. The Google trends also pretty clearly indicate decline: https://www.google.com/trends/explore#q=facebook&geo=US (I don't know who Google's "facebook" either, but less people do it now than they used to). In some ways I think they're a victim of their own success.  When it was first started it was college only and you needed a .edu. Now with grandparents, coworkers and share buttons, it forces people to be more careful (post less).
2. Their user growth now is coming almost exclusively internationally. The problem is those customers are way less valuable on average than North American customers. (Slides 5 and 12: http://edge.media-server.com/m/p/r62axc3n) Part of it may be that advertisers haven't caught up, but my guess is the value of a user is pretty correlated with GDP/capita.
3. I think Instagram is good platform but I don't think it monetizes as well. Because there's very little text, people don't need to spend as much time on it.
4. I've heard a lot of their best people got rich and left.
5. I don't really understand the whatsapp acqusition. Sure, it had a lot of users, but users of one app don't necessarily translate to another. If someone isn't messaging through facebook they probably don't want to. There really was nothing gained from a technology perspective that I can see.

Definitely an amazing company.. Let me know if I'm missing something and cover. Time to go check my facebook..
Title: Re: FB - Facebook
Post by: Grey512 on October 01, 2015, 05:05:14 AM
he Google trends also pretty clearly indicate decline: https://www.google.com/trends/explore#q=facebook&geo=US (I don't know who Google's "facebook" either, but less people do it now than they used to).

I would be careful with reading into Google Trends too much, what with the increasing migration to Chrome, which has an auto-complete function and takes people straight to FB whenever they start typing "facebo.." etc. What you see on Google Trends could simply be a representation of the fact that people who were unfamiliar with FB and interested in it now have FB accounts or have already somehow found out what FB is, so there are fewer people searching for FB on Google. So Google Trends is probably more correlated to the annual # of new user signups at FB than anything else.
Title: Re: FB - Facebook
Post by: Liberty on October 01, 2015, 05:36:51 AM
I wouldn't trust google trends for that kind of stuff either. Grey is right about autocomplete of URLs, but most people go on facebook in an app on a mobile device now, so they're not even going to Google search...

Quote
3. In Peter Thiel's book he's very critical of the typical VC mindset that market is #1.  He discusses how the typical VC pitch is "this market is huge and if we capture 1% of it we're rich!". He looks for the exact opposite.. "we control this tiny market and..". Ironically, what he liked about Facebook when he invested was they had a tiny market (Harvard) that they completely dominated. This guy seems to classify Facebook's current market as mobile internet advertising..

I don't think that's quite what Ben Thompson is saying here. It sounds similar, but it's not the same.

He's more saying that there's now a gigantic market for attention without intent, and it's very huge and very valuable to both users and advertisers in a way that is aligned for Facebook's interest.

This is more about market structure, with people demanding what you offer (people just want to pull out their phone whenever they're bored and see what their friends are up to, see some news, message people, etc) and facebook being solidly entrenched (network effect, can buy competitors, etc). In the typical "the market is huge" example, you usually don't have a dynamic like that, you are trying to ram something down people's throats that they don't necessarily want, they're not beating a path to your door.
Title: Re: FB - Facebook
Post by: TheAiGuy on October 01, 2015, 07:02:44 AM
This is definitely something I didn't understand when FB was cheep, but here's my take:


1. I think it was new and cool, but people are losing interest. My newsfeed used to be constantly refilling itself, but now I can scroll for 10 minutes and be back at yesterday's news. I think a lot of this is people shifting to other platforms. The Google trends also pretty clearly indicate decline: https://www.google.com/trends/explore#q=facebook&geo=US (I don't know who Google's "facebook" either, but less people do it now than they used to). In some ways I think they're a victim of their own success.  When it was first started it was college only and you needed a .edu. Now with grandparents, coworkers and share buttons, it forces people to be more careful (post less).

I think people are pretty entrenched here. I can give you an anecdote: about a year ago my brother in law was helping a refugee get settled in the states. The organization got him a dumb phone but the man asked for one with Facebook so he could call his family. They got him a new phone --> I think Thompson is right that Facebook is like email and everyone will be on it.


2. I don't see how the acquisition of Whatsapp can be compared to Android. Google paid ~$50M for Android. Facebook paid $22B for Whatsapp.

Yeah, that's a lot for WhatsApp. Thompson is a strategy guy, FWIW.

2. Their user growth now is coming almost exclusively internationally. The problem is those customers are way less valuable on average than North American customers. (Slides 5 and 12: http://edge.media-server.com/m/p/r62axc3n) Part of it may be that advertisers haven't caught up, but my guess is the value of a user is pretty correlated with GDP/capita.

Revenue growth substantially lags user growth, so the growth story here is that they can gobble up all of the TV advertising dollars in developed markets. Also, international users will become more valuable overtime as those societies become richer (which they will, in part because of Facebook, to be controversial).
3. I think Instagram is good platform but I don't think it monetizes as well. Because there's very little text, people don't need to spend as much time on it.

Instagram should actually be pretty easy to monetize. My wife, for example, follows several brands on Instagram and many people post pictures of things like Nike shoes. My take is there are a number of people who would actually be fine with highly targeted brand adds in their Instagram feed.
Title: Re: FB - Facebook
Post by: JayGatsby on October 01, 2015, 09:03:45 AM
I wouldn't trust google trends for that kind of stuff either. Grey is right about autocomplete of URLs, but most people go on facebook in an app on a mobile device now, so they're not even going to Google search...
Those are definitely fair points, but I do think it's indicative. Piper Jaffray does a teen survey that showed use is declining. I definitely see less posts per person on my newsfeed than I did a few years ago. Maybe that's partly the mobile effect where it isn't quite as easy to post / share content?

Quote
I don't think that's quite what Ben Thompson is saying here. It sounds similar, but it's not the same.

He's more saying that there's now a gigantic market for attention without intent, and it's very huge and very valuable to both users and advertisers in a way that is aligned for Facebook's interest.

This is more about market structure, with people demanding what you offer (people just want to pull out their phone whenever they're bored and see what their friends are up to, see some news, message people, etc) and facebook being solidly entrenched (network effect, can buy competitors, etc). In the typical "the market is huge" example, you usually don't have a dynamic like that, you are trying to ram something down people's throats that they don't necessarily want, they're not beating a path to your door.
That's fair as well. I definitely pop on my facebook app when i get bored.  The problem is Facebook doesn't have any of their own content, so they need users to be generating that content.  If users generate less content, readers consume less content, and revenue per user declines.

I think people are pretty entrenched here. I can give you an anecdote: about a year ago my brother in law was helping a refugee get settled in the states. The organization got him a dumb phone but the man asked for one with Facebook so he could call his family. They got him a new phone --> I think Thompson is right that Facebook is like email and everyone will be on it.
I 100% agree witht that. Personally I find it immensely valuable for keeping in contact with friends I wouldn't otherwise see. I just think people are spending less time on it and will continue to do so. I think Facebook is a tremendously valuable platform, just not $250B valuable.

Quote
Revenue growth substantially lags user growth, so the growth story here is that they can gobble up all of the TV advertising dollars in developed markets. Also, international users will become more valuable overtime as those societies become richer (which they will, in part because of Facebook, to be controversial).
I don't think the trends on page 12 here support this, at least over the short term. The value of a user has actually been pretty constant with the exception of North America, for whatever reason: http://files.shareholder.com/downloads/AMDA-NJ5DZ/795783791x0x842064/619A417E-5E3E-496C-B125-987FA25A0570/FB_Q215EarningsSlides.pdf

Quote
Instagram should actually be pretty easy to monetize. My wife, for example, follows several brands on Instagram and many people post pictures of things like Nike shoes. My take is there are a number of people who would actually be fine with highly targeted brand adds in their Instagram feed.
I agree that Instagram is hugely valuable for advertisers, and some people are making a fortune from it.  The problem, at least today, is that money isn't going to Instagram. I see the "sponsored" ads today but typically scroll right past them.
Title: Re: FB - Facebook
Post by: Liberty on October 01, 2015, 09:20:02 AM
Facebook is now driving more traffic to most sites than Google is. I don't think there's less content generated overall. Maybe on your feed, though? If you don't care about facebook, you probably haven't been curating much, adding new people, "liking" new organizations, etc.

Facebook is starting to get big publishers to host content directly on it (NYT, etc) and will share ad revenue with it. But not having to pay for your own content is a benefit, not a problem.

The thing about teens and facebook is way overblown, IMO. A lot of that was based on the article written a couple years ago by a young teen saying that nobody at her school used facebook, etc. Well, she just wrote a new article on Medium (can't find it right now), and she's in high school now, and says most people uses facebook and/or instagram...

I don't even study facebook the company that much, and I'm certainly no investor. But I don't think your reasons for shorting it are very strong. Facebook has become part of the internet's infrastructure, like Google, and they'll collect their toll... Branding advertising and native advertising are the next thing, and facebook is well positioned.
Title: Re: FB - Facebook
Post by: JayGatsby on October 01, 2015, 10:03:11 AM
Regarding teen use, I was referring to Piper Jaffray's survey: http://www.buzzfeed.com/sapna/only-14-of-teens-say-facebook-is-the-most-important#.st1v18b3p

I was using # of posts on my feed as a proxy of user engagement.  My guess was if people are posting less, they're also engaging less, but you could be right that people (at least the ones I know) are consuming more while posting less.

I'm not saying Facebook will go the way of MySpace. I do think they have a moat and are a very valuable platform, but I think they're priced for perfection with some very real challenges. 
Title: Re: FB - Facebook
Post by: Jurgis on October 01, 2015, 03:17:43 PM
It's so nice not to use FB or any other social networking crap *.

Now, get off my lawn!  :P





* Yes, I am aware of the irony of posting this on CoBF.
Title: Re: FB - Facebook
Post by: ScottHall on October 02, 2015, 04:23:38 PM
Maybe I'm the only guy who doesn't care much if teen use is down or not. The 15-year-old scene kids of today will be mothers and fathers 15 years from now. Will they still prefer private social media services that delete embarrassing information quickly at that point, or will they be sharing videos of baby's first steps on Facebook? Maybe if they have an Ashley Madison account they'll go for the former, but otherwise...

We all go through phases in our lives. Being a teenager has its own problems and challenges. Being an adult has completely different problems and challenges, and those experiences will probably be related with others much differently. More importantly, teenagers are not particularly important advertising targets.
Title: Re: FB - Facebook
Post by: Liberty on December 01, 2015, 01:37:43 PM
Zuckerberg following in Bill Gates and Buffett's footsteps:

https://www.facebook.com/notes/mark-zuckerberg/a-letter-to-our-daughter/10153375081581634?pnref=story

Impressive guy. Like Bill Gates on fast-forward, doing this so young with so much money...
Title: Re: FB - Facebook
Post by: johnny on December 02, 2015, 09:52:37 AM
More importantly, teenagers are not particularly important advertising targets.

They may not be the most important for purchase-intent-demonstrated, deal-about-to-close things like ads for people searching for "insurance". But they are incredibly important for media and brand advertising. And that is probably why you see so much money being raised for social media applications aimed at 15-25 year olds.
Title: Re: FB - Facebook
Post by: fareastwarriors on January 18, 2016, 09:42:04 AM
WhatsApp and Instagram shift business models


WhatsApp and Instagram unveiled changes to their business models on Monday, as the Facebook-owned apps look to find ways of turning their wide user bases into substantial businesses.

http://www.ft.com/intl/cms/s/0/fac63040-bddd-11e5-9fdb-87b8d15baec2.html#axzz3xXJSWaHW (http://www.ft.com/intl/cms/s/0/fac63040-bddd-11e5-9fdb-87b8d15baec2.html#axzz3xXJSWaHW)
Title: Re: FB - Facebook
Post by: ScottHall on January 27, 2016, 08:49:39 PM
What a glorious quarter from Facebook. Holding this one for a long time to come.

http://investor.fb.com/releasedetail.cfm?ReleaseID=952040
Title: Re: FB - Facebook
Post by: DCG on April 27, 2016, 10:03:26 AM
I'd like to own Facebook, but just don't know how to value it. There's plenty of room to grow earnings from Facebook, Instagram, OR, and WhatsApp, but FB is currently valued to 57% of the size of Apple, yet Apple has 13 times the amount of earnings than FB.
Title: Re: FB - Facebook
Post by: gjangal on April 27, 2016, 12:36:41 PM
In my view secular growth companies like Facebook growing revs at 40% will rarely be cheap and its "pe" will be unpredictable.

If growth materializes paying a high pe within reason will be worth it . IMO it's best to think about these companies from an opportunity cost perspective, if you have something better to buy one can ignore FB, else joining the bandwagon of a fast growing company may not be a bad idea
Title: Re: FB - Facebook
Post by: glorysk87 on April 27, 2016, 12:49:40 PM
I'd like to own Facebook, but just don't know how to value it. There's plenty of room to grow earnings from Facebook, Instagram, OR, and WhatsApp, but FB is currently valued to 57% of the size of Apple, yet Apple has 13 times the amount of earnings than FB.

I found it difficult to value as well but hopefully my line of thought helps you. Keep in mind this is just a crude way to approximate/ballpark the value of the company. It leaves a lot of factors out so take it with a grain of salt.  It's more of a "sanity check" than anything.

Basically, global media advertising sums to about $550B annually, right now.  Facebook currently captures about 6% of peoples' total media consumption time.  However, they're not earning a proportionate amount of those ad dollars - 6% would be $33B, whereas FB only takes in somewhere around $17B currently (2015 revenue).  If we assume that FB can capture their "justified" 6% of total media ad dollars, they could potentially earn up to $33B annually.  Keep net margins the same at mid 30%'s gives you EPS of around $4.25, or a valuation of 25x earnings.  At recent growth rate of 50% YoY, that's achievable within a few years.  If you assume that FB can continue to grow their "% captured" of the global ad market to 10%, that gives $55B in revs and $7.00 of EPS, or a forward multiple of 15x. 

Obviously there are some HUGE assumptions in there, but I found it a useful thought exercise to go through.  The other thing is that the above thought process basically values FB on earnings.  It might be better to look at cash, since they have phenomenal ROIC and FCF conversion.
Title: Re: FB - Facebook
Post by: JayGatsby on April 27, 2016, 08:14:36 PM
Based on the small portion of the universe I'm facebook friends with there's a distinct and rapid decline in original content sharing. Is no one else seeing that? There's been a few articles to that effect (http://www.bloomberg.com/news/articles/2016-04-07/facebook-said-to-face-decline-in-people-posting-personal-content). FB tells you # of users like it's a traditional subscription media company, but doesn't give anything on true volume (other than on the videos that start automatically). So if ARPU is increasing, but underlying volume is decreasing doesn't that cap growth?
Title: Re: FB - Facebook
Post by: ZenaidaMacroura on April 28, 2016, 12:02:05 AM
Based on the small portion of the universe I'm facebook friends with there's a distinct and rapid decline in original content sharing. Is no one else seeing that? There's been a few articles to that effect (http://www.bloomberg.com/news/articles/2016-04-07/facebook-said-to-face-decline-in-people-posting-personal-content). FB tells you # of users like it's a traditional subscription media company, but doesn't give anything on true volume (other than on the videos that start automatically). So if ARPU is increasing, but underlying volume is decreasing doesn't that cap growth?
I actually don't think that's a problem -as long as people are engaging with the content being posted?  Everyone seems to love weighing in on that medium.

And ultimately I think facebook could nudge people to post more personal content if they wanted... (decrease the rate at which people see news versus personal content on their feed, etc)
Title: Re: FB - Facebook
Post by: fareastwarriors on July 27, 2016, 02:05:17 PM
FB... I did not expect this to get so big and successful. I remembered I was cheering when the price went below its IPO price...
Title: Re: FB - Facebook
Post by: Jurgis on July 27, 2016, 02:20:05 PM
FB... I did not expect this to get so big and successful. I remembered I was cheering when the price went below its IPO price...

Got shares in IPO, sold on the first day when it breached IPO price, patted myself on the back when it went below IPO price, never bought. Oh well. Still, I'd rank this one as one of my smaller sins of omission.  ::)  8)
Title: Re: FB - Facebook
Post by: giofranchi on August 02, 2016, 05:51:42 AM
I have opened a very small position in FB.
I still see lots of growth ahead: imo FB users will continue to grow and advertisers will keep growing even faster, also FB will probably start monetizing Messenger, WhatsApp, and Oculus Rift soon.
It is a wonderful company run by Zuckerberg who has by now proven himself as an outstanding technology visionary and a great capital allocator too.
Just like IBB, NKE, and SBUX, FB is another investment I’ll gladly make larger during any pullback.

PS
Andrew Left seems to be shorting the stock:

http://seekingalpha.com/article/3994102-notable-analyst-right-short-facebook

Last time I was long a stock Left was shorting it ended very badly… We’ll see!

Cheers,

Gio
Title: Re: FB - Facebook
Post by: glorysk87 on August 02, 2016, 05:57:05 AM
Interesting Gio. I agree with your main points, but I'm finally starting to think about exiting my position. I bought late last September, and I'm getting the point where it's difficult to defend the name on valuation.  Qualitatively, I think it's a fantastic company. But on valuation it's getting more and more difficult to hold.

I'm curious what your estimate of upside is.  My optimistic scenario had them earning $7.00 at peak earnings.  Unless they can capture more of a their users' time and attention than they do currently, I couldn't model them earning much more than that.  Based on that peak earnings estimate, the valuation becomes pretty tough to defend at a ~$350mm market cap.
Title: Re: FB - Facebook
Post by: giofranchi on August 02, 2016, 06:23:43 AM
I'm curious what your estimate of upside is.  My optimistic scenario had them earning $7.00 at peak earnings.  Unless they can capture more of a their users' time and attention than they do currently, I couldn't model them earning much more than that.  Based on that peak earnings estimate, the valuation becomes pretty tough to defend at a ~$350mm market cap.

Of course FB valuation makes sense only if it keeps growing. Because of the huge network effects it enjoys (the larger the number of users, the more new users will be drawn in), I think its users might still grow quickly for some time. And what about all those other technologies Zuckerberg has bought? How much will they grow? And those $23 billion in cash? How successfully will Zuckerberg use them?
Answer: I really don’t know. But I believe Zuckerberg has by now proven to be among the most prescient technology and business leaders in the world and will probably go on making smart moves for a very long time.
This being said, the position I have opened is small, and here is what I intend to do:
a) FB’s growth remains strong and its stock price keeps rising: I’ll keep buying small amounts when I have some cash.
b) FB’s growth slows down materially: I’ll admit I was wrong, and sell out at a loss (which will be very small).
c) FB’s growth remains strong and its stock price falls in a general market decline: I’ll add aggressively.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: glorysk87 on August 02, 2016, 06:38:50 AM
Of course FB valuation makes sense only if it keeps growing. Because of the huge network effects it enjoys (the larger the number of users, the more new users will be drawn in), I think its users might still grow quickly for some time. And what about all those other technologies Zuckerberg has bought? How much will they grow? And those $23 billion in cash? How successfully will Zuckerberg use them?
Answer: I really don’t know. But I believe Zuckerberg has by now proven to be among the most prescient technology and business leaders in the world and will probably go on making smart moves for a very long time.
This being said, the position I have opened is small, and here is what I intend to do:
a) FB’s growth remains strong and its stock price keeps rising: I’ll keep buying small amounts when I have some cash.
b) FB’s growth slows down materially: I’ll admit I was wrong, and sell out at a loss (which will be very small).
c) FB’s growth remains strong and its stock price falls in a general market decline: I’ll add aggressively.

Cheers,

Gio

Yea I understand all of that, and I agree with the qualitative aspects of your analysis.  I have IG, WhatsApp, Messenger, and Oculus all included in my analysis. I still only get to somewhere around $7.00 of EPS at the peak.  Growth is all well and good, but no company can grow above the market forever. That's where I'm running into trouble. I've continued to hold my FB position due to my faith in Zuckerberg and his team. But it's getting more and more difficult to defend.  The assumptions I have to make to justify the current valuation are pretty wild.
Title: Re: FB - Facebook
Post by: giofranchi on August 02, 2016, 07:22:44 AM
Yea I understand all of that, and I agree with the qualitative aspects of your analysis.  I have IG, WhatsApp, Messenger, and Oculus all included in my analysis. I still only get to somewhere around $7.00 of EPS at the peak.  Growth is all well and good, but no company can grow above the market forever. That's where I'm running into trouble. I've continued to hold my FB position due to my faith in Zuckerberg and his team. But it's getting more and more difficult to defend.  The assumptions I have to make to justify the current valuation are pretty wild.

How many users do you think FB will have when it reaches peak earnings? How many years from now? How large a market will VR be? Which new technologies will Zuckerberg invest in with $23 billion of cash and counting? How much will those new technologies grow?

I clearly agree that no company grows faster than the market forever. But FB is a very young company, just like Zuckerberg is a very young founder/CEO. I don’t see the risk of FB becoming too bureaucratic and slow, nor the risk that Zuckerberg might grow complacent any time soon. And certainly he won’t retire for the foreseeable future. The only thing that might dampen FB’s growth is its sheer size. But size is always relative, and FB’s market is potentially huge.

I know all this is still just qualitative and I am sorry I cannot come up with a number to be compared with your estimated peak EPS.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: frommi on August 02, 2016, 07:41:00 AM
I'm curious what your estimate of upside is.  My optimistic scenario had them earning $7.00 at peak earnings.  Unless they can capture more of a their users' time and attention than they do currently, I couldn't model them earning much more than that.  Based on that peak earnings estimate, the valuation becomes pretty tough to defend at a ~$350mm market cap.

Of course FB valuation makes sense only if it keeps growing. Because of the huge network effects it enjoys (the larger the number of users, the more new users will be drawn in), I think its users might still grow quickly for some time. And what about all those other technologies Zuckerberg has bought? How much will they grow? And those $23 billion in cash? How successfully will Zuckerberg use them?
Answer: I really don’t know. But I believe Zuckerberg has by now proven to be among the most prescient technology and business leaders in the world and will probably go on making smart moves for a very long time.
This being said, the position I have opened is small, and here is what I intend to do:
a) FB’s growth remains strong and its stock price keeps rising: I’ll keep buying small amounts when I have some cash.
b) FB’s growth slows down materially: I’ll admit I was wrong, and sell out at a loss (which will be very small).
c) FB’s growth remains strong and its stock price falls in a general market decline: I’ll add aggressively.

Cheers,

Gio

I think you are overestimating Zuckerberg. For me this is a rich kid throwing money at everything he likes, without looking at price paid. Thats the opposite of the guy that i want to run my business. While FB itself is a nice business, capital allocation is the weak point here. I can`t see that he bought anything that will throw off a profit anytime soon. Facebook itself is out of style for the young kids already and the facebook generation is getting older and more wary about what happens with their data. I really doubt that Facebook will exist in the current form with the current number of users 10 years from now and can imagine that we are already close to peak earnings here. I will add to my puts on every pop higher, valuation is out of reality when you compare it to Google.
Title: Re: FB - Facebook
Post by: giofranchi on August 02, 2016, 07:53:00 AM
I think you are overestimating Zuckerberg. For me this is a rich kid throwing money at everything he likes, without looking at price paid. Thats the opposite of the guy that i want to run my business. While FB itself is a nice business, capital allocation is the weak point here. I can`t see that he bought anything that will throw off a profit anytime soon. Facebook itself is out of style for the young kids already and the facebook generation is getting older and more wary about what happens with their data. I really doubt that Facebook will exist in the current form with the current number of users 10 years from now and can imagine that we are already close to peak earnings here. I will add to my puts on every pop higher, valuation is out of reality when you compare it to Google.

Morningstar puts FV at $127. Which are the “out of reality” assumptions you think they are making?
Of course if your judgment about Zuckerberg is so negative, valuation does not matter much.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: giofranchi on August 02, 2016, 07:57:23 AM
I will add to my puts on every pop higher, valuation is out of reality when you compare it to Google.

Let me ask a question: will you add to your short position even if FB's growth remains strong? Do you think it is so much overvalued?

Cheers,

Gio
Title: Re: FB - Facebook
Post by: frommi on August 02, 2016, 08:03:55 AM
Morningstar puts FV at $127. Which are the “out of reality” assumptions you think they are making?
Of course if your judgment about Zuckerberg is so negative, valuation does not matter much.

Cheers,

Gio

I don`t care about Morningstar, i look at EV/EBITDA and how fast it can grow. The last 3 quarters EBITDA at FB was around 3 billion, so with 12 billion EBITDA, current EV/EBITDA is around 30. GOOG and similar companies that are growing 10-15% are around 15, so FB fair value is around half the current price when you assume it is growing at 10-15%. Since i believe growth will stall next year its true intrinsic value is much lower, but around 70$ is my short target.
Title: Re: FB - Facebook
Post by: giofranchi on August 02, 2016, 08:11:40 AM
Since i believe growth will stall next year its true intrinsic value is much lower, but around 70$ is my short target.

Ok... I guess we won't have to wait much longer to see! ;)
If you are right, and growth stalls next year, as I have already said, I'll sell my position at a very small loss (even if the share price should actually reach your short target).

Cheers,

Gio
Title: Re: FB - Facebook
Post by: TorontoRaptorsFan on August 02, 2016, 12:15:43 PM
Hi Gio,

Your portfolio is starting to resemble a mutual fund. Why do you have so many positions?
Title: Re: FB - Facebook
Post by: PatientCheetah on August 02, 2016, 01:03:09 PM
I think you are overestimating Zuckerberg. For me this is a rich kid throwing money at everything he likes, without looking at price paid. Thats the opposite of the guy that i want to run my business. While FB itself is a nice business, capital allocation is the weak point here. I can`t see that he bought anything that will throw off a profit anytime soon. Facebook itself is out of style for the young kids already and the facebook generation is getting older and more wary about what happens with their data. I really doubt that Facebook will exist in the current form with the current number of users 10 years from now and can imagine that we are already close to peak earnings here. I will add to my puts on every pop higher, valuation is out of reality when you compare it to Google.

I remember people saying that Zuckerberg is out of his mind when he offered $4bil for snapchat. If snapchat actually accepted, it would have been a slam dunk. Great CEOs are also great strategists, they actively eliminate future threats by either crushing or buying future competitions before their cashflow potential become evident.
Title: Re: FB - Facebook
Post by: frommi on August 02, 2016, 09:48:08 PM
I remember people saying that Zuckerberg is out of his mind when he offered $4bil for snapchat. If snapchat actually accepted, it would have been a slam dunk. Great CEOs are also great strategists, they actively eliminate future threats by either crushing or buying future competitions before their cashflow potential become evident.

If buying the competition is necessary, what does that tell me about the sustainability of the moat?
Title: Re: FB - Facebook
Post by: ScottHall on August 02, 2016, 10:01:14 PM
I remember people saying that Zuckerberg is out of his mind when he offered $4bil for snapchat. If snapchat actually accepted, it would have been a slam dunk. Great CEOs are also great strategists, they actively eliminate future threats by either crushing or buying future competitions before their cashflow potential become evident.

If buying the competition is necessary, what does that tell me about the sustainability of the moat?

There is a difference between necessary and beneficial.
Title: Re: FB - Facebook
Post by: giofranchi on August 03, 2016, 12:38:07 AM
Hi Gio,

Your portfolio is starting to resemble a mutual fund. Why do you have so many positions?

Given the fact I think of the Malone family of businesses as just one business, my portfolio right now is made of 14 businesses: most would define such portfolio a concentrated one!

Among the companies I think are great businesses I don’t hold a strong conviction about which will perform better in the next 5 years. Therefore, I like to own them all.
I might have more conviction about their price (which among them are better bargains right now), and that is reflected in the position sizing I choose.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: giofranchi on August 03, 2016, 12:53:22 AM
But size is always relative, and FB’s market is potentially huge.

Another reason I think size might not be an unsurmountable obstacle for companies like GOOG and FB is that their revenues right now come from just one market: online advertising.
Not only that market could still grow a lot imo, but GOOG and FB could also become broader technology companies and start generating revenues in other markets. If the GOOG guys and Zuckerberg are good enough to follow in Bezos' footsteps, who has transformed AMZN from an online retailer into a true technology company with AWS.
Of course, if like frommi you believe Zuckerberg is no good, than you also think this transformation will never happen successfully.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: ajc on August 03, 2016, 05:01:01 AM

I'm curious what your estimate of upside is.  My optimistic scenario had them earning $7.00 at peak earnings.  Unless they can capture more of a their users' time and attention than they do currently, I couldn't model them earning much more than that.  Based on that peak earnings estimate, the valuation becomes pretty tough to defend at a ~$350mm market cap.

Of course FB valuation makes sense only if it keeps growing. Because of the huge network effects it enjoys (the larger the number of users, the more new users will be drawn in), I think its users might still grow quickly for some time. And what about all those other technologies Zuckerberg has bought? How much will they grow? And those $23 billion in cash? How successfully will Zuckerberg use them?
Answer: I really don’t know. But I believe Zuckerberg has by now proven to be among the most prescient technology and business leaders in the world and will probably go on making smart moves for a very long time.
This being said, the position I have opened is small, and here is what I intend to do:
a) FB’s growth remains strong and its stock price keeps rising: I’ll keep buying small amounts when I have some cash.
b) FB’s growth slows down materially: I’ll admit I was wrong, and sell out at a loss (which will be very small).
c) FB’s growth remains strong and its stock price falls in a general market decline: I’ll add aggressively.

Cheers,

Gio

I think you are overestimating Zuckerberg. For me this is a rich kid throwing money at everything he likes, without looking at price paid. Thats the opposite of the guy that i want to run my business. While FB itself is a nice business, capital allocation is the weak point here. I can`t see that he bought anything that will throw off a profit anytime soon. Facebook itself is out of style for the young kids already and the facebook generation is getting older and more wary about what happens with their data. I really doubt that Facebook will exist in the current form with the current number of users 10 years from now and can imagine that we are already close to peak earnings here. I will add to my puts on every pop higher, valuation is out of reality when you compare it to Google.


According to Credit Suisse, and by giving Instagram a standard asset-light tech profit margin, Instagram will pay for its original purchase price in profit this year alone.
The deep learning/AI department that they bought, run by Yann Lecun, has also already paid for itself by improving the algorithms which focus on improving ad conversion rates.
So, actually Facebook have made purchases that are clearly profitable.

Not to mention that Messenger is only starting to be monetized now. WeChat has fewer MAUs and an estimated ARPU of $7. North American and European users (Messenger) are probably worth about at least double, if not triple, your average Chinese user. That's going by Facebook's latest earnings presentation, with 1 or 2 market-specific caveats. Which means Messenger's billion MAUs today have between $14B to $21B of unmonetized annual revenue.
Considering that Whatsapp has even more users, and they paid $22B for it, it also doesn't look overpriced even if you consider the markets it's in and the fact that it likely overlaps with Messenger to a decent extent.

Having said all that, I think the price is stretched right now so I only want to buy after the stock gets hit hard ($70 would be excellent!), but intrinsically the company is really great at what it does. They're basically following the Microsoft playbook from back in the day. Their moat isn't their original products, so much as it's their ability to relentlessly copy their competitors (Newsfeed - Twitter, new Instagram - Snapchat, new Messenger - WeChat) in a way that provides existing users with an equal or superior experience without ever having to leave a Facebook platform.
This is Word, Excel, and Internet Explorer all over again, though they're only now beginning to focus on monetization because they've always said they want 1 billion users on a platform before that happens.


Title: Re: FB - Facebook
Post by: fareastwarriors on August 03, 2016, 06:04:24 PM
WhatsApp: Let’s chat

http://www.ft.com/cms/s/0/ea17605e-4846-11e6-8d68-72e9211e86ab.html#axzz4GJo4UG3m (http://www.ft.com/cms/s/0/ea17605e-4846-11e6-8d68-72e9211e86ab.html#axzz4GJo4UG3m)

The app acts as an alternative internet hub in many emerging markets — but can it make a profit?
Title: Re: FB - Facebook
Post by: Deepdive on August 03, 2016, 07:24:28 PM
http://www.forbes.com/sites/kathleenchaykowski/2016/08/01/instagram-the-50-billion-grand-slam-driving-facebooks-future-the-forbes-cover-story/#57f9acb6278f

Everyone thought that Zuckerberg was crazy for buying Instagram for $1bn, but now everyone's eating humble pie. I don't think Instagram would be where it is now without Facebook's resources. Liike look at Microsoft and Yahoo's acquisitions, real synergy exists in the case of Facebook and Instagram. Wonder what's going to happen with Linkedin and Microsoft now.
Title: Re: FB - Facebook
Post by: fareastwarriors on September 23, 2016, 08:26:36 AM
Facebook Says It Gave Advertisers Inflated Video Metrics
http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics (http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics)
Title: Re: FB - Facebook
Post by: glorysk87 on September 23, 2016, 08:32:30 AM
Facebook Says It Gave Advertisers Inflated Video Metrics
http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics (http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics)

I don't think this is a big deal.  Marketers have been overwhelmingly positive regarding the ROI's they're earning on Facebook's platform. They buy advertising based on ROI's, not based on FB's reporting metrics.
Title: Re: FB - Facebook
Post by: frank87 on September 23, 2016, 09:08:11 AM
Facebook Says It Gave Advertisers Inflated Video Metrics
http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics (http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics)

I don't think this is a big deal.  Marketers have been overwhelmingly positive regarding the ROI's they're earning on Facebook's platform. They buy advertising based on ROI's, not based on FB's reporting metrics.

How do they measure these ROIs? Curious because I've always been fairly skeptical about the benefits of video ads.
Title: Re: FB - Facebook
Post by: winjitsu on September 23, 2016, 12:14:45 PM
Facebook Says It Gave Advertisers Inflated Video Metrics
http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics (http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics)

I don't think this is a big deal.  Marketers have been overwhelmingly positive regarding the ROI's they're earning on Facebook's platform. They buy advertising based on ROI's, not based on FB's reporting metrics.

How do they measure these ROIs? Curious because I've always been fairly skeptical about the benefits of video ads.

I can confirm glorysk87's comment. I am currently working with a portfolio company that is using an ad agency and the ad budget will almost entirely be on facebook ads. Facebook has a scary amount of info on people that allows for very specific targeting. Also learned twitter is low ROI, instagram was low, but getting better.

When creating a fb ad, you set a goal such as click through to website, or likes on your fb page, or email address signup to your mailing list. ROI in the advertising world is the inverse of cost of customer acquisition, e.g. we spent $100 and got 50 email sign ups. Increasing ROI means decreasing COCA.
Title: Re: FB - Facebook
Post by: valueinvesting101 on September 23, 2016, 01:17:16 PM
Facebook Says It Gave Advertisers Inflated Video Metrics
http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics (http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics)

I don't think this is a big deal.  Marketers have been overwhelmingly positive regarding the ROI's they're earning on Facebook's platform. They buy advertising based on ROI's, not based on FB's reporting metrics.

How do they measure these ROIs? Curious because I've always been fairly skeptical about the benefits of video ads.

I can confirm glorysk87's comment. I am currently working with a portfolio company that is using an ad agency and the ad budget will almost entirely be on facebook ads. Facebook has a scary amount of info on people that allows for very specific targeting. Also learned twitter is low ROI, instagram was low, but getting better.

When creating a fb ad, you set a goal such as click through to website, or likes on your fb page, or email address signup to your mailing list. ROI in the advertising world is the inverse of cost of customer acquisition, e.g. we spent $100 and got 50 email sign ups. Increasing ROI means decreasing COCA.

What happens if lot advertisers are using FB and everyone is getting fair amount of likes and email addresses or even clicks on websites. Does that translate into increased revenue for the company? Is the relation sticky over last 5 years or declining.
Title: Re: FB - Facebook
Post by: winjitsu on September 23, 2016, 03:48:10 PM
What happens if lot advertisers are using FB and everyone is getting fair amount of likes and email addresses or even clicks on websites. Does that translate into increased revenue for the company? Is the relation sticky over last 5 years or declining.

Just to be clear there are two types of ROIs. When I talk to my ad buyer, their ROI is to get the cost per email lower (or whatever metric). We gave them a budget, call it 100k, and their goal is to play around with different ads/messaging until they find something that works really well, then spend all that money on placing that ad. Lets call this advertising ROI.

My ROI, as an investor or business, is conversion of those emails into sales, then analyze my overall profit margin/cost. To be honest, I think interests aren't totally aligned in this industry.

I think ad buyers will go wherever the cost for acquisition is lowest. Based on my conversation with a few firms, it seems the preference is for facebook and google. Facebook's advantage is their data that they have on you, which I see as the moat and hard for the other platforms to replicate (everything you like, what articles you read etc) and their scale. See http://ghostinfluence.com/the-ultimate-retaliation-pranking-my-roommate-with-targeted-facebook-ads/. Most of the time, this highly targeted advertising will make it the cheapest option.

There really isn't anything preventing you from moving to a different platform. With larger ad budgets, you'll see a mix of facebook, google adwords, and some playing around with instagram/snapchat/twitter/taboola etc. In addition to ad buyers, we're using a PR firm to get us into top publications/websites. This is clearly a substitute (but ultimately ads + PR work together). Influencer/celebrity marketing also another substitute (see http://www.bloomberg.com/news/articles/2015-07-14/how-daniel-wellington-made-a-200-million-business-out-of-cheap-watches).

Anyways that's all I know on the client side of things. Best of luck on your research.

Title: Re: FB - Facebook
Post by: SlowAppreciation on September 23, 2016, 04:06:26 PM
Facebook Says It Gave Advertisers Inflated Video Metrics
http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics (http://www.bloomberg.com/news/articles/2016-09-23/facebook-says-it-gave-advertisers-inflated-video-view-metrics)

I don't think this is a big deal.  Marketers have been overwhelmingly positive regarding the ROI's they're earning on Facebook's platform. They buy advertising based on ROI's, not based on FB's reporting metrics.

I worked in the industry for a number of years, and while many agencies/advertisers are probably quite upset, I don't think it changes much in the long run. Advertisers are still going to spend on FB. This is a blip.

However, the industry as a whole has many skeletons in the closet. Digital advertising is full of fraud, hucksters masquerading as "tech" companies, and wasted advertising spend. Further, you have to trust the numbers reported by FB and GOOG for what they are. While they—and especially FB—go to great lengths to ensure their walled gardens are clean, I think many would be shocked at how inefficient and wasteful digital advertising is.

Despite all the promises of technology being able to target more precisely, spend more efficiently, and measure results more granularly, I'm not convinced the advertising industry of today is any more valuable than that of 50 years ago. Brands are still wasting 50% of their budgets, and we still don't know which half.

But I do know that advertising spend has to go somewhere, and that over time it will move more and more online. This only benefits Facebook, and a small change in one metric isn't going to change that.
Title: Re: FB - Facebook
Post by: JayGatsby on September 23, 2016, 04:36:08 PM
Nobody else sees a precipitous drop in original content on their facebook walll? I have a short position and am trying to be objective. I realize that revenue growth has been phenomenal.
Title: Re: FB - Facebook
Post by: DCG on October 10, 2016, 01:18:47 PM
New revenue driver for Facebook. Workplace by Facebook (https://workplace.fb.com/)
Title: Re: FB - Facebook
Post by: ajc on October 10, 2016, 03:37:11 PM

New revenue driver for Facebook. Workplace by Facebook (https://workplace.fb.com/)


I'd prefer it if they got the new Marketplace feature to take off, but if Workplace could succeed then that'd clearly be great too. My reasoning is that most countries still need Taobao/eBay/Craigslist type platforms in order for e-commerce to become a simpler thing. Facebook is obviously extremely well-positioned for this because they have a large enough concentration of users for the network effects to work quickly and mean something, and they already have the required online infrastructure. Even if they can only establish themselves as the 2nd biggest e-commerce business in a few nations where big e-commerce companies already exist (eg. Nigeria with Jumia), that'd still be a massive long-term win for the company.

If you look at the business model like those listed above where escrow accounts are often used to build user trust in the system, you can also see how Facebook would be the perfect partner because it's the only place that basically represents your real world identity online, it has the technology to handle money, and it has a globally-known, reliable brand. The company already has money transmitter licences in the US and elsewhere and now with Messenger enabling payments, it's becoming increasingly evident that they're competing like crazy to get into this arena. Messenger's hiring of Anand Chandrasekaran was definitely a good move in this regard, given that the guy is super smart and has worked at the top of both Bharti Airtel (messaging) and Snapdeal (e-commerce) in charge of creative product solutions.

A few more points to buttress this argument: Online retail is currently a far bigger market than apps that address inefficiencies in workplace communication and numerous other activities. Not to throw shade at Slack, which I think is an excellent company, but there's probably a limit to how much a business will pay per employee. I'm open to having my ignorance exposed here by someone with more expertise, but I think it'll take a while before Slack, or Asana, or Facebook Workplace can charge more than $50 per employee in the developed world for their services and clearly elsewhere that number will be far less. That said, I appreciate the fact that for every company Facebook can sign up to this service the more likely it is they'll have a shopfront page as well and transact via the platform. So these two Facebook services are no doubt totally aligned.

Business Insider released a story just the other day based on a Morgan Stanley report that shows Amazon users spend $544 per year and Amazon Prime users spend $2486 annually. If you just take a rough look at numbers in China, or a number of other less-developed countries it's hard to argue that for now e-commerce isn't a far bigger market opportunity. Clearly GMV is not in any way equivalent to revenue, but I think this is where it gets somewhat interesting. If you take a look at Alibaba for instance and Alipay specifically, you'll see a couple things....

One is that Alipay is the biggest player in a total and growing market of $500 billion worth of transaction volume per quarter. Another is that they offer asset management services for individuals via Yu'e Bao which currently has $100 billion of AUM and increasing. Finally, they also make microloans to Taobao sellers, offer insurance products, have their own bank (MYBank) for the unbanked in rural areas, and own a credit scoring business. I think when you put that those kind of businesses together with maybe an extremely minimal fee on transactions or some type of targeted advertising revenue for Facebook to grow its existing advertising income and you multiply that by a few billion people, then the potential for a business like that if executed properly might be really significant.

Having gone through that though, I do think that what Slack, Asana, and now Workplace do and will try to do is an excellent opportunity. For big corporations that have annual earnings per employee in the 10's of 1000's of dollars, I don't see a good reason why they shouldn't pay $100 or $200 per year for something that can be shown to increase productivity and improve decision-making and communication. So, Workplace of Facebook can pull it off is unarguably a really nice market to go after especially because the margins are so much better. Still though, for the reasons listed above Messenger, Whatsapp, and businesses like Marketplace remain my favorite aspects of the company's future growth prospects.


Title: Re: FB - Facebook
Post by: hooplaer23 on November 14, 2016, 10:16:51 AM
FB looks pretty attractive at this price, trading at about 22x consensus 2017 EPS.  Management has signaled pretty clearly that growth will come down from 50%+ range as they slow down increases in ad-load, but the growth should still be strong relative to the valuation. 
Title: Re: FB - Facebook
Post by: abyli on November 14, 2016, 10:18:07 AM
FB looks pretty attractive at this price, trading at about 22x consensus 2017 EPS.  Management has signaled pretty clearly that growth will come down from 50%+ range as they slow down increases in ad-load, but the growth should still be strong relative to the valuation.

Keep quiet please.... :-)
Title: Re: FB - Facebook
Post by: Liberty on November 14, 2016, 05:57:55 PM
FB looks pretty attractive at this price, trading at about 22x consensus 2017 EPS.  Management has signaled pretty clearly that growth will come down from 50%+ range as they slow down increases in ad-load, but the growth should still be strong relative to the valuation.

Keep quiet please.... :-)

I don't think this forum can move the price on a $300bn+ company ;)
Title: Re: FB - Facebook
Post by: fareastwarriors on November 14, 2016, 06:16:30 PM
FB looks pretty attractive at this price, trading at about 22x consensus 2017 EPS.  Management has signaled pretty clearly that growth will come down from 50%+ range as they slow down increases in ad-load, but the growth should still be strong relative to the valuation.

Keep quiet please.... :-)

I don't think this forum can move the price on a $300bn+ company ;)

Whale watch

Title: Re: FB - Facebook
Post by: LounginMKL on November 14, 2016, 06:33:32 PM
*pick up the phone* "Blue horseshoe loves Facebook."
Title: Re: FB - Facebook
Post by: Joe689 on December 07, 2016, 12:46:26 PM
Initiating a position on this pullback.   My company started advertising on Facebook almost 6 months.  I have paid half what I have paid elsewhere and see over double the results.  Great ROI.    The key here is the "targeting".   Facebook unlike Google and others, allows me to target my audience with a fine comb.   Our company is very niche based, and being able to easily, and accurately target a certain age group, gender,  education level, and even specific interests is HUGE for us.  We have cut our google budget in half and have doubled our Facebook budget.    I read that only 4 million advertisers on Facebook. However, there are 60 million businesses that have pages but are not yet advertising.  Based on my results, I expect their advertising portion of their revenue to outperform.

On a side note, I really do not enjoy Facebook spending less than hour per week.   But I am sort of an introvert, antisocial.    But I need an account.   Keeping up connections is huge.   People announce their new baby on FB before making phone calls.   If you are not on FB, you miss major life events of your friends and family!   Facebook will not shrink for a very very long time IMO
Title: Re: FB - Facebook
Post by: John Hjorth on January 19, 2017, 02:19:43 AM
Facebook to build its third server center outside US in Odense (http://jyllands-posten.dk/indland/ECE9302496/facebook-loefter-sloeret-for-milliardinvestering-bygger-stort-datacenter-i-odense/). It's actually just in my back yard, just about 7 kms from me. This will be very good for the city, and for the regional utility Energi Fyn (https://www.energifyn.dk/om-energi-fyn/presse-og-nyheder/nyheder/2017/19-01-2017-facebook).
Title: Re: FB - Facebook
Post by: Liberty on February 21, 2017, 08:10:01 AM
https://stratechery.com/2017/manifestos-and-monopolies/
Title: Re: FB - Facebook
Post by: ajc on February 21, 2017, 11:49:43 AM


https://stratechery.com/2017/manifestos-and-monopolies/



I call bullshit.

I read the manifesto when it came out and it was fine. I think Facebook becomes the equivalent of a real world passport or ID document and that's all to the good. It's the obvious solution to encourage global citizenship over national citizenship.

Part of what Zuckerberg seemed to get at is Facebook is ideally situated to allow people to participate directly in the political process instead of being represented by others. A few 100 years ago only royals and land-owners had the vote. Currently we have representative democracy. Recently, India has seen a push for voting via SMS. Facebook is the best platform available for this stuff. All of which goes a long way to contradicting Thompson's point because what's more empowering and decentralized than that.

Another thing Thompson completely misses is that Facebook's recent actions on security authentication and news accuracy are actually consistent with creating a fair and responsible environment for all. Far more so than most governments and countries do. So, how exactly is this a problem?  Why complain about a bigger system that's way better. His view of government's relative purity and efficiency is hopelessly naive, and they're clearly the only real alternative available to us.

The other point is a system with a number of big players is not naturally better than one with a dominant player. What matters is the commitment and ability of either to a working system with high standards that creates the most good. Imagine for a second that Facebook was limited in size, and Twitter as well as Snapchat were given extra space. Does anyone think Dorsey and Spiegel are nearly as reflective and conscientious about issues of speech, fairness, and good governance?

Dorsey can't even ban racists, trolls, and every other type of asshole off of his service even when they're openly pointed out, and while Spiegel is not that bad there are some pretty messed up issues at Snap regarding how they keep employees in the dark, fire entire departments on a whim, and how management plans to not give ordinary shareholders a single voting right. Thanks, but Facebook is easily the best existing option for a global online community - and that definitely includes any existing government programs. Maybe one reason they're big is their integrity and professionalism, not the other way around?

So, Thompson's argument is stupid because it applies a silly formula instead of judging the issues on their merits. The telecom business sucks at customer service even with two very big players and two mid-size ones, and Amazon rocks even though it almost solely dominates e-commerce. The issue is culture, execution, and incentives, not size. Especially at the level that Thompson is talking about.

I'm so far deep in the opposing camp, I'm practically underground. Thompson's argument is dangerous and based on some incredibly nonsensical assumptions and silly reasoning. The world would be far better off with a fair system run by a benevolent and ever so slightly dictatorial company, than by a collection of companies/governments most of whom don't know shit about execution, openness, participation, or all of the above. If Facebook's quality levels drop off then lets talk, but in the meantime it's a safe environment and delivery that's the priority.

And, if it weren't the case, people would simply leave Facebook and go to the next best alternative no matter how small. That would then become the new dominant player. It's how tech works and why companies in the space almost always have to compete harder than anyone to stay ahead.

Does anyone other than Thompson really think every Facebook weakness won't be targeted by some new startup from now until forever? His arguments here are moronic on so many levels, it really is incredibly hard to know whether he's actually being serious or if he's so busy writing everyday that he occasionally prefers simply not to think about what he's doing at all.



Disclosure: I own Facebook stock.

Title: Re: FB - Facebook
Post by: abyli on February 21, 2017, 12:17:41 PM


https://stratechery.com/2017/manifestos-and-monopolies/



I call bullshit.

I read the manifesto when it came out and it was fine. I think Facebook becomes the equivalent of a real world passport or ID document and that's all to the good. It's the obvious solution to encourage global citizenship over national citizenship.

Part of what Zuckerberg seemed to get at is Facebook is ideally situated to allow people to participate directly in the political process instead of being represented by others. A few 100 years ago only royals and land-owners had the vote. Currently we have representative democracy. Recently, India has seen a push for voting via SMS. Facebook is the best platform available for this stuff. All of which goes a long way to contradicting Thompson's point because what's more empowering and decentralized than that.

Another thing Thompson completely misses is that Facebook's recent actions on security authentication and news accuracy are actually consistent with creating a fair and responsible environment for all. Far more so than most governments and countries do. So, how exactly is this a problem?  Why complain about a bigger system that's way better. His view of government's relative purity and efficiency is hopelessly naive, and they're clearly the only real alternative available to us.

The other point is a system with a number of big players is not naturally better than one with a dominant player. What matters is the commitment and ability of either to a working system with high standards that creates the most good. Imagine for a second that Facebook was limited in size, and Twitter as well as Snapchat were given extra space. Does anyone think Dorsey and Spiegel are nearly as reflective and conscientious about issues of speech, fairness, and good governance?

Dorsey can't even ban racists, trolls, and every other type of asshole off of his service even when they're openly pointed out, and while Spiegel is not that bad there are some pretty messed up issues at Snap regarding how they keep employees in the dark, fire entire departments on a whim, and how management plans to not give ordinary shareholders a single voting right. Thanks, but Facebook is easily the best existing option for a global online community - and that definitely includes any existing government programs. Maybe one reason they're big is their integrity and professionalism, not the other way around?

So, Thompson's argument is stupid because it applies a silly formula instead of judging the issues on their merits. The telecom business sucks at customer service even with two very big players and two mid-size ones, and Amazon rocks even though it almost solely dominates e-commerce. The issue is culture, execution, and incentives, not size. Especially at the level that Thompson is talking about.

I'm so far deep in the opposing camp, I'm practically underground. Thompson's argument is dangerous and based on some incredibly nonsensical assumptions and silly reasoning. The world would be far better off with a fair system run by a benevolent and ever so slightly dictatorial company, than by a collection of companies/governments most of whom don't know shit about execution, openness, participation, or all of the above. If Facebook's quality levels drop off then lets talk, but in the meantime it's a safe environment and delivery that's the priority.

And, if it weren't the case, people would simply leave Facebook and go to the next best alternative no matter how small. That would then become the new dominant player. It's how tech works and why companies in the space almost always have to compete harder than anyone to stay ahead.

Does anyone other than Thompson really think every Facebook weakness won't be targeted by some new startup from now until forever? His arguments here are moronic on so many levels, it really is incredibly hard to know whether he's actually being serious or if he's so busy writing everyday that he occasionally prefers simply not to think about what he's doing at all.



Disclosure: I own Facebook stock.

Well said. Thumbs up!
Title: Re: FB - Facebook
Post by: roark33 on February 21, 2017, 12:21:46 PM
Thompson is paid to write, so he always reaches to be heard, i.e. taking fairly extreme points on issues. 
Title: Re: FB - Facebook
Post by: Liberty on February 21, 2017, 12:58:38 PM
I disagree, I think Thompson's arguments are much stronger than yours, and his position and prescriptions aren't even that extreme when you consider how a single controlling shareholder will control the platform on which a very very large fraction of global communications and access to news will take place, on a medium where things are pushed to people rather than pulled. You also project positions on Thompson that he doesn't actually hold. He even said that FB had incentives to try to stay fair and that he thought Zuckerberg had good intentions, but massive centralization of power + strongest network effect the world has ever seen + unforeseen consequences + implicit biases might be something we'll regret down the road. A lot of the things that you like about Facebook should be encouraged, but it shouldn't be given total carte blanche to own people's digital lives, which are increasingly just as real and important as their offline lives. Facebook is a business, and it might not always be so benign or run by trustworthy people.

Of course the business argument if you're just thinking about that is for facebook to be left alone, but as someone who likes liberty and dislike those with too much power, I'm not sure that the best argument from a societal point of view. Industrial-era regulation isn't adapted to digital world. I think social graph portability should be a minimum so that people can at least own the IP of their "real world social networks" and use them on whichever service they want to use, rather than be trapped to the one that got critical mass first in this winner-takes-all networked world. That'd at least create the possibility of an escape valve if things go really bad, and it would keep FB on its toes a bit.
Title: Re: FB - Facebook
Post by: ScottHall on February 21, 2017, 01:18:38 PM
Seems like a reason to get long to me.
Title: Re: FB - Facebook
Post by: Liberty on February 21, 2017, 01:25:40 PM
Seems like a reason to get long to me.

Probably. Wasn't looking at it as an investment. It's not all about stocks in life.

When it comes down to it, Facebook is an advertising company. I'm not sure an ad company should have this much global power. Might be fine for ten years, but it doesn't sound like such a good idea to have it entirely entrench itself...
Title: Re: FB - Facebook
Post by: ajc on February 21, 2017, 02:45:49 PM


I disagree, I think Thompson's arguments are much stronger than yours, and his position and prescriptions aren't even that extreme when you consider how a single controlling shareholder will control the platform on which a very very large fraction of global communications and access to news will take place, on a medium where things are pushed to people rather than pulled. You also project positions on Thompson that he doesn't actually hold. He even said that FB had incentives to try to stay fair and that he thought Zuckerberg had good intentions, but massive centralization of power + strongest network effect the world has ever seen + unforeseen consequences + implicit biases might be something we'll regret down the road. A lot of the things that you like about Facebook should be encouraged, but it shouldn't be given total carte blanche to own people's digital lives, which are increasingly just as real and important as their offline lives. Facebook is a business, and it might not always be so benign or run by trustworthy people.

Of course the business argument if you're just thinking about that is for facebook to be left alone, but as someone who likes liberty and dislike those with too much power, I'm not sure that the best argument from a societal point of view. Industrial-era regulation isn't adapted to digital world. I think social graph portability should be a minimum so that people can at least own the IP of their "real world social networks" and use them on whichever service they want to use, rather than be trapped to the one that got critical mass first in this winner-takes-all networked world. That'd at least create the possibility of an escape valve if things go really bad, and it would keep FB on its toes a bit.



I'm sure people like you and Thompson would do a great job. Why not call for the break-up of others too though. Payments is a form of social network if messaging is. After all, it's all just bits of data moving between people. And that data set gives as much insight as Facebook's.

So you and Thompson are both calling for Apple to either get rid of iMessage or Apple Pay, right? I mean, one of the two has to go under your infinitely wise ruling. Same with Google with their payments efforts and YouTube. Or does YouTube not qualify, but Instagram does? We're just all waiting for experts like you and Thompson to draw the lines fairly here so that us plebians can know what we need to do next.

Silicon Valley will thank you guys though, because now VCs would only be able to invest in a very limited amount of companies. Of course, you guys know that a large amount of startups get acquired instead of ever going public. We're talking 100's of companies each year in the million dollar to a few hundred million dollar range. Only problem is, these companies are often all of a kind. Like social media startups, or payments startups, and so on. Only very few of those companies would now exist because of folks like you and it would send a chill through the tech industry that would knock it back to the dark days after the Dotcom crash. That's fine though, because you all know exactly what you're doing.

Obviously it would be sad that Shenzen, London, and other cities would then swoop in and hire all those engineers that otherwise would've been working in America because of all the new restrictions on purchasing social media, messaging, payments, and other companies, but you'd be doing us such a great service that it would be a price we'll gladly pay.

I think the best part is that after dampening the entire culture and investment levels across Silicon Valley, you'd also be disadvantaging American companies against their Chinese counterparts who'd have no such restrictions - because clearly at this early stage of the global social media industry, that'd be completely fucking stupid. So, after the US big five had one shot each at a social messaging app, and a payments app, and most of them flopped, then Alibaba and Tencent would have their pick of all of the rest worldwide and they could have as many bites of the cherry as they'd like. It's great you two understand so well how venture bets and actual acquisition strategies of big companies play out on a daily basis in the real world.

So yeah, you're definitely right. We should just kneecap the best and biggest US companies in the 2nd inning of the global social media landgrab so your notions of how the world should work can be catered too. Fuck all the hardworking people who take many bets on the wrong things until they finally get it right, or who want to work in technology, because they'd simply be collateral damage of your enlightened policies and what could be more honorable than that.

Your laws will be the best no doubt. Regulations that will make us win again. Bigly.


Title: Re: FB - Facebook
Post by: Liberty on February 22, 2017, 04:15:53 AM
So many strawmen and so much projection, we're not even talking about the same thing...

If we ever meet, let's discuss this over a beer or whisky.
Title: Re: FB - Facebook
Post by: ajc on February 23, 2017, 04:22:02 AM


So many strawmen and so much projection, we're not even talking about the same thing...

If we ever meet, let's discuss this over a beer or whisky.



Whatever you say, Dr. Freud.

Give my seat to a homeless person. They need the sustenance, and you sure as shit need the reality check.


Title: Re: FB - Facebook
Post by: Liberty on February 23, 2017, 04:27:30 AM
Thank you, that's much better.
Title: Re: FB - Facebook
Post by: Patmo on February 23, 2017, 12:33:24 PM
Holy snapperoni baloni, brotheroni, tune back the hissy meter a notch or 2, we can smell the foam dripping off your mouth through the monitor.
Title: Re: FB - Facebook
Post by: fareastwarriors on February 23, 2017, 12:41:33 PM
https://www.bloomberg.com/graphics/2017-snapchats-copycats/ (https://www.bloomberg.com/graphics/2017-snapchats-copycats/)
Title: Re: FB - Facebook
Post by: ajc on February 23, 2017, 01:21:30 PM


Holy snapperoni baloni, brotheroni, tune back the hissy meter a notch or 2, we can smell the foam dripping off your mouth through the monitor.



Aaah, Dad....

All I was going to say is Liberty's right. My idea is much better.
So, so, so, so, sooooo much better.
See, he's right - I'm better.

Can we get pizza now? I don't know why, but I'm ravenous.


Title: Re: FB - Facebook
Post by: Liberty on February 27, 2017, 09:47:58 AM
More discussion of FB:

http://exponent.fm/episode-105-the-most-political/
Title: Re: FB - Facebook
Post by: roark33 on February 27, 2017, 11:12:05 AM
I didn't know this existed, but my wife bought a pair of shoes, directly from an ad on instagram this weekend.  Three clicks. 

1. Shop now
2. Shoe size
3. Pay with Amazon

That's easily measured ROI for the company...

Also, shows a little disconnect with facebook, who should have my wife's credit card details, but instead has to rely on amazon. 

But, obviously amazing what facebook has done with instagram (incidentally, my wife commented the other day, "I don't think instagram has ads..."--zuck laughing all the way to the bank). 
Title: Re: FB - Facebook
Post by: LesPaul on February 27, 2017, 12:45:28 PM
I didn't know this existed, but my wife bought a pair of shoes, directly from an ad on instagram this weekend.  Three clicks. 

1. Shop now
2. Shoe size
3. Pay with Amazon

That's easily measured ROI for the company...

Also, shows a little disconnect with facebook, who should have my wife's credit card details, but instead has to rely on amazon. 

But, obviously amazing what facebook has done with instagram (incidentally, my wife commented the other day, "I don't think instagram has ads..."--zuck laughing all the way to the bank).

Instagram is nothing but ads. Maybe not in the conventional sense (although sponsored ads exist)... Whether it's your pal posting a picture of a fancy meal at the newest steakhouse or the beautiful places in Iceland that your crush visited on their last vacation... they are ads and they are enticing! Real people are acting as content creators for brands and they gladly do it for free (or status!)...then there are the influencers who do it professionally.

In fact, I feel these 'ads' are far more powerful than the regular ads on TV or even targeted AdWords ads because they feel more 'genuine'.
Title: Re: FB - Facebook
Post by: ScottHall on March 10, 2017, 06:03:39 PM
An old note of mine I found in my sent box, that I PMed Liberty on September 5th, 2014.

I don't think I'll ever be this right about the core thesis of something again, but it was nice to find and look back on. I should take better notes; most of my investing thoughts are lost to time.

--------------------------------------------------------------

The thesis is fundamentally very simple; I think the network effects associated with websites will end up resulting in most of the world's online ad spend congregating at just a handful of companies, creating a power law dynamic where a handful of sites account for the vast majority of the advertising spending while everyone else is going to fight for scraps.

If that is true, and you accept the premise that Facebook's network is solid, then the stock is cheap at current levels. Today, the largest website in the world is Google. Facebook is #2. Google accounts for approximately 33% of worldwide digital ad spending today, and around 10% of worldwide ad spending. Facebook, on the other hand, accounted for just 5.8% of worldwide digital ad spending in 2013 and 1.3% of total worldwide ad spending.

What's really interesting is Facebook's position in mobile ads in particular. When Facebook went public, mobile ad revenue was a negligible part of its business, but since the third quarter of 2012, mobile advertising has gone from 14% of the company's advertising revenue to 62% today. Although the company doesn't directly break out mobile advertising revenue for you in its press releases, it gives you enough information to do so by giving you the percentages.

I went back and sussed out mobile ads from traditional digital ads for every quarter since Facebook started reporting it. In the third quarter of 2012, Facebook generated $152.6 million in mobile ad revenue and $937.4 million in traditional ad revenue. Last quarter? Mobile ad revenue was $1.66 billion and traditional was barely over $1 billion.

That means that mobile ad revenue increased nearly 1,000% in eight quarters, while traditional digital advertising was up just 9%. In the past three quarters, Facebook's mobile ad revenue has increased 305%, 225%, and 153% year-over-year. The growth rate is very high, and I expect it will remain very high for quite some time for a few very simple reasons.

The first is that mobile advertising is very underrepresented when compared to a consumer's time spend on mobile devices. In 2013, 4% of advertising spend went to mobile, despite consumers spending 20% of their media-focused time (defined as time spent watching TV, listening to radio, reading print, time spent consuming media online on traditional devices and time spent consuming media on mobile devices) on mobile devices.

There's a huge gap to be filled just for ad spending to reflect where consumer habits are today, so I expect mobile will continue to take share from the other sources of media to better reflect those habits.

The second big driver is that I think the trend towards mobile will continue; we'll keep seeing people moving away from traditional media consumption channels and towards mobile, as has been the trend for some time. So not only will we see ad spending increase to try to more accurately reflect the time consumers are spending on these devices, we're likely to see the time consumers are spending on these devices continue to grow as well.

The third big driver is that, as one of the dominant mobile sites, Facebook will be one of handful of players that will capture the lion's share of these ad dollars. We're already seeing that happen; Facebook accounted for about 18% of all mobile ad spend in 2013, but the amount of money advertisers have been spending on mobile ads on Facebook has been growing faster than mobile ad spending has as a whole.

For example, eMarketer projects worldwide mobile ad spending to grow about 83% in 2014, but after the first two quarters, Facebook's own mobile ad revenue grew at about 180% year-over-year. So not only are they growing, they're taking huge share here.

So now you have the combination of a market that is growing very quickly, that is starting from a revenue base that is well below its fair share as measured by consumer time spent, and a company benefiting from unreal network effects that is substantially outgrowing that market, and that I'd say is very likely to be one of only a handful of winners here.

In my model, I assumed Facebook would reach about 11% of worldwide ad spend by 2028. Assuming some operating leverage, that gave me a valuation of a bit over $100 using a 10% cost of equity. That's a pretty big share of worldwide ad spend, but it's only about 10% more than what Google reached in 2013, so it's not unheard of for a dominant digital franchise to hit that mark. If it happens more quickly, obviously the stock is worth much more.

In any case, it's up for everyone to decide for themselves whether or not Facebook is sustainable. I think it is. It is also up to everyone else to determine whether they think the stock is expensive or not. By the superficial valuation metrics, it certainly looks it. I am of the opinion that the business is actually so dominant that today's price will prove to be relatively cheap in hindsight. I may be wrong.

That is a pretty straightforward version of how I look at the business. It is a dominant franchise in an insanely fast growing market where it's likely to be one of a few companies that reaps most of the rewards.
Title: Re: FB - Facebook
Post by: roark33 on March 10, 2017, 10:21:05 PM
This is really good, Scott....
Title: Re: FB - Facebook
Post by: Liberty on March 12, 2017, 11:59:41 AM
While we're publishing old private messages, here's my response to Scott from back then (this is an old opinion, so it doesn't necessarily reflect what I think now):

----

Thank you for sharing your thesis, Scott. It makes a lot of sense to me. I agree that Facebook has incredibly strong network effects that make it very hard, if not impossible unless FB kills itself by making big errors, for any competition to gain critical mass.

The main reason why I'm not that interested in FB are more qualitative. I see FB keep doing things that benefit itself over its users over and over again (for example, brand pages have ever declining organic reach, now down to low single digits -- so if you have 100k followers and post something, you might reach a few thousand of those despite having them explicitly follow you -- all in the name of trying to force these people to spend on ads to increase their organic reach. And once you spend once on ads, your organic reach falls further so that you are now on the ad treadmill. There are also problems with regular users, who end up with feeds full of Buzzfeed and auto-playing 'funny' videos, etc).

All that stuff can work for a while, but I'm afraid that you can only mistreat your customers so long. They won't necessarily go away in droves, but you also don't want to be perceived as Microsoft in the early 2000s (the Borg that everybody hates yet everybody uses) because the barriers to switching were much higher back then than today.  If platforms like Whatsapp and Line and such can get hundreds of millions of users in short periods of time, I wonder if a different kind of social paradigm, different enough from facebook, yet that canibalizes the time that people spend on FB, might not gain some traction at some point in the future when people dislike facebook a lot more than they do now.

That's just speculation, of course, but it does give me pause for the longer term.

It's a similar problem with Google. Their interests are not quite aligned with their users. Their goal is to learn as much as possible about you so they can show you as many targeted ads as possible. That conflict in the relationship can only get worse over time (you don't want to show fewer ads to your users over time... growth requires ever more). Apple, on the other hand, is pretty aligned with its customers. They want you to have a really good experience so you'll keep buying their hardware and services.

But as I said, all that is more on the qualitative side. I'm sure that Facebook still has a lot of growth potential, especially in mobile and geotargeted ads. It could be a very good investment.

Do you have some of the same reservations but they're overruled by the current growth inertia for the foreseeable future, or do you think those concerns aren't valid? Just curious.
Title: Re: FB - Facebook
Post by: bonkers on March 13, 2017, 08:05:33 AM
I'm not into FB at all, so I'm sure this sounds stupid to everyone who values their service.

I think people talk about "network effects" too lightly. Sure, there is a lot of value that almost everyone can be found on a single platform, and it is certainly appealing to people as 2 B people (and growing) currently use it.

But it's not like FB owns its users: If people find better things to do (like spending time on some cooler mousetrap), they can drop FB if not overnight then at least fairly quickly. I really cannot estimate the power of habit here, but I do know that sometimes people also stop doing certain things, like playing the yo-yo, or Nintendo Donkey Kong, or doing IRC... And I do know that considering the size of the prize, Silicon Valley is full of people trying to develop new things every day.

When anyone around the planet invents "the new thing" - e.g. a new way to reach other people - distribution over the Internet has no entry barrier. Microsoft has within its own turf played defense very well over the years, so maybe FB can as well. But they couldn't buy e.g. Snapchat because those guys didn't need to sell. What if they couldn't have bought WhatsApp? And people don't have to leave overnight, they can start using a few things first in parallel, sliding over.

So at some point time spent on FB will decline, then "first quitters" will stop using it altogether. Even if new people would still join, finally value to advertisers goes down. Revenues and profits go down. Multiple collapses.

I have no idea if and when this is going to happen, and how quickly it will happen. Without that, I cannot value FB with any certainty, and I doubt they will pay me enough dividends to cover the market cap before it happens. So for me it is not an investment, but pure speculation.
Title: Re: FB - Facebook
Post by: rishig on March 13, 2017, 09:04:56 AM
I'm not into FB at all, so I'm sure this sounds stupid to everyone who values their service.

I think people talk about "network effects" too lightly. Sure, there is a lot of value that almost everyone can be found on a single platform, and it is certainly appealing to people as 2 B people (and growing) currently use it.

But it's not like FB owns its users: If people find better things to do (like spending time on some cooler mousetrap), they can drop FB if not overnight then at least fairly quickly. I really cannot estimate the power of habit here, but I do know that sometimes people also stop doing certain things, like playing the yo-yo, or Nintendo Donkey Kong, or doing IRC... And I do know that considering the size of the prize, Silicon Valley is full of people trying to develop new things every day.

When anyone around the planet invents "the new thing" - e.g. a new way to reach other people - distribution over the Internet has no entry barrier. Microsoft has within its own turf played defense very well over the years, so maybe FB can as well. But they couldn't buy e.g. Snapchat because those guys didn't need to sell. What if they couldn't have bought WhatsApp? And people don't have to leave overnight, they can start using a few things first in parallel, sliding over.

So at some point time spent on FB will decline, then "first quitters" will stop using it altogether. Even if new people would still join, finally value to advertisers goes down. Revenues and profits go down. Multiple collapses.

I have no idea if and when this is going to happen, and how quickly it will happen. Without that, I cannot value FB with any certainty, and I doubt they will pay me enough dividends to cover the market cap before it happens. So for me it is not an investment, but pure speculation.

You are right when you say that Facebook doesn't its users. Isn't it true that none of the networks (ESPN, Discovery etc) owns their user base. Customers "choose" to spend their time on the network consuming content because they find value, not because they are captive. And as soon as don't find value, they may choose to not spend time there.

Close to two billion users are voting for Facebook by choosing to spend significant part of their day there. Facebook is smart to keep innovating to improve the core interactions that engages its users on its platform. They started with news feed, moved on to picture sharing, and now onto video content. And I don't think they are going to stop here. What could the future be like: Visit Shanghai and watch a Chinese user use WeChat to know what the future is like. Leave the question of investment on the side for now, and I suggest you keep an open mind to see this video on WeChat usage on China: http://a16z.com/2017/02/06/china-trends-2016-2017/

You are right that network effects can be disrupted. Any other network with a billion or two users can start stealing users time onto their platform. Having said that, it is incredibly hard. It is hard to convince a user and its 500 friends to move to the alternate platform that is still emerging i.e. does not have the rich content as Facebook. Users aren't simply on the platform because their friends are there. It is because of the finely curated content (using machine learning) on the platform. An emerging platform can't get the content without the users and users won't come without the content. Comparing the content to playing yo-yo or Donkey King is naive in my opinion.

The de-facto leading economists on multi-sided markets (i.e. what we call as markets driven by network effects) recently wrote a book called 'Platform Revolution'. I highly recommend reading this book. I am happy to point to more resources for learning if you are open.
Title: Re: FB - Facebook
Post by: glorysk87 on March 13, 2017, 11:02:47 AM
I do know that sometimes people also stop doing certain things, like playing the yo-yo, or Nintendo Donkey Kong, or doing IRC...

er. the difference is that none of those things have any sort of self-reinforcing network effect. which kind of makes me think you're misunderstanding the term network effect.
Title: Re: FB - Facebook
Post by: bonkers on March 13, 2017, 02:01:00 PM
As said, my apologies for being so stupid. I'm interested in the book, though. Should make an interesting read.

My naïve point was simply that people have spent their time in different ways over time, sometimes dropping widely popular things quite quickly.

As for the network effects, my point is that while they provide value to users, they do not provide protection for the system.

I remember from history IRC, ICQ, etc. as ways of communicating with other Internet users, early "social networks". They certainly had (small) network effects, but are now history.

One can argue that Facebook is now so big that it has become an unsurmountable titan. Well, maybe. But it's not only the sheer amount of users that counts, it's also the user experience, features, method of communicating, reputation, fads, cool...new innovation.

MySpace certainly had network effects from its 100 M users. I'm sure that was more than enough to cover 90 % of my friends and relatives. How many more do you really need, after certain point there's a diminishing marginal utility. Was that sufficient to protect them? No.

I'm out of my league here, but I understood eBay should have some of the strongest network effects out there to use for its advantage. Now I read merchants who once sold there have apparently decided to jump ship to sell at Amazon (that also has a bunch of "networks"). Most probably sell at both places, but the volumes are not 100 % eBay, they will be split.

I do appreciate the logic more content - more users - more content... But that would be much stronger if FB would own the content (and there were no close substitute). If the users create and own or just share others' content, they can take it with them to the next network. And as said, this does not have to happen in one big bang. It can happen gradually.

Snapchat started from a single user and grew from there while Facebook already had substantial scale and network effects. Didn't stop them. Considering the user demographics, I bet that almost all Snapchat users use both Snap AND Facebook, and have already cut down on their Facebook time.

Especially with consumer-centric technology, more often that not something comes out of left field, and things move quickly. I'm not saying one cannot make money owning FB shares, I'm just saying I find it highly speculative.

As an aspiring value investor, I'd like to know how everyone else values Facebook. P/Friends, perhaps?  ;)
Title: Re: FB - Facebook
Post by: JayGatsby on March 13, 2017, 03:06:35 PM
Facebook seems like one of those companies where in 10 years people will look back and the outcome will have seemed so obvious but half will have missed it.
Path 1: Facebook leverage its growing network by adding content and advertisers. Facebook becomes a platform of sorts for other forms of content. The data they have drives continually increasing ARPU.
Path 2: Facebook users tire of sharing their personal happenings with a "friend" base that grow increasingly disconnected with given the passage of time. Despite a growing user base, average time per user declines.

Currently I think you see both trends happening. User #s have continued to increase creating a "network effect" that in some ways requires people to be registered users. Facebook has leveraged that to sell ads that are very profitable for both them and the advertiser. Meanwhile original content is declining.
Title: Re: FB - Facebook
Post by: rishig on March 13, 2017, 04:12:18 PM
As said, my apologies for being so stupid. I'm interested in the book, though. Should make an interesting read.

My naïve point was simply that people have spent their time in different ways over time, sometimes dropping widely popular things quite quickly.

As for the network effects, my point is that while they provide value to users, they do not provide protection for the system.

I remember from history IRC, ICQ, etc. as ways of communicating with other Internet users, early "social networks". They certainly had (small) network effects, but are now history.

One can argue that Facebook is now so big that it has become an unsurmountable titan. Well, maybe. But it's not only the sheer amount of users that counts, it's also the user experience, features, method of communicating, reputation, fads, cool...new innovation.

MySpace certainly had network effects from its 100 M users. I'm sure that was more than enough to cover 90 % of my friends and relatives. How many more do you really need, after certain point there's a diminishing marginal utility. Was that sufficient to protect them? No.

I'm out of my league here, but I understood eBay should have some of the strongest network effects out there to use for its advantage. Now I read merchants who once sold there have apparently decided to jump ship to sell at Amazon (that also has a bunch of "networks"). Most probably sell at both places, but the volumes are not 100 % eBay, they will be split.

I do appreciate the logic more content - more users - more content... But that would be much stronger if FB would own the content (and there were no close substitute). If the users create and own or just share others' content, they can take it with them to the next network. And as said, this does not have to happen in one big bang. It can happen gradually.

Snapchat started from a single user and grew from there while Facebook already had substantial scale and network effects. Didn't stop them. Considering the user demographics, I bet that almost all Snapchat users use both Snap AND Facebook, and have already cut down on their Facebook time.

Especially with consumer-centric technology, more often that not something comes out of left field, and things move quickly. I'm not saying one cannot make money owning FB shares, I'm just saying I find it highly speculative.

As an aspiring value investor, I'd like to know how everyone else values Facebook. P/Friends, perhaps?  ;)

It's important to understand why MySpace fizzled out as a social network. When one builds a platform, it is very important to enforce rules that discourage or even ban users from bad behavior. MySpace completely lacked this - they focused on vanity metrics like user growth at any cost. And they ignored the bad behaviors (trolling, porn etc). The ads that became prevalent also started going downstream.

Unlike MySpace, Facebook was always focused on engagement, which is driven by things you mentioned - user experience, features, method of communicating, reputation, fads etc. More on this topic here if you are open to evidence that may be disconfirming to what you think: http://a16z.com/2016/07/16/network-effects-event/

On your comment on valuing Facebook, you do it like any other business: P/FCF. I am not sure what makes you say that one has to value it on P/friends? Do you know the level of free cash flow Facebook generates? And the kind of operating leverage the business has?
Title: Re: FB - Facebook
Post by: Jurgis on March 14, 2017, 04:48:02 AM
It's a similar problem with Google. Their interests are not quite aligned with their users. Their goal is to learn as much as possible about you so they can show you as many targeted ads as possible. That conflict in the relationship can only get worse over time (you don't want to show fewer ads to your users over time... growth requires ever more).

This is a good observation in re Youtube ad explosion that happened last couple years.
Title: Re: FB - Facebook
Post by: brendanb22 on March 14, 2017, 08:41:53 AM
Think the growth hinges on what FB can do with the additional digital advertising demand. The question is not if FB is a dominant ad force -- the targeting and scale is unparalleled and at this point you really can't avoid the platform if you're a digital advertiser. The real question is, how much growth in ad revenue is truly possible for Facebook? Are users' news feeds at peak ad capacity? Where will the additional ad demand go and will CPM's rise so that it is no longer pofitable to advertise for many of the players?

It looks like the latter is starting to be the case for many companies. In ecom, I've actually seen many instances, where FB is making more contribution margin than the company itself -- i.e. An ecommerce company selling shoes for $100 with a $50 margin (pre ads), will pay $30-$50 to acquire the customer (to FB at essentially 100% margin). At the end of the day, these companies are ultimately working for FB, and the vc funding they continue to get is going right into their pockets.

Unless facebook can continue to expand their ad offering  (they added audience network recently to do this for example), value of user base (through better targeting options, better engagement, new ad products, etc.), i'm not sure if they can sustain the growth rates in ad revenue they've seen.
Title: Re: FB - Facebook
Post by: giofranchi on April 19, 2017, 07:14:00 AM
Why Facebook Keeps Beating Every Rival: It’s the Network, of Course

https://www.nytimes.com/2017/04/19/technology/facebook-snapchat-instagram-innovation.html?_r=0

Quote
Do you know what happens when you control four of the biggest social networks in the world? You get to stop worrying about competitors beating you on features.

Mr. Zuckerberg had done it before: Every time some other social company came up with social features that people seemed to enjoy — Twitter with the follower mechanism, Foursquare with checking in to stuff, Vine with short videos, Periscope and Meerkat with live video — Facebook or one of its subsidiaries (or all of them) could just copy and co-opt.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: bonkers on April 19, 2017, 03:28:53 PM
I've done some more research, and one could say 'now I'm a believer':

With high likelihood, (net) additional users will join the network for at least a few more years, most people will spend a lot of time there also in the future, and its accurate targeting makes it a highly valuable, global media platform for advertisers. In the future they might even have some substantial ancillery businesses, a webshop or a subscription model for games and content, who knows. And they can probably play successfully "MSFT defence" against new entrants, copy them quickly, as they can't patent-protect.

And even if they have announced that the ad growth will slow down, I believe there is still room to increase the revenue/ad spot with an auction mechanism setting the right price, for the right advertisers. In fact, as advertisers increase their digital share, I expect FB to have substantial pricing power, even if they would not add another ad. But this is hard to know without knowing the IRRs of their advertisers, something brendanb22 referred to.

Quote
On your comment on valuing Facebook, you do it like any other business: P/FCF. I am not sure what makes you say that one has to value it on P/friends? Do you know the level of free cash flow Facebook generates? And the kind of operating leverage the business has?
That P/friends was just a lame joke to bring a memory or two from the late 1990s, my apologies.

However, the question still stands: I'm still interested how everyone values FB.

And no, I don't know what kind of operating leverage the business has, which is kind of my point. It should have a lot of op.leverage, but so far I cannot see it from the numbers. In fact, in my superficial look their GP% is improving,  but so far their SG&A (incl. R&D) of revenue shows no clear trend. To me it's still a guessing game.

Just for some perspective, FB made 12 B FCF last year, while even the mighty MSFT and GOOGL made some 25 B each, give or take. Where do you see FB's cash flows to go in few years' time, or longer term? And finally, will that make it a real bargain at today's 410 B market cap?
Title: Re: FB - Facebook
Post by: giofranchi on April 20, 2017, 02:03:20 AM
Just for some perspective, FB made 12 B FCF last year, while even the mighty MSFT and GOOGL made some 25 B each, give or take. Where do you see FB's cash flows to go in few years' time, or longer term? And finally, will that make it a real bargain at today's 410 B market cap?

I don't think many people know how to value FB: I certainly don't!

Malone called its business model the best in the world and here is a tweet I received yesterday by Jeff Stibel, author of "Breakpoint":
https://twitter.com/Stibel/status/854724773699502080

The best business model on a truly global scale and a leader at the helm who is making all the right moves. Imo very few people are estimating its rate of future growth correctly, nor for how long FB will be able to sustain it: 5 years ago a brain scientist and network expert like Jeff Stibel already was predicting that FB would become "wiser", but smaller...

I have a small position in case the market is still underestimating how fast and how long FB could keep growing.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: Spekulatius on April 20, 2017, 04:05:41 AM
Biggest risk is that someone develops a better mousetrap out of nowhere. Since such a business is asset  light and mostly supported by network effects, it's hard to do, but once a competing business gains traction, it could grow very quickly, since you can rent out the server capacity as needed.
Network effect are hard to overcome, but again, if the user would allow an alternative software to tap into their  FB user contacts, a user could reestablish his own network very quickly.

I think the question with FB is not how long it is going to grow, but about the longevity of it's dominance. In the past, large business, once they gained scale where dominating based on  a mix of physical presence, brand, technology, scale, distribution etc. Now, a lot of these factors above are not issues any more in this asset light world. Just as FB grew quickly, a competitor can potentially grow just as quickly and dislodge them.
Title: Re: FB - Facebook
Post by: giofranchi on April 20, 2017, 04:18:04 AM
Biggest risk is that someone develops a better mousetrap out of nowhere. Since such a business is asset  light and mostly supported by network effects, it's hard to do, but once a competing business gains traction, it could grow very quickly, since you can rent out the server capacity as needed.
Network effect are hard to overcome, but again, if the user would allow an alternative software to tap into their  FB user contacts, a user could reestablish his own network very quickly.

I think the question with FB is not how long it is going to grow, but about the longevity of it's dominance. In the past, large business, once they gained scale where dominating based on  a mix of physical presence, brand, technology, scale, distribution etc. Now, a lot of these factors above are not issues any more in this asset light world. Just as FB grew quickly, a competitor can potentially grow just as quickly and dislodge them.

I guess the same could be said for AMZN and GOOG. And that’s why I keep each of them a small position (3.5% AMZN, 3.5% FB, and 5.5% GOOG). Taken as a whole they are a meaningful part of my portfolio, but I guess the risk all three will be dislodged by new competitors is small (at least for the foreseeable future).

Cheers,

Gio
Title: Re: FB - Facebook
Post by: Liberty on April 20, 2017, 05:30:46 AM
https://stratechery.com/2017/facebook-and-the-cost-of-monopoly/
Title: Re: FB - Facebook
Post by: glorysk87 on April 20, 2017, 06:09:26 AM
I've owned FB since IPO both in my PA and at my fund. I finally sold all my shares at $140.

The company is obviously extremely difficult to value, and I will likely regret selling my shares, but the company finally reached my estimate of fair value.

I've used many many ways to value the company, but the most 'generous' was to make an estimate of total worldwide advertising spend that I thought FB could eventually capture. By this, I mean ALL advertising spend - not just digital. And then making some assumptions about their cost structure and growth at that point.

To justify above a $140 price in my model, I had to assume that FB will capture 10% of total global advertising spend. I can't reasonably justify a figure much above that. But at that level, my model puts fair value at $140.

Obviously there are some business offshoots that may develop into cash machines in their own right (WhatsApp, Messenger, Oculus, etc), but I don't have a clear view on those, and it's likely regardless that most of the revenue from those segments will be related to advertising, and thus captured in my original model.

I'd be interested in hearing others' methods for valuation. Can anyone make a reasonable argument for the company being worth substantially more than it is now?
Title: Re: FB - Facebook
Post by: no_free_lunch on April 20, 2017, 07:29:30 AM
Gloorysk I don't own FB and won't touch it at these prices.   However, the one thing your methodology might be lacking is that FB can probably change the amount of advertising that is done due to the targeted nature of their advertising platform.  I think that there are many small vendors who would advertise on FB and simply wouldn't advertise via more traditional avenues.  Now some of these would have already converted into the advertising pool via google search ads or some other tech but I don't think iti s done.  Facebook's ability to target specific users based on geography or demographics should continue to grow the net advertising base.

All that being said I will wait for a substantial pullback as I already have enough blue sky thinking going on with my TSLA investment.
Title: Re: FB - Facebook
Post by: glorysk87 on April 20, 2017, 07:41:09 AM
Gloorysk I don't own FB and won't touch it at these prices.   However, the one thing your methodology might be lacking is that FB can probably change the amount of advertising that is done due to the targeted nature of their advertising platform.  I think that there are many small vendors who would advertise on FB and simply wouldn't advertise via more traditional avenues.  Now some of these would have already converted into the advertising pool via google search ads or some other tech but I don't think iti s done.  Facebook's ability to target specific users based on geography or demographics should continue to grow the net advertising base.

All that being said I will wait for a substantial pullback as I already have enough blue sky thinking going on with my TSLA investment.

Yea agree with you - the point I think you're missing is that FB is no where close to being 10% of the total ad market. So my valuation at $140 leaves plenty of room for them to capture additional customers (like the small vendors you list). So yes, I agree they should continue to grow their advertising base. But I'm being very generous in how much I think that will be able to grow.
Title: Re: FB - Facebook
Post by: DTEJD1997 on April 20, 2017, 08:34:53 AM
Hey all:

I am not active on the Facebook.  I found that a lot of people that I had lost contact with (high school friends) simply had no interest in maintaining contact beyond looking that first time at your Facebook page.  One & done.

I also found a small percentage of contacts were blasting out dozens of "shares' per day over nothing.  This started to flood my inbox.

The above two are annoying...but the thing that did me in was the HOT women wanting to be friends!

I fell for it the first time...but what is some hottie in Washington state that I've never heard of and have no connection to wanting to be friends on Facebook?  To harvest my personal data of course!  Then there are the scammers....and on & on.  It got to the point where I would guess more than 1/2 of friend requests were harvesters & scammers.  No thanks.

I still have a linked in profile...and now I am getting friend requests from people that I have absolutely no idea who they are, and can not figure out any link to them.  Of course, this happens form time to time...but now it is starting to really crank up.

Call me old fashioned, but I really do not like Facebook, Linkedin & other networks.  In my experience they are overwhelmed with fake accounts, scammers, harvesters & weirdos.

No thanks...
Title: Re: FB - Facebook
Post by: giofranchi on April 20, 2017, 08:35:41 AM
This is my experience: the business I own and manage has always been a local business, but I have often thought that its services could be of great interest for architects and engineers working in other nations as well. To advertise them in those nations though would have been an effort both incredibly costly and time consuming. Therefore, I have never tried to expand my business outside Italy. Now thanks to FB that’s exactly what I am trying to do, and already with some tangible results. Obviously the jury is still out: this experiment could still fail in a miserable way… Anyway, just think about the possibilities that FB has opened up for me, and probably for many other small business owners around the world! I am willing to spend much more than I have ever spent in marketing to test those possibilities.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: John Hjorth on April 20, 2017, 09:07:25 AM
This is my experience: the business I own and manage has always been a local business, but I have often thought that its services could be of great interest for architects and engineers working in other nations as well. To advertise them in those nations though would have been an effort both incredibly costly and time consuming. Therefore, I have never tried to expand my business outside Italy. Now thanks to FB that’s exactly what I am trying to do, and already with some tangible results. Obviously the jury is still out: this experiment could still fail in a miserable way… Anyway, just think about the possibilities that FB has opened up for me, and probably for many other small business owners around the world! I am willing to spend much more than I have ever spent in marketing to test those possibilities.

Cheers,

Gio

Very interesting endeavour, Gio. I really hope you will keep us all updated on your experience of professional use of FB this way going forward.
Title: Re: FB - Facebook
Post by: no_free_lunch on April 20, 2017, 10:16:30 AM
Gloorysk I don't own FB and won't touch it at these prices.   However, the one thing your methodology might be lacking is that FB can probably change the amount of advertising that is done due to the targeted nature of their advertising platform.  I think that there are many small vendors who would advertise on FB and simply wouldn't advertise via more traditional avenues.  Now some of these would have already converted into the advertising pool via google search ads or some other tech but I don't think iti s done.  Facebook's ability to target specific users based on geography or demographics should continue to grow the net advertising base.

All that being said I will wait for a substantial pullback as I already have enough blue sky thinking going on with my TSLA investment.

Yea agree with you - the point I think you're missing is that FB is no where close to being 10% of the total ad market. So my valuation at $140 leaves plenty of room for them to capture additional customers (like the small vendors you list). So yes, I agree they should continue to grow their advertising base. But I'm being very generous in how much I think that will be able to grow.

I don't think I am missing that.  The reason why I am not invested is they still need to do quite some growing to justify their share price.  All I am saying is that if we use some measure of the current global ad spend as their limit to growth I think it will understate that limit.
Title: Re: FB - Facebook
Post by: Spekulatius on April 20, 2017, 10:20:28 AM
Biggest risk is that someone develops a better mousetrap out of nowhere. Since such a business is asset  light and mostly supported by network effects, it's hard to do, but once a competing business gains traction, it could grow very quickly, since you can rent out the server capacity as needed.
Network effect are hard to overcome, but again, if the user would allow an alternative software to tap into their  FB user contacts, a user could reestablish his own network very quickly.

I think the question with FB is not how long it is going to grow, but about the longevity of it's dominance. In the past, large business, once they gained scale where dominating based on  a mix of physical presence, brand, technology, scale, distribution etc. Now, a lot of these factors above are not issues any more in this asset light world. Just as FB grew quickly, a competitor can potentially grow just as quickly and dislodge them.

I guess the same could be said for AMZN and GOOG. And that’s why I keep each of them a small position (3.5% AMZN, 3.5% FB, and 5.5% GOOG). Taken as a whole they are a meaningful part of my portfolio, but I guess the risk all three will be dislodged by new competitors is small (at least for the foreseeable future).

Cheers,

Gio

AMZN would be hard to dislodge, imo. First, this is not a virtual company, since they run a substantial distribution infrastructure. Then they are willing to forgo profits seemingly indefinitely? Who would, much less could dislodge them ? There is only Walmart who can match the infrastructure and maybe beat them on price, said if they get sloppy.
Title: Re: FB - Facebook
Post by: awindenberger on April 20, 2017, 07:29:48 PM
This is my experience: the business I own and manage has always been a local business, but I have often thought that its services could be of great interest for architects and engineers working in other nations as well. To advertise them in those nations though would have been an effort both incredibly costly and time consuming. Therefore, I have never tried to expand my business outside Italy. Now thanks to FB that’s exactly what I am trying to do, and already with some tangible results. Obviously the jury is still out: this experiment could still fail in a miserable way… Anyway, just think about the possibilities that FB has opened up for me, and probably for many other small business owners around the world! I am willing to spend much more than I have ever spent in marketing to test those possibilities.

Cheers,

Gio

Given my day job as an online marketer, I completely agree with Gio, there is no better way to target the people that will be most likely to be interested in your product than Facebook. They still seem priced for perfection right now though.

Very interesting endavour, Gio. I really hope you will keep us all updated on your experience of professional use of FB this way going forward.
Title: Re: FB - Facebook
Post by: giofranchi on April 21, 2017, 01:05:07 AM
Very interesting endavour, Gio. I really hope you will keep us all updated on your experience of professional use of FB this way going forward.

Thank you, John!
The following quote from Larry Page summerizes quite well how I feel about this endeavour:
https://twitter.com/giovfranchi/status/855317127594516480
And I will surely keep you updated on how it is going.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: giofranchi on April 21, 2017, 01:11:28 AM
AMZN would be hard to dislodge, imo. First, this is not a virtual company, since they run a substantial distribution infrastructure. Then they are willing to forgo profits seemingly indefinitely? Who would, much less could dislodge them ? There is only Walmart who can match the infrastructure and maybe beat them on price, said if they get sloppy.

All very true.
On the other hand AMZN already has a formidable competitor on a global scale: Alibaba of course. And I guess it could be said the same reasons that make AMZN difficult to dislodge in the west also make BABA difficult to dislodge in the east.
Instead, at least for now, there is nothing that even gets close to FB's 1,892 million active users, which keep increasing at the pace of 10 per second!

Cheers,

Gio
Title: Re: FB - Facebook
Post by: giofranchi on April 21, 2017, 01:43:43 AM
Given my day job as an online marketer, I completely agree with Gio, there is no better way to target the people that will be most likely to be interested in your product than Facebook. They still seem priced for perfection right now though.

As I have said, it is extremely difficult imo to get right how fast and how long FB could keep growing. Who really knows? Maybe, also FB will develope other businesses besides its core advertising business, like GOOG and AMZN are doing... Who says FB will remain only an advertising company? It surely has the wherewithal to expand in other areas as well.
If you cannot predict how fast and how long FB could keep growing, its FV must remain very uncertain.
Maybe you are right, and the market is too optimistic right now... or maybe the market is ignoring future opportunities... given this uncertainty, FB remains a small position for me.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: ScottHall on April 21, 2017, 02:27:32 AM
Welcome to the right side of history, Gio.
Title: Re: FB - Facebook
Post by: giofranchi on April 21, 2017, 02:39:04 AM
Welcome to the right side of history, Gio.

As you have told me: "Good if I am right, and I can afford it if I am wrong".

Cheers,

Gio
Title: Re: FB - Facebook
Post by: Liberty on April 21, 2017, 05:58:14 AM
Ajc, you're still acting petulant because I disagreed with you the other day? Grow up. You must be quite a miserable person to be driven to flailing anger by mild push-back online.

I'm sure it's by having no judgement, no independent thinking, and no balls that I retired at 34 starting from zero while never having what most here would consider a high-paying job...

Anyway, I hope things turn around for you and you can someday let go of all this pointless anger. It's not good for you and those around you.

Cheers!
Title: Re: FB - Facebook
Post by: Liberty on April 21, 2017, 07:34:01 AM
Further discussion of Facebook on the latest episode of Exponent:

http://exponent.fm/episode-111-lamentation-not-condemnation/
Title: Re: FB - Facebook
Post by: ZenaidaMacroura on April 21, 2017, 10:11:01 AM
I ran a $20 ad on FB for my Wife's "small business" and the result quite frankly doesn't make sense to express in percentage terms.  From then on they increased the cost of engagements but it is still far and away the best bang for buck.  A $200 campaign brings in $2-3K "reoccurring" monthly revenue -for some reason if I spend more than that per month the marginal return becomes bad quickly.  But up to $200 per month and I get a fairly sticky $2-3K increase in top line month over month.


We pretty much eat the share of everyone who isn't advertising on FB (a lot of niches, and or older mom and pop businesses don't run ads at all on Facebook and just maintain a default page out of obligation).
Title: Re: FB - Facebook
Post by: giofranchi on April 21, 2017, 10:34:10 AM
We pretty much eat the share of everyone who isn't advertising on FB (a lot of niches, and or older mom and pop businesses don't run ads at all on Facebook and just maintain a default page out of obligation).

+1

Cheers,

Gio
Title: Re: FB - Facebook
Post by: Aurelius on May 04, 2017, 05:49:19 AM
I never really considered Facebook as an investment. Neither have I looked at it or try to understand it. I’ve heard people say it’s expensive.

On balance most people actually can’t live without being part of “the Facebook family” in one shape or another. We all know this. And the numbers reveal this truth*:
1,284 DAU
1,936 MAU
*Whatsapp and Instagram are not included.

Facebook is the third most visited site after Google and Youtube. In addition to Facebook there’s Instagram, Whatsapp and Messenger. All very popular services.

It’s a monopoly and so far it keeps getting more relevant in our lives.

A cursory view tells me it requires little capital to run. Has no debt. Plenty of excess cash. Earns high ROIC. Their management has a great reputation.

Facebook just grew revenue 51%. EPS grew 73%.

The Global advertising market is roughly 600-650B growing at 4.4% per year. Digital advertising naturally is growing a lot faster than that.

Both TAM and FB numbers suggest that there’s room for further growth.

After netting out cash, Facebook is selling for just under 21 times next year earnings.

Value in plain sight?
Title: Re: FB - Facebook
Post by: LongTermView on May 25, 2017, 01:04:21 PM
I'm long FB and I'm thinking about going to the annual meeting a week from today. Is anyone going to be around? Does anyone have a question I should ask management?
Title: Re: FB - Facebook
Post by: Phaceliacapital on July 05, 2017, 02:47:14 AM
Did you get anything out of the annual meeting?
Title: Re: FB - Facebook
Post by: LongTermView on July 05, 2017, 05:53:27 AM
Did you get anything out of the annual meeting?

Yes, it was nice seeing Mark think on his feet in person, I have a lot of confidence in him. Also, they partially answered my question about revenue per user by geography.
Title: Re: FB - Facebook
Post by: DW on July 05, 2017, 06:07:04 AM
I ran a $20 ad on FB for my Wife's "small business" and the result quite frankly doesn't make sense to express in percentage terms.  From then on they increased the cost of engagements but it is still far and away the best bang for buck.  A $200 campaign brings in $2-3K "reoccurring" monthly revenue -for some reason if I spend more than that per month the marginal return becomes bad quickly.  But up to $200 per month and I get a fairly sticky $2-3K increase in top line month over month.


We pretty much eat the share of everyone who isn't advertising on FB (a lot of niches, and or older mom and pop businesses don't run ads at all on Facebook and just maintain a default page out of obligation).

Wow! Spending $200 on advertising to bring in $2-3K of recurring revenue. That's awesome. Congrats!

I have had mixed results running FB ads, but I'm not selling a product, my wife and I have a recipe/"food porn" website. We have used FB to drive traffic to the site with mixed results.
Title: Re: FB - Facebook
Post by: roark33 on July 05, 2017, 06:13:19 AM
I ran a $20 ad on FB for my Wife's "small business" and the result quite frankly doesn't make sense to express in percentage terms.  From then on they increased the cost of engagements but it is still far and away the best bang for buck.  A $200 campaign brings in $2-3K "reoccurring" monthly revenue -for some reason if I spend more than that per month the marginal return becomes bad quickly.  But up to $200 per month and I get a fairly sticky $2-3K increase in top line month over month.


We pretty much eat the share of everyone who isn't advertising on FB (a lot of niches, and or older mom and pop businesses don't run ads at all on Facebook and just maintain a default page out of obligation).

What does her small business do/sell?  Thanks.
Title: Re: FB - Facebook
Post by: Liberty on July 18, 2017, 09:04:02 AM
China seems to have disabled Whatsapp, the last major FB property that was active there:

https://www.nytimes.com/2017/07/18/technology/whatsapp-facebook-china-internet.html
Title: Re: FB - Facebook
Post by: vegaseller on August 01, 2017, 03:10:00 PM
http://www.barrons.com/articles/facebook-slips-pivotal-says-sell-p-g-ad-spend-cuts-worrisome-says-pivotal-1501506978

Anyone worried we are seeing a near term top here on CPG spend on digital ads?
Title: Re: FB - Facebook
Post by: beerbaron on August 01, 2017, 06:51:53 PM
http://www.barrons.com/articles/facebook-slips-pivotal-says-sell-p-g-ad-spend-cuts-worrisome-says-pivotal-1501506978

Anyone worried we are seeing a near term top here on CPG spend on digital ads?

I love the first sentence... like there is a direct cause and effect. A whopping 0.27% head for the bunkers guys the nuke is coming!

Shares of Facebook (FB) are down 47 cents at $171.98, after Pivotal Research’s Brian Wieser this morning cut his rating on the stock to Sell from Hold, and reiterated a $140 price target, warning the stock is too expensive given the risk advertisers may not spend enough.
Title: Re: FB - Facebook
Post by: SlowAppreciation on September 04, 2017, 07:50:17 AM
https://www.lrb.co.uk/v39/n16/john-lanchester/you-are-the-product
Title: Re: FB - Facebook
Post by: Liberty on September 20, 2017, 12:40:41 PM
https://www.facebook.com/sheryl/posts/10159255449515177
Title: Re: FB - Facebook
Post by: Foreign Tuffett on September 21, 2017, 12:32:46 AM
https://www.facebook.com/sheryl/posts/10159255449515177

How did Facebook not foresee that this could happen? Even more, how did it not realize it was happening until outside observers reported it? One possible conclusion is that Sandberg and Zuckerberg's innumerable outside activities are pulling them away from Facebook's core business.
Title: Re: FB - Facebook
Post by: merkhet on September 21, 2017, 06:28:05 AM
https://www.facebook.com/sheryl/posts/10159255449515177

How did Facebook not foresee that this could happen? Even more, how did it not realize it was happening until outside observers reported it? One possible conclusion is that Sandberg and Zuckerberg's innumerable outside activities are pulling them away from Facebook's core business.

A more cynical view might be that people don't look so hard at the shadows when they're minting money hand over fist, and they responded when it became inevitable.
Title: Re: FB - Facebook
Post by: rkbabang on September 21, 2017, 06:33:44 AM
https://www.facebook.com/sheryl/posts/10159255449515177

How did Facebook not foresee that this could happen? Even more, how did it not realize it was happening until outside observers reported it? One possible conclusion is that Sandberg and Zuckerberg's innumerable outside activities are pulling them away from Facebook's core business.

A more cynical view might be that people don't look so hard at the shadows when they're minting money hand over fist, and they responded when it became inevitable.

It could be that this type of thing is only obvious in retrospect and they never thought about the consequences of letting machine intelligence produce the key words.   I think as humans become more and more reliant on AI to data mine, observe, and analyze us in more and more ways, we are going to find out things about ourselves that we don't always like.
Title: Re: FB - Facebook
Post by: Liberty on September 21, 2017, 06:45:17 AM
https://www.facebook.com/sheryl/posts/10159255449515177

How did Facebook not foresee that this could happen? Even more, how did it not realize it was happening until outside observers reported it? One possible conclusion is that Sandberg and Zuckerberg's innumerable outside activities are pulling them away from Facebook's core business.

I think they already banned all kinds of keywords and phrases but those slipped through. If it was that obvious, not only would they have thought about it before, but some journalists would also have found it before, y'know, anti-semitism was a daily news item in the US.
Title: Re: FB - Facebook
Post by: UK on September 21, 2017, 07:57:22 AM
https://www.buzzfeed.com/bensmith/theres-blood-in-the-water-in-silicon-valley?utm_term=.bk4gVJZdn#.xqGA1VPdB

Could it be real risk?
Title: Re: FB - Facebook
Post by: Jurgis on September 21, 2017, 08:06:19 AM
https://www.buzzfeed.com/bensmith/theres-blood-in-the-water-in-silicon-valley?utm_term=.bk4gVJZdn#.xqGA1VPdB

Could it be real risk?

Maybe a bit, but a lot of this is hot journalistic air. EU is way ahead of US of fighting big tech and it's unlikely that US ever reaches EU-level of wrist slapping.

(Any political comments to politics section please)
Title: Re: FB - Facebook
Post by: gjangal on September 21, 2017, 04:51:08 PM
https://www.facebook.com/sheryl/posts/10159255449515177

How did Facebook not foresee that this could happen? Even more, how did it not realize it was happening until outside observers reported it? One possible conclusion is that Sandberg and Zuckerberg's innumerable outside activities are pulling them away from Facebook's core business.

A more cynical view might be that people don't look so hard at the shadows when they're minting money hand over fist, and they responded when it became inevitable.

This is what happens in big organizations, these things wouldn't even have been on someone's radar until the problem is highlighted. Everyone is more involved in building the next big thing
Title: Re: FB - Facebook
Post by: rkbabang on September 22, 2017, 06:39:53 AM
https://www.facebook.com/sheryl/posts/10159255449515177

How did Facebook not foresee that this could happen? Even more, how did it not realize it was happening until outside observers reported it? One possible conclusion is that Sandberg and Zuckerberg's innumerable outside activities are pulling them away from Facebook's core business.

A more cynical view might be that people don't look so hard at the shadows when they're minting money hand over fist, and they responded when it became inevitable.

This is what happens in big organizations, these things wouldn't even have been on someone's radar until the problem is highlighted. Everyone is more involved in building the next big thing

Quick, make a list of every word or phrase that could be offensive.   It would be a long list and I'm sure you would forget some.
Title: Re: FB - Facebook
Post by: Liberty on September 22, 2017, 08:08:18 AM
Quick, make a list of every word or phrase that could be offensive.   It would be a long list and I'm sure you would forget some.

Context also matters. It's not like you can ban "jew" or "jewish", or the local Klezmer orchestra might not be able to target potential customers, but how many phrases with those words in them along with other words that aren't by themselves over the line could be deemed offensive? ("hater" can also be used with inoffensive stuff, like I'm a "reality TV hater" or whatever)

It's a tough problem. But that's why they pay them the big bucks, so I'm sure they'll figure it out over time.
Title: Re: FB - Facebook
Post by: Liberty on September 22, 2017, 03:16:51 PM
https://www.bloomberg.com/news/articles/2017-09-22/facebook-scraps-plan-to-create-new-class-of-shares
Title: Re: FB - Facebook
Post by: Liberty on September 25, 2017, 03:44:12 PM
https://www.theverge.com/2017/9/25/16362292/china-whatsapp-censorship-wechat-no-more-texts

China blocks WhatsApp

(for some reason the URL slug sas wechat, probably a typo that has been fixed but stayed in the URL)
Title: Re: FB - Facebook
Post by: Liberty on October 03, 2017, 11:21:37 AM
https://stratechery.com/2017/trustworthy-networking/

Most of the post is about Facebook's reaction to the Russian ads issue.
Title: Re: FB - Facebook
Post by: Liberty on October 16, 2017, 02:52:12 PM
https://techcrunch.com/2017/10/16/facebook-acquires-anonymous-teen-compliment-app-tbh-will-let-it-run/
Title: Re: FB - Facebook
Post by: UK on October 19, 2017, 10:19:24 PM
https://www.buzzfeed.com/bensmith/theres-blood-in-the-water-in-silicon-valley?utm_term=.bk4gVJZdn#.xqGA1VPdB

Could it be real risk?

Maybe a bit, but a lot of this is hot journalistic air. EU is way ahead of US of fighting big tech and it's unlikely that US ever reaches EU-level of wrist slapping.

(Any political comments to politics section please)

Some more info on the subject:

https://www.wsj.com/articles/buzzfeed-ceo-google-facebook-should-share-more-revenue-1508356543

“The business model of news is changing, and if Google and Facebook take all the revenue but don’t want to pay for the fact checking, the reporting, the more-intensive investigations, who does that work?” Mr. Peretti said Wednesday at The Wall Street Journal’s WSJ D.Live technology conference. “I think Google and Facebook are going to have to fix that.”

https://www.wsj.com/articles/barry-diller-says-tech-giants-inevitably-will-face-more-regulation-1508263601

“Inevitably it has to face regulation,” said Mr. Diller in an interview at The Wall Street Journal’s WSJ D. Live technology conference. “This is a different situation than the standard fear that down the street in a garage somewhere is your competitor…The dominant companies do not have fundamental competition.”

https://www.wsj.com/articles/investors-are-cautious-on-techs-big-startups-many-may-be-overvalued-1508360252

“The system is not working right,” said Sam Altman, president of the tech incubator Y Combinator, at a panel at The Wall Street Journal’s WSJ D.Live technology conference. “I don’t know if tech companies are going to get broken up, but I do know the tech backlash is going to be strong.” Driving these concerns are job losses and economic inequality resulting from advances in tech and artificial intelligence, mixed with tech giants’ growing influence in Americans’ lives and politics, the panelists said. “These companies are more powerful than AT&T ever was,” said Bill Maris, a venture capitalist who ran the venture-capital arm of Google-parent Alphabet Inc. until earlier this year. “If you think the system is broken,” Mr. Maris added, “the people with power and money are the ones that people will look to say, ‘We need to disrupt that.’ ”

https://www.bloomberg.com/news/features/2017-10-19/everyone-s-mad-at-google-and-sundar-pichai-has-to-fix-it

The CEO is increasingly boxed in by regulators, tech critics on both the right and the left, and even his own employees.
Title: Re: FB - Facebook
Post by: Liberty on November 01, 2017, 01:07:14 PM
Q3:

https://investor.fb.com/investor-news/press-release-details/2017/Facebook-Reports-Third-Quarter-2017-Results/default.aspx

Revenue up 47%, EPS 77%.  :P
Title: Re: FB - Facebook
Post by: JayGatsby on November 01, 2017, 07:59:01 PM
International growth was really impressive. I was skeptical, but they seem to be monetizing that very effectively. Continued US growth surprises me as well. My feed continues to get more empty, but whatever they're doing seems to be working.
Title: Re: FB - Facebook
Post by: Schwab711 on November 01, 2017, 08:49:26 PM
International growth was really impressive. I was skeptical, but they seem to be monetizing that very effectively. Continued US growth surprises me as well. My feed continues to get more empty, but whatever they're doing seems to be working.

A congressmen today admitted that Facebook knows more about an individual than the US government. Facebook has a better business than Moody's. I'm in awe, but still no position, yet.
Title: Re: FB - Facebook
Post by: JayGatsby on November 02, 2017, 12:45:15 AM
International growth was really impressive. I was skeptical, but they seem to be monetizing that very effectively. Continued US growth surprises me as well. My feed continues to get more empty, but whatever they're doing seems to be working.

A congressmen today admitted that Facebook knows more about an individual than the US government. Facebook has a better business than Moody's. I'm in awe, but still no position, yet.
I'm really curious to see if there's any decline in user engagement as time goes on. On one hand you could say its a form of entertainment and will fade, on the other hand you could say its a form of communication and won't fade any more than email. I see a strong decline in content from my network. Google trends and some of the other online traffic tools seem to see the same, although I doubt they're all that accurate (who Google's facebook?). They seem to be replacing any decline in users either with more users, more ads per page, or higher price per ad.
Title: Re: FB - Facebook
Post by: ICUMD on November 02, 2017, 05:03:23 AM
Over the near term FB will continue to be a fine business I expect.  It is still a dominant player in terms of its online presence and will therefore attract a significant amount of ad revenue.  The extent that it penetrates other countries remains to be seen.  I suspect that over the longer time frame its growth rate will level off and may fall as there is FB fatigue - especially if they fail to innovate or if there is a new messaging/ networking competitor that emerges which is more captivating.  Now if we were to compare FB with Tencent for example - an integrated company with many dimensional components, I think Tencent has a more compelling investment case.
Title: Re: FB - Facebook
Post by: Liberty on November 02, 2017, 05:51:06 AM
The extent that it penetrates other countries remains to be seen.  [...]  Now if we were to compare FB with Tencent for example - an integrated company with many dimensional components, I think Tencent has a more compelling investment case.

What do you mean that it remains to be seen if FB penetrates other countries?

MAUs on FB for US & Canada are 239m. Europe is 364m. Asia-Pacific is 794m and Rest of World is 675m.

I think that' pretty well penetrated in "other countries", depending on "other" compared to what. But if it's compared to N-A, then 88.5% of their users are outside. Even compared to N-A + Europe it's 70.9% outside of those "western" countries.

On the other hand, Tencent is pretty a Chinese story (where they dominate). It might be a more compelling investment case, I don't know, but I don't think there's much question that FB is well penetrated around the world, with China a notable exception.
Title: Re: FB - Facebook
Post by: ICUMD on November 02, 2017, 07:37:26 AM
Those are pretty good numbers for MAU's.  I'll have to plead some ignorance on this front.  However, would you have any data on how well they are able to monetize their MAU's.  Ie. Income per MAU by region and the growth in this income?  That I think would be more telling about the health of this company.
Title: Re: FB - Facebook
Post by: Liberty on November 02, 2017, 07:43:06 AM
Those are pretty good numbers for MAU's.  I'll have to plead some ignorance on this front.  However, would you have any data on how well they are able to monetize their MAU's.  Ie. Income per MAU by region and the growth in this income?  That I think would be more telling about the health of this company.

It's all in the presentation here:

https://s21.q4cdn.com/399680738/files/doc_financials/2017/Q3/Q3-'17-Earnings-Presentation.pdf

ARPUs in Europe are about 1/4 of NA, and ARPUs in Asia-Pacific are about 1/10th.

Seems like an opportunity more than a problem.
Title: Re: FB - Facebook
Post by: ICUMD on November 02, 2017, 08:38:02 AM
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.

Title: Re: FB - Facebook
Post by: Liberty on November 02, 2017, 09:08:11 AM
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?
Title: Re: FB - Facebook
Post by: JayGatsby on November 02, 2017, 09:36:04 AM
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).
Title: Re: FB - Facebook
Post by: Liberty on November 02, 2017, 11:40:05 AM
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.
Title: Re: FB - Facebook
Post by: Jerry Capital on November 02, 2017, 08:45:37 PM
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?


Title: Re: FB - Facebook
Post by: ICUMD on November 02, 2017, 08:51:41 PM
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.
Title: Re: FB - Facebook
Post by: rkbabang on November 03, 2017, 08:32:40 AM
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.

Title: Re: FB - Facebook
Post by: walkie518 on November 03, 2017, 03:32:50 PM
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
[url]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
[url]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
[url]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
[url]https://www.sec.gov/Archives/edgar/data/1326801/000132680117000053/fb-09302017x10q.htm (https://www.facebook.com/zuck/posts/10103253901916271[\url)

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 (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?
Title: Re: FB - Facebook
Post by: JayGatsby on November 03, 2017, 03:57:59 PM
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.
Title: Re: FB - Facebook
Post by: Liberty on November 03, 2017, 07:35:42 PM
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
[url=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
[url]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
[url]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
[url]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
[url]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
[url]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
[url]https://www.sec.gov/Archives/edgar/data/1326801/000132680117000053/fb-09302017x10q.htm (https://www.facebook.com/zuck/posts/10103253901916271[\url)

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 (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.
Title: Re: FB - Facebook
Post by: Jurgis on November 03, 2017, 08:07:22 PM
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

Title: Re: FB - Facebook
Post by: SlowAppreciation on November 04, 2017, 07:58:58 AM
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
Title: Re: FB - Facebook
Post by: Jurgis on November 04, 2017, 08:53:59 AM
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
Title: Re: FB - Facebook
Post by: LongTermView on November 04, 2017, 10:59:26 AM
Does anyone have references that give clues as to the replacement vs growth capex for the data centers?
Title: Re: FB - Facebook
Post by: Liberty on November 04, 2017, 03:53:26 PM
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)
Title: Re: FB - Facebook
Post by: rishig on November 04, 2017, 09:20:05 PM
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/
Title: Re: FB - Facebook
Post by: LongTermView on November 05, 2017, 08:47:15 AM
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.
Title: Re: FB - Facebook
Post by: rkbabang on November 06, 2017, 06:31:37 AM
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.
Title: Re: FB - Facebook
Post by: Astrea on November 08, 2017, 01:09:15 AM
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?     
Title: Re: FB - Facebook
Post by: giofranchi on November 08, 2017, 06:12:40 AM
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
Title: Re: FB - Facebook
Post by: Schwab711 on November 08, 2017, 08:47:22 AM
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?
Title: Re: FB - Facebook
Post by: giofranchi on November 08, 2017, 10:20:41 AM
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
Title: Re: FB - Facebook
Post by: Schwab711 on November 08, 2017, 10:24:16 AM
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.
Title: Re: FB - Facebook
Post by: ZenaidaMacroura on November 08, 2017, 12:19:00 PM
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
Title: Re: FB - Facebook
Post by: ZenaidaMacroura on November 08, 2017, 12:25:12 PM
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.
Title: Re: FB - Facebook
Post by: ScottHall on November 08, 2017, 05:56:54 PM
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

They LAUGHED when I said this was the most valuable book I've ever read...

By itself, it is useful. In combination with an understanding of psychology, it is a book of spells.
Title: Re: FB - Facebook
Post by: giofranchi on November 09, 2017, 01:02:59 AM
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.

Though I have a larger investment in GOOGL than FB, I am not sure which moat will be longer lasting.
Networks are the strongest things on earth, and FB is the most amazing network created by men so far. Here is what Jeff Stibel had to say about this topic in his book “Breakpoint” (see attachment): “The important point is this: social networks after the breakpoint are highly successful both in the short term and the long term.”

Cheers,

Gio
Title: Re: FB - Facebook
Post by: writser on November 09, 2017, 01:16:23 AM
Did you highlight the entire book? ;)
Title: Re: FB - Facebook
Post by: giofranchi on November 09, 2017, 01:20:00 AM
Did you highlight the entire book? ;)

Ahah!! No no... I have taken the picture only of the part I highlighted.😉

Cheers,

Gio
Title: Re: FB - Facebook
Post by: petec on November 09, 2017, 01:42:03 AM

Networks are the strongest things on earth, and FB is the most amazing network created by men so far that hasn't been regulated.


I'd submit that the original electric and water utilities created stronger networks.
Title: Re: FB - Facebook
Post by: writser on November 09, 2017, 01:55:35 AM
I'd submit christianity and the islam .. And don't forget the Illuminati.
Title: Re: FB - Facebook
Post by: petec on November 09, 2017, 02:01:59 AM
I'd submit christianity and the islam .. And don't forget the Illuminati.

I wonder. Those networks sometimes seem to get more powerful (or at least, the adherents more dogmatic) as they get smaller!
Title: Re: FB - Facebook
Post by: giofranchi on November 09, 2017, 02:10:05 AM
Ok, sorry... I was only referring to the sheer number of people in the FB network. Not its strength nor its quality. In fact, strength and quality are features usually developed by a network after its breakpoint (after it stops growing). FB is still growing circa 10 new active users per second.

Cheers,

Gio
Title: Re: FB - Facebook
Post by: Jurgis on November 09, 2017, 06:29:34 AM
We seriously should invest in Space X, so we could conquer the stars and bring Facebook's network to the Galactic unwashed citizens.
Title: Re: FB - Facebook
Post by: ICUMD on November 09, 2017, 07:48:42 AM

Though I have a larger investment in GOOGL than FB, I am not sure which moat will be longer lasting.
Networks are the strongest things on earth, and FB is the most amazing network created by men so far. Here is what Jeff Stibel had to say about this topic in his book “Breakpoint” (see attachment): “The important point is this: social networks after the breakpoint are highly successful both in the short term and the long term.”

Cheers,

Gio

Certainly agree with this assertion.  However, its worthwhile to define 'Network'. It could loosely be said that any interaction with anything or anyone can be called 'networking'.  With this in mind, the strength of the network depends on the value that the network provides to the end user, otherwise it can fail. This value may change over time. 

Some examples:
Electrical generation and distribution:  long lived, guaranteed multigenerational dependency.
Computer gaming:  short duration networks that can be replaced by competitive disruptors (ie. Early success of Nintendo, then Sony Playstation)
Social Networking:  may include email systems, text messaging, home pages etc.  FB, Google, Twitter, Snapchat, Tencent play in this space.  I agree that FB is dominant here in N. America, Tencent in China.
Search Engines:  Possibly more stable once mature - ex. Google, emerging as dominant to Yahoo! and Bing.
Online Shopping:  Amazon, Walmart, Alibaba.

Of course, being a dominant player and the ability to monetize do not necessarily go hand in hand.


Title: Re: FB - Facebook
Post by: rkbabang on November 09, 2017, 08:16:05 AM
We seriously should invest in Space X, so we could conquer the stars and bring Facebook's network to the Galactic unwashed citizens.

I know. It's a shame that there is just no easy way to keep in touch with my friends in the Alpha Centauri system.
Title: Re: FB - Facebook
Post by: Liberty on December 12, 2017, 01:41:47 PM
https://www.bloomberg.com/news/articles/2017-12-12/facebook-to-start-paying-tax-locally-instead-of-through-ireland
Title: Re: FB - Facebook
Post by: Liberty on January 09, 2018, 06:37:01 PM
https://cheddar.com/videos/exclusive-facebook-dives-into-home-device-market-with-video-chat-product-named-portal
Title: Re: FB - Facebook
Post by: Jerry Capital on January 10, 2018, 08:45:47 AM
I thought this was a great read

https://www.theatlantic.com/technology/archive/2018/01/the-strange-brands-in-your-instagram-feed/550136/?utm_source=twb

"If he looks at FB Audience Insights tool, he can see how large FB estimates the audience for certain interests might be. When he types in “lions,” “[FB] says I have 5 to 6 million monthly active people I can target”

"I like lions, so I follow an Instagram account that posts pictures of them, they post an ad, so I go to a webpage, and now I get ads chasing me all over the Internet advertising a lion bracelet"
Title: Re: FB - Facebook
Post by: Liberty on January 12, 2018, 05:23:26 AM
https://www.facebook.com/zuck/posts/10104413015393571
Title: Re: FB - Facebook
Post by: fareastwarriors on January 12, 2018, 08:59:35 AM
https://www.facebook.com/zuck/posts/10104413015393571

What do you guys think of the changes?
Title: Re: FB - Facebook
Post by: Liberty on January 12, 2018, 09:06:03 AM
https://www.facebook.com/zuck/posts/10104413015393571

What do you guys think of the changes?

Seems like a good idea, long-term thinking, trying to make things better for users and preempt mounting criticism.
Title: Re: FB - Facebook
Post by: DCG on January 12, 2018, 09:09:31 AM
Could of course also be aimed at getting businesses to spend more on ads to show up in people's feeds.
Title: Re: FB - Facebook
Post by: Liberty on January 17, 2018, 08:16:56 AM
https://stratechery.com/2018/facebooks-motivations/
Title: Re: FB - Facebook
Post by: Liberty on January 18, 2018, 09:13:03 AM
https://www.reuters.com/article/us-facebook-whatsapp/whatsapp-inches-closer-to-revenue-plan-with-accounts-for-businesses-idUSKBN1F727R
Title: Re: FB - Facebook
Post by: tengen on January 18, 2018, 10:30:33 AM
"I like lions, so I follow an Instagram account that posts pictures of them, they post an ad, so I go to a webpage, and now I get ads chasing me all over the Internet advertising a lion bracelet"

As far as "big data" goes, we are in the stone age.
Title: Re: FB - Facebook
Post by: Liberty on January 19, 2018, 11:17:31 AM
Podcast ep on Facebook:

http://exponent.fm/episode-137-addicted-to-facebook/
Title: Re: FB - Facebook
Post by: Liberty on January 22, 2018, 05:45:17 AM
Zuck post on another change:

https://www.facebook.com/zuck/posts/10104445245963251
Title: Re: FB - Facebook
Post by: JayGatsby on January 22, 2018, 11:14:11 AM
This podcast was interesting regarding facebook: https://thefelderreport.com/2017/12/12/podcast-roger-mcnamee-on-being-in-the-right-place-at-the-right-time-and-making-the-most-of-it/

Roger claims he convinced Zuck not to take the buyout offer from Yahoo and introduced Cheryl Sandberg. He's now more negative on Facebook but thinks there's still time for the company to save itself (perhaps these recent announcements are Zuck listening to Roger again).
Title: Re: FB - Facebook
Post by: Liberty on January 22, 2018, 01:18:28 PM
This podcast was interesting regarding facebook: https://thefelderreport.com/2017/12/12/podcast-roger-mcnamee-on-being-in-the-right-place-at-the-right-time-and-making-the-most-of-it/

Roger claims he convinced Zuck not to take the buyout offer from Yahoo and introduced Cheryl Sandberg. He's now more negative on Facebook but thinks there's still time for the company to save itself (perhaps these recent announcements are Zuck listening to Roger again).

Yeah, that part was interesting, and it did sound like the recent announcements were in the vein of what he was suggesting (I'm sure they'll keep iterating on it). The whole first part about his life story was fascinating too. What a career.
Title: Re: FB - Facebook
Post by: Liberty on January 31, 2018, 02:15:52 PM
Q4:

https://investor.fb.com/investor-news/press-release-details/2018/Facebook-Reports-Fourth-Quarter-and-Full-Year-2017-Results/default.aspx

https://s21.q4cdn.com/399680738/files/doc_financials/2017/Q4/Q4-2017-Earnings-Presentation.pdf
Title: Re: FB - Facebook
Post by: Liberty on February 14, 2018, 06:34:36 AM
http://www.adweek.com/digital/brian-killen-shareiq-guest-post-instagram-regram/
Title: Re: FB - Facebook
Post by: walkie518 on February 15, 2018, 09:13:34 AM
https://www.youtube.com/watch?v=MbaqRte7jYE
Title: Re: FB - Facebook
Post by: ebdem on February 16, 2018, 05:53:45 AM
There might be some headwinds ahead: https://foragerfunds.com/bristlemouth/fragmenting-social-media-facebooks-withering-popularity/

Just some observations: I am hosting two facebook pages. One is for a soccer fanclub and one for a foundation. FB must have changed it's algorithm, cause most of the posts don't go through to users - if I don't pay any money. We are posting active and weekly, but at the moment it is just frustrating. twitter makes way more fun.
Title: Re: FB - Facebook
Post by: Jurgis on February 16, 2018, 08:28:39 AM
There might be some headwinds ahead: https://foragerfunds.com/bristlemouth/fragmenting-social-media-facebooks-withering-popularity/

Just some observations: I am hosting two facebook pages. One is for a soccer fanclub and one for a foundation. FB must have changed it's algorithm, cause most of the posts don't go through to users - if I don't pay any money. We are posting active and weekly, but at the moment it is just frustrating. twitter makes way more fun.

OT?

This is normal for FB. If you want to see posts of user X or club Y, you have to go directly to that user's page/feed whatever they call it. You're almost certain to see very little of it in your own feed unless you do magic gestures to make it more prominent.

Anyway, that's what I do for people/clubs/whatever that I want to read on FB.  8)
I don't write/maintain FB pages, so I don't have expectations that what I write will be in followers' streams.

FWIW. Have fun  8)
Title: Re: FB - Facebook
Post by: philly value on March 02, 2018, 06:48:12 AM
Fun stat: Facebook's GAAP EBT increased 64% in 2017. The stock is up 26% over the past 12 months, and +50% since the beginning of 2017.

Ex-cash and adjusting for the (minor) amount of acquisition-related SBC/amort left in the #s, FB trades at a low-20s multiple of 2018 earnings.
Title: Re: FB - Facebook
Post by: walkie518 on March 02, 2018, 12:29:15 PM
https://www.youtube.com/watch?v=oVfHeWTKjag

caveat emptor!
Title: Re: FB - Facebook
Post by: Liberty on March 12, 2018, 11:06:56 AM
https://www.forbes.com/sites/kathleenchaykowski/2018/03/08/inside-facebooks-bet-on-an-augmented-reality-future/
Title: Re: FB - Facebook
Post by: Jerry Capital on March 20, 2018, 06:42:58 AM
Eerily quiet on the Facebook front here.

Anyone have thoughts on current valuation, current valuation relative to Alphabet. I am trying to figure out at what price you just don't have a choice but to get long. I think we are getting close.
Title: Re: FB - Facebook
Post by: adventurer on March 20, 2018, 06:53:21 AM
I currently do not have an idea regarding valuation. But in what respect do the current events have an influence on Facebook`s profitability? I mean I don`t see why millions of users would delete their account due to a scandal regarding the election. Because Fb`s function stays the same, nothing changes for them.
Title: Re: FB - Facebook
Post by: philly value on March 20, 2018, 09:16:27 AM
Eerily quiet on the Facebook front here.

Anyone have thoughts on current valuation, current valuation relative to Alphabet. I am trying to figure out at what price you just don't have a choice but to get long. I think we are getting close.

On Core Earnings for Google (excluding Other Bets), GOOG is trading at low-twenties (21x or so) 2018 earnings, ex-cash. FB trades at a similar multiple, maybe a bit lower at the moment depending on your assumptions. That said, I think the growth opportunity for FB (% growth, not necessarily absolute $ growth - FB and GOOG are capturing a similar % of incremental ad dollars but FB is off of a much smaller base) remains meaningfully higher than GOOG.

We're in an interesting spot. The regulatory risk is real, and this is likely to make it more likely that FB experiences real pain from GDPR this May in Europe. There's also now some risk GDPR-like data protection philosophy spreads to the U.S. I think the impact of the current situation is near impossible to quantify, which should make you uncomfortable for good reason, but I think the realistic scenarios where you lose money (long term) buying FB at current prices is also limited.

Title: Re: FB - Facebook
Post by: Jerry Capital on March 20, 2018, 09:51:10 AM
They guided to capex of 15$ billion for 2018 (double 2017 7$ billion)... These numbers are baked into sell side, under what scenario can they possibly spend this?
Title: Re: FB - Facebook
Post by: walkie518 on March 20, 2018, 10:35:28 AM
In the 10-K there's a note on other liabilties that doesn't seem match up with the cash flow statement.

There's $9.5B of "other liabilities (http://"https://www.sec.gov/cgi-bin/viewer?action=view&cik=1326801&accession_number=0001326801-18-000009&xbrl_type=v#")."  They note in the 10K shows two tranches: (1) accrued expenses and other current liabilities ($2.8B) and (2) income tax payable and "other liabilities" ($6.4B).  Income tax payalbe is $5.4B for 2017.  The operating statement shows $4.7B provision for income taxes.  Does this mean that 2018 taxes will be that much higher or that the 2017 tax provision is understated fairly substantially?

This is a little confusing especially since we see a provision for income taxes on the operating statement that is far less than the income tax payable line in the liabilities note.  Can anyone explain?
Title: Re: FB - Facebook
Post by: DTEJD1997 on March 20, 2018, 10:59:56 AM
I currently do not have an idea regarding valuation. But in what respect do the current events have an influence on Facebook`s profitability? I mean I don`t see why millions of users would delete their account due to a scandal regarding the election. Because Fb`s function stays the same, nothing changes for them.
I very well could see why millions of people would eventually delete OR drastically cut back on Facebook/social media usage.

I stopped using Facebook YEARS ago.  If somebody as dim witted as I am could see that the Facebook was FILLED to the brim with scams and fraudsters back then, what is it like now?  I can't even imagine.

A good example of ONE of the scams/frauds going on with Facebook years ago was that a "hot" looking woman several states away from me wants to be friends!  I don't know her, I am not in her profession, we don't have any common friends that I am aware of.

Now don't get me wrong, I am a pretty handsome dude, and a good catch!  So of course I became friends with this "woman"...A few days later the same thing happened again!  I wondered why didn't I get on Facebook sooner!  So I sent a message to both these "women"...nothing, radio silence.

Some more time passes, and more & more & more women want to be friends...so now I'm wondering why I am such a hot commodity?  With a just a few minutes of research, it was obvious these hot "women" were bots, collecting information on me.  Who knows for what purpose.

Other goofy things went on before I shut it down...

I suspect I am not the only one who experienced something like this on the Facebook.

Now the Facebook has been shown to be wrapped in stealing the election from Hillary!  Who knows what other stuff they are wrapped up in?

I really dislike social media...the people who need to interact with me know about me.  They can write me, they can visit me, they can call me, they can email me.

LONG on privacy, SHORT on Facebook/social media
Title: Re: FB - Facebook
Post by: sleepydragon on March 20, 2018, 11:23:57 AM
I currently do not have an idea regarding valuation. But in what respect do the current events have an influence on Facebook`s profitability? I mean I don`t see why millions of users would delete their account due to a scandal regarding the election. Because Fb`s function stays the same, nothing changes for them.
I very well could see why millions of people would eventually delete OR drastically cut back on Facebook/social media usage.

I stopped using Facebook YEARS ago.  If somebody as dim witted as I am could see that the Facebook was FILLED to the brim with scams and fraudsters back then, what is it like now?  I can't even imagine.

A good example of ONE of the scams/frauds going on with Facebook years ago was that a "hot" looking woman several states away from me wants to be friends!  I don't know her, I am not in her profession, we don't have any common friends that I am aware of.

Now don't get me wrong, I am a pretty handsome dude, and a good catch!  So of course I became friends with this "woman"...A few days later the same thing happened again!  I wondered why didn't I get on Facebook sooner!  So I sent a message to both these "women"...nothing, radio silence.

Some more time passes, and more & more & more women want to be friends...so now I'm wondering why I am such a hot commodity?  With a just a few minutes of research, it was obvious these hot "women" were bots, collecting information on me.  Who knows for what purpose.

Other goofy things went on before I shut it down... ???

I suspect I am not the only one who experienced something like this on the Facebook.

Now the Facebook has been shown to be wrapped in stealing the election from Hillary!  Who knows what other stuff they are wrapped up in?

I really dislike social media...the people who need to interact with me know about me.  They can write me, they can visit me, they can call me, they can email me.

LONG on privacy, SHORT on Facebook/social media

Did you tell your wife about your fb story?  ;)
Title: Re: FB - Facebook
Post by: writser on March 20, 2018, 12:41:30 PM
Quote
Now don't get me wrong, I am a pretty handsome dude, and a good catch!  So of course I became friends with this "woman"...A few days later the same thing happened again!  I wondered why didn't I get on Facebook sooner!  So I sent a message to both these "women"...nothing, radio silence.

You sound incredibly naive. Hot girls don't like value investors.
Title: Re: FB - Facebook
Post by: whiterose on March 20, 2018, 01:17:37 PM
Quote
You sound incredibly naive. Hot girls don't like value investors.

It's funny 'cause it's true..
Title: Re: FB - Facebook
Post by: Jurgis on March 20, 2018, 01:19:02 PM
Quote
Now don't get me wrong, I am a pretty handsome dude, and a good catch!  So of course I became friends with this "woman"...A few days later the same thing happened again!  I wondered why didn't I get on Facebook sooner!  So I sent a message to both these "women"...nothing, radio silence.

You sound incredibly naive. Hot girls don't like value investors.

Yeah. Value investors are cheap bastards who eat dollar menus at McDs. No self respecting hot girl would be caught in such a company.  8)

Although you can always mention your ... net worth.  ::)
Title: Re: FB - Facebook
Post by: NBL0303 on March 20, 2018, 02:11:43 PM
Quote
Now don't get me wrong, I am a pretty handsome dude, and a good catch!  So of course I became friends with this "woman"...A few days later the same thing happened again!  I wondered why didn't I get on Facebook sooner!  So I sent a message to both these "women"...nothing, radio silence.

You sound incredibly naive. Hot girls don't like value investors.

Yeah. Value investors are cheap bastards who eat dollar menus at McDs. No self respecting hot girl would be caught in such a company.  8)

Although you can always mention your ... net worth.  ::)

This discussion is neglecting hot girls who are value investors.
Title: Re: FB - Facebook
Post by: Jurgis on March 20, 2018, 03:27:22 PM
This discussion is neglecting hot girls who are value investors.

We love them all dearly... 8)


No sexism, biases or prejudices towards hot girls or value investors were intended in my posts.
I am aware that this is thin ice to tread and bow out of further comments.  8)


Peace and love and lollipops 8)
Title: Re: FB - Facebook
Post by: rb on March 21, 2018, 01:24:20 PM
https://www.reuters.com/article/us-facebook-cambridge-analytica-zuckerbe/zuckerberg-says-facebook-made-mistakes-on-cambridge-analytica-idUSKBN1GX2X7?il=0

Zuckerberg is so full of shit.
Title: Re: FB - Facebook
Post by: walkie518 on March 21, 2018, 01:44:38 PM
https://www.reuters.com/article/us-facebook-cambridge-analytica-zuckerbe/zuckerberg-says-facebook-made-mistakes-on-cambridge-analytica-idUSKBN1GX2X7?il=0

Zuckerberg is so full of shit.

Agreed but there are other cockroaches that are much bigger and so far no one cares?!

I don't understand why the media is only focusing on this story...maybe this segues into Facebook's failure to monitor (or even possibly Facebook's funding of?) click-farms to inflate active user counts and raise $/click.



Title: Re: FB - Facebook
Post by: Spekulatius on March 21, 2018, 03:41:17 PM
https://www.reuters.com/article/us-facebook-cambridge-analytica-zuckerbe/zuckerberg-says-facebook-made-mistakes-on-cambridge-analytica-idUSKBN1GX2X7?il=0

Zuckerberg is so full of shit.

It’s part of the job descption if you are CEO. What did you expect him to say?
Title: Re: FB - Facebook
Post by: rb on March 21, 2018, 07:45:46 PM
https://www.reuters.com/article/us-facebook-cambridge-analytica-zuckerbe/zuckerberg-says-facebook-made-mistakes-on-cambridge-analytica-idUSKBN1GX2X7?il=0

Zuckerberg is so full of shit.

It’s part of the job descption if you are CEO. What did you expect him to say?
Not true. If you do your job right you don't have to go into full of shit mode. There's lots of CEOs that do their job right.
Title: Re: FB - Facebook
Post by: adventurer on March 22, 2018, 05:01:15 AM
https://www.reuters.com/article/us-facebook-cambridge-analytica-zuckerbe/zuckerberg-says-facebook-made-mistakes-on-cambridge-analytica-idUSKBN1GX2X7?il=0

Zuckerberg is so full of shit.

It’s part of the job descption if you are CEO. What did you expect him to say?
Not true. If you do your job right you don't have to go into full of shit mode. There's lots of CEOs that do their job right.

And if you don`t do it completely right it might become yet a part of the job, right? ;)
Title: Re: FB - Facebook
Post by: longinvestor on March 22, 2018, 07:42:23 AM
This is all noise, FB is the winner and they ain’t done taking all of it.
Title: Re: FB - Facebook
Post by: Jerry Capital on March 22, 2018, 07:53:56 AM
 Not only that it seems that Zuck wanted regulation, regulation favors the incumbent... I think he is authentic when he says he doesn't wanna have to make decisions on free speech and such.
Title: Re: FB - Facebook
Post by: no_free_lunch on March 26, 2018, 08:40:22 AM
I tend to agree.  Everyone I have talked to is staying on Facebook. 

Back out cash and you have a $390B market cap, vs $22B earnings based on last quarter and new tax rates.  18x past earnings and still growing.  Seems like a decent bet.
Title: Re: FB - Facebook
Post by: Jerry Capital on March 26, 2018, 09:17:59 AM
Started a position on Friday, added today and will continue adding as it goes lower. Too cheap.
Title: Re: FB - Facebook
Post by: rb on March 26, 2018, 09:36:20 AM
There are a couple of differences here between this and salad oil. Salad oil affected a small subsidiary of Amex whereas this affects the main business of Facebook.

Amex stock went down by more than 50%. FB is down only 15%. It didn't even hit a 52 week low.
Title: Re: FB - Facebook
Post by: Matson125 on March 26, 2018, 09:46:12 AM
There are a couple of differences here between this and salad oil. Salad oil affected a small subsidiary of Amex whereas this affects the main business of Facebook.

Amex stock went down by more than 50%. FB is down only 15%. It didn't even hit a 52 week low.

Good point, RB.  I would add that Buffett went to a local restaurant in Omaha and determined that folks were still using their AMEX card. 

Fast Forward today an investor would be able to track FB downloads on the Apple app store and Google play, in addition to any anecdotal evidence about family or friends deleting their FB.

Title: Re: FB - Facebook
Post by: Liberty on March 26, 2018, 10:01:27 AM
There are a couple of differences here between this and salad oil. Salad oil affected a small subsidiary of Amex whereas this affects the main business of Facebook.

Amex stock went down by more than 50%. FB is down only 15%. It didn't even hit a 52 week low.

Good point, RB.  I would add that Buffett went to a local restaurant in Omaha and determined that folks were still using their AMEX card. 

Fast Forward today an investor would be able to track FB downloads on the Apple app store and Google play, in addition to any anecdotal evidence about family or friends deleting their FB.

https://www.buzzfeed.com/alexkantrowitz/nothing-is-going-to-happen-to-facebook-or-mark-zuckerberg

"And though users posted #DeleteFacebook en masse, Facebook actually rose to 8th place from 12th in the iOS mobile App Store since the day before the Cambridge Analytica news broke. It’s holding steady on Android, too.

After examining whether first-time US installs of Facebook were dropping, Randy Nelson, head of mobile insights at app analytics company SensorTower, told BuzzFeed News: “The short answer is no.” App Store rankings don't directly reflect user numbers, but they're a good of indicator of interest."

Also:

https://www.appannie.com/en/apps/ios/top/united-states/overall/iphone/

https://www.appannie.com/en/apps/google-play/top/united-states/overall/
Title: Re: FB - Facebook
Post by: siddharth18 on March 26, 2018, 10:14:07 AM
There are a couple of differences here between this and salad oil. Salad oil affected a small subsidiary of Amex whereas this affects the main business of Facebook.

Amex stock went down by more than 50%. FB is down only 15%. It didn't even hit a 52 week low.

Did Amex really go down by more than 50%? I'm looking at https://hurricanecapital.wordpress.com/2014/04/30/valuation-of-amex-in-1964-price-vs-value-part-3/ (https://hurricanecapital.wordpress.com/2014/04/30/valuation-of-amex-in-1964-price-vs-value-part-3/) and it says 41% from peak to trough.

On the other hand, FB has a higher growth rate and better operating margin than Amex did.
Title: Re: FB - Facebook
Post by: Matson125 on March 26, 2018, 11:23:35 AM
There are a couple of differences here between this and salad oil. Salad oil affected a small subsidiary of Amex whereas this affects the main business of Facebook.

Amex stock went down by more than 50%. FB is down only 15%. It didn't even hit a 52 week low.

Good point, RB.  I would add that Buffett went to a local restaurant in Omaha and determined that folks were still using their AMEX card. 

Fast Forward today an investor would be able to track FB downloads on the Apple app store and Google play, in addition to any anecdotal evidence about family or friends deleting their FB.

https://www.buzzfeed.com/alexkantrowitz/nothing-is-going-to-happen-to-facebook-or-mark-zuckerberg

"And though users posted #DeleteFacebook en masse, Facebook actually rose to 8th place from 12th in the iOS mobile App Store since the day before the Cambridge Analytica news broke. It’s holding steady on Android, too.

After examining whether first-time US installs of Facebook were dropping, Randy Nelson, head of mobile insights at app analytics company SensorTower, told BuzzFeed News: “The short answer is no.” App Store rankings don't directly reflect user numbers, but they're a good of indicator of interest."

Also:

https://www.appannie.com/en/apps/ios/top/united-states/overall/iphone/

https://www.appannie.com/en/apps/google-play/top/united-states/overall/

Good catch, Liberty.
Title: Re: FB - Facebook
Post by: walkie518 on March 26, 2018, 11:58:22 AM
The uncertainty about this scandal isn't what happened a few years ago but what might happen a few years from now.

To assume Washington does nothing about the CA data "loss" is the bet one makes when buying FB shares today. 

The fines to be levied will likely be immaterial.  While a likely event and a positive for the company, this would be a big negative for the average user.

Making matters worse, consumers might not care in spite of the breach of trust. 

Instagram and WeChat are both doing very well.  If there wasn't so much power in the platform's ability to target users, the CA scandal wouldn't bear so much credence.

What happens, however, if Facebook is required to provide information on its user-base.  What happens when there are third-parties required to oversee Facebook user data. 

Say 1/4 users are not real or are part of a click-farm.  If Facebook is managing this grouping by itself, the number doesn't change. 

If Facebook is required to use a legitimate third-party paid for by its advertisers, maybe the statistics and estimates of user base start to make more sense together?

Where I struggle most is the divergence between what they do and the value the products bring to customers.  It's as if the advertiser wins because of how direct the platform is.  It's as if the consumer wins because it's easy to stay in touch.  These two aims, while seemingly symbiotic, pose problems in the application for more reasons than simply the Facebook CA scandal...
Title: Re: FB - Facebook
Post by: siddharth18 on March 26, 2018, 12:16:27 PM
The uncertainty about this scandal isn't what happened a few years ago but what might happen a few years from now.

To assume Washington does nothing about the CA data "loss" is the bet one makes when buying FB shares today. 

The fines to be levied will likely be immaterial.  While a likely event and a positive for the company, this would be a big negative for the average user.

Making matters worse, consumers might not care in spite of the breach of trust. 

Instagram and WeChat are both doing very well.  If there wasn't so much power in the platform's ability to target users, the CA scandal wouldn't bear so much credence.

What happens, however, if Facebook is required to provide information on its user-base.  What happens when there are third-parties required to oversee Facebook user data. 

Say 1/4 users are not real or are part of a click-farm.  If Facebook is managing this grouping by itself, the number doesn't change. 

If Facebook is required to use a legitimate third-party paid for by its advertisers, maybe the statistics and estimates of user base start to make more sense together?

Where I struggle most is the divergence between what they do and the value the products bring to customers.  It's as if the advertiser wins because of how direct the platform is.  It's as if the consumer wins because it's easy to stay in touch.  These two aims, while seemingly symbiotic, pose problems in the application for more reasons than simply the Facebook CA scandal...


I don't think a third party oversight would affect ad revenues. It could affect margins, maybe but also not by much.

Facebook's ad revenues are a function of the return on ad spend the advertisers are able to extract from their adspend. So long as facebook retains its unique laser like accuracy in targeting ads to its users, the advertisers will be able to extract an ever higher return on their ad spend.

The fact that facebook advertising is so incredibly profitable (when the targeting and the marketing funnel is right) overrides concerns about a percentage of users not being real or being part of a click farm.
Title: Re: FB - Facebook
Post by: roark33 on March 26, 2018, 03:33:30 PM
The idea that the Cambridge story has "hit a nerve with users" is such an odd comment.  The 38-year old mother of 3 who went to Disneyworld this past weekend posted the same 8 photos she would have posted had the CA story not been published this past week.  The father whose son won the wrestling tournament over the weekend also posted the photo of his 10-year old hoisting the trophy. 

I always find it funny how much investors think the average people are moved by stories in the press.  These stories may really be interesting to the average WSJ reader, but they are meaningless to the average soccer mom in america. 
Title: Re: FB - Facebook
Post by: walkie518 on March 26, 2018, 03:40:02 PM
The idea that the Cambridge story has "hit a nerve with users" is such an odd comment.  The 38-year old mother of 3 who went to Disneyworld this past weekend posted the same 8 photos she would have posted had the CA story not been published this past week.  The father whose son won the wrestling tournament over the weekend also posted the photo of his 10-year old hoisting the trophy. 

I always find it funny how much investors think the average people are moved by stories in the press.  These stories may really be interesting to the average WSJ reader, but they are meaningless to the average soccer mom in america.

It might be that they don't read the news?

As for click farms, maybe with the correct marketing knowledge the force is Facebook can be unleashed. However, I am very curious how much money is spent by people who have no idea how to use Facebook's advertising tools. Any one have a sense what that piece of ad revenue's might look like? The common small business owner with limited SEO expertise?
Title: Re: FB - Facebook
Post by: nkp007 on March 26, 2018, 04:11:50 PM
People are pissed because they think FB handed Trump the election. That's the only reason.

No one really cares about nor expects privacy anymore. That's the cost of using FB, GOOGL, etc.

Title: Re: FB - Facebook
Post by: LounginMKL on March 26, 2018, 04:24:23 PM
The idea that the Cambridge story has "hit a nerve with users" is such an odd comment.  The 38-year old mother of 3 who went to Disneyworld this past weekend posted the same 8 photos she would have posted had the CA story not been published this past week.  The father whose son won the wrestling tournament over the weekend also posted the photo of his 10-year old hoisting the trophy. 

I always find it funny how much investors think the average people are moved by stories in the press.  These stories may really be interesting to the average WSJ reader, but they are meaningless to the average soccer mom in america.

It might be that they don't read the news?

As for click farms, maybe with the correct marketing knowledge the force is Facebook can be unleashed. However, I am very curious how much money is spent by people who have no idea how to use Facebook's advertising tools. Any one have a sense what that piece of ad revenue's might look like? The common small business owner with limited SEO expertise?

I can't speak for all SMBs, but you can read about their success stories here (https://www.facebook.com/business/success). The value of targeted ads is real and is incredibly powerful. FB/GOOG allows SMBs with limited budgets to compete, lowering the barriers to entry for B2C.   

I personally know a friend who was able to leverage FB/Instagram advertising (among other digital marketing tools) to sell $18M worth of consumer products. Her case study is also featured on FB's success stories.

IMHO, to focus on click farms is missing the forest from the trees. Maybe there are are fake/duplicate accounts, but they remain a very small percentage of the overall user base.
Title: Re: FB - Facebook
Post by: Nell-e on March 26, 2018, 05:09:32 PM
IMHO - I think the regulatory risk is very real.  I think back to the Microsoft antitrust legal issues that lasted over 20 years.  I can't think of much downside for politicians to turn FB into a utility.  I doubt voters will care as long as current functionality stays the same.  For average people, it's a tool like a telephone. 

What's more I think it's a legitimate debate people should be having after seeing how much influence FB has over our elections.  At the very least, they should be subjected to more regulation over transparency. 
Title: Re: FB - Facebook
Post by: rb on March 26, 2018, 05:18:33 PM
Well you can assume that the Americans don't care or that the American government doesn't care. But Facebook is a global business. And while the mother of 3 from Kansas may not care what's shared about her Disney trip and how that's used, the mother of 3 from Berlin definitely does. So do a lot of governments since politicians generally don't like interference in their elections. So while the US business may be relatively safe the foreign business is at serious risk.

I think that a smart move for FB would be to ban political advertising and data collection from the platform. It's a small piece of the revenue pie that carries with it a big risk. Better be safe than sorry.
Title: Re: FB - Facebook
Post by: Nell-e on March 27, 2018, 05:24:08 PM
Article from Business Insider: http://www.businessinsider.com/people-are-sharing-their-terrifying-downloaded-facebook-data-2018-3

People are downloading their Facebook data and posting it to Twitter

People discovered they could request all of their Facebook data as a zip file and now they are posting the results on Twitter.
People were astounded to know that Facebook has access to every call they had made and text they had sent.
Users also found that their data had been shared to various advertisers.
One developer made a code available on Github for anyone who would like to make sense of their own Facebook data.
Title: Re: FB - Facebook
Post by: Nell-e on March 27, 2018, 05:49:19 PM
Here’s how to download all your data from Facebook. https://www.washingtonpost.com/news/the-intersect/wp/2018/03/27/heres-how-to-download-all-your-data-from-facebook-it-might-be-a-wake-up-call/?utm_term=.a9a061ffeccd
Title: Re: FB - Facebook
Post by: Jurgis on March 28, 2018, 02:25:14 PM
https://www.bloomberg.com/news/features/2018-03-27/ad-scammers-need-suckers-and-facebook-helps-find-them
Title: Re: FB - Facebook
Post by: LounginMKL on March 28, 2018, 09:52:48 PM
https://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?pagewanted=1&_r=1&hp

Maybe we should ask Target CEO to appear before Congress too  ;) Where I can download my data profile from Target? Or Google?

I personally feel this whole FB saga has turned into media fearmongering. Advertisers don't actually see the individual-level data. They don't know which individuals are in their targeted campaign. Yes, FB collects a lot of data on you; but so does Google and everyone else. If one doesn't want to be target advertised, s/he needs to go off the grid.

Then again, as an investor, we are not here to judge right or wrong, we are here to determine outcome. Although I think FB has "good" intentions, I am worried that we could see a "run on the bank" scenario here. For now, I'm betting on the status quo.
Title: Re: FB - Facebook
Post by: KCLarkin on March 29, 2018, 06:58:09 AM
I personally feel this whole FB saga has turned into media fearmongering. Advertisers don't actually see the individual-level data. They don't know which individuals are in their targeted campaign. Yes, FB collects a lot of data on you; but so does Google and everyone else.

This scandal isn't about collecting personal data and using it to sell advertising. It is about FB handing over your personal data and the data for all your friends (including individual data) to 3rd party developers with nothing more than a "policy" restricting how that data can be used.
Title: Re: FB - Facebook
Post by: Liberty on March 29, 2018, 09:52:33 AM
https://twitter.com/MarceloPLima/status/979374911675355136
Title: Re: FB - Facebook
Post by: Liberty on March 29, 2018, 12:37:50 PM
Thread:

https://twitter.com/michaelsayman/status/979418834976124928
Title: Re: FB - Facebook
Post by: LounginMKL on March 29, 2018, 01:47:02 PM
I personally feel this whole FB saga has turned into media fearmongering. Advertisers don't actually see the individual-level data. They don't know which individuals are in their targeted campaign. Yes, FB collects a lot of data on you; but so does Google and everyone else.

This scandal isn't about collecting personal data and using it to sell advertising. It is about FB handing over your personal data and the data for all your friends (including individual data) to 3rd party developers with nothing more than a "policy" restricting how that data can be used.

KCLarkin- I agree that the focus of the issue is FB letting third party developers obtain user data in 2013 (5 years ago). My previous comment (probably too ambiguous in hindsight) is that the media has really sensationalize and extrapolate the Cambridge event into something that's much more horrifying- everyone can invade your privacy via FB. I mean, that's why people are downloading their profile data and panicking. The reality is that FB (allegedly) has not been sharing individual user data with advertiser/developer for years and probably won't after this event. If regulation begins to heavily restrict user data mobility, then a FB challenger will have to build the social network organically- and that is hard...

Liberty- Thanks for sharing the twitter thread- he explains it better than I.
Title: Re: FB - Facebook
Post by: sleepydragon on March 31, 2018, 07:02:02 PM
In the town i live, we have a 5000-people town Facebook page. Someone posted detailed instructions of disabling FB platforms and Ads under profile settings. I did that, and probably many others too.
Title: Re: FB - Facebook
Post by: LongTermView on March 31, 2018, 08:25:44 PM
Thread:

https://twitter.com/michaelsayman/status/979418834976124928

Thanks for the link, Liberty. Michael's twitter thread does a good job explaining why it is in the best interest of Facebook to keep user data private.
Title: Re: FB - Facebook
Post by: LounginMKL on April 01, 2018, 09:14:38 AM
In the town i live, we have a 5000-people town Facebook page. Someone posted detailed instructions of disabling FB platforms and Ads under profile settings. I did that, and probably many others too.

Sleepydragon- may I ask what's the alternative? I guess a town of 5k already has a pretty tightly knitted network where they don't need online organization as much?

I live in the Bay Area, where people use FB to form groups around hobbies, seeking roomates, seeking jobs, etc... It's basically Craigslist, but with identities. When you are interacting with someone, s/he is not just an email address, but someone with a social network to vouch for their existence.

Of course, we could be living in a bubble where my experience is an exception...
Title: Re: FB - Facebook
Post by: DTEJD1997 on April 01, 2018, 12:11:14 PM
Hey all:

The hits just keep coming for FB.

I don't think there is any question that these scandals are bad and have damaged FB.

The question is how much damage and will it be permanent.

I got rid of my Facebook account YEARS ago.

A few years from now, you could see new competitors gains strength, and/or people start to drift away from it.

Most of the people that I am close to have NO FB account, OR it is dormant, OR it is low usage for them.  Obviously not everybody, just most of the people I am close to.  Nobody I know is saying, "I've got to get on the Facebook, and be more active!".  The few people I hear discussing it, are mainly discussing it in a negative fashion.
Title: Re: FB - Facebook
Post by: cameronfen on April 01, 2018, 05:31:51 PM
Hey all:

The hits just keep coming for FB.

I don't think there is any question that these scandals are bad and have damaged FB.

The question is how much damage and will it be permanent.

I got rid of my Facebook account YEARS ago.

A few years from now, you could see new competitors gains strength, and/or people start to drift away from it.

Most of the people that I am close to have NO FB account, OR it is dormant, OR it is low usage for them.  Obviously not everybody, just most of the people I am close to.  Nobody I know is saying, "I've got to get on the Facebook, and be more active!".  The few people I hear discussing it, are mainly discussing it in a negative fashion.

The only people that are saying "I've got to get on the Facebook and be more active" are in India.  Everyone in the developed country has Facebook if they want it.  I'm not surprised you don't see any growth where ever you live.  That doesn't mean growth isn't happening. 
Title: Re: FB - Facebook
Post by: Spekulatius on April 01, 2018, 06:20:29 PM
Hey all:

The hits just keep coming for FB.

I don't think there is any question that these scandals are bad and have damaged FB.

The question is how much damage and will it be permanent.

I got rid of my Facebook account YEARS ago.

i haven’t seen any difference on how my circle uses FB. I am a low frequency user myself, but it is hard to replace for what it is. If you delete your Fb account years ago, you are obviously not a representative user. I dont think the community here represents the average FB user well.

A few years from now, you could see new competitors gains strength, and/or people start to drift away from it.

Most of the people that I am close to have NO FB account, OR it is dormant, OR it is low usage for them.  Obviously not everybody, just most of the people I am close to.  Nobody I know is saying, "I've got to get on the Facebook, and be more active!".  The few people I hear discussing it, are mainly discussing it in a negative fashion.
Title: Re: FB - Facebook
Post by: DTEJD1997 on April 01, 2018, 08:36:46 PM
Hey all:

The hits just keep coming for FB.

I don't think there is any question that these scandals are bad and have damaged FB.

The question is how much damage and will it be permanent.

I got rid of my Facebook account YEARS ago.

A few years from now, you could see new competitors gains strength, and/or people start to drift away from it.

Most of the people that I am close to have NO FB account, OR it is dormant, OR it is low usage for them.  Obviously not everybody, just most of the people I am close to.  Nobody I know is saying, "I've got to get on the Facebook, and be more active!".  The few people I hear discussing it, are mainly discussing it in a negative fashion.

The only people that are saying "I've got to get on the Facebook and be more active" are in India.  Everyone in the developed country has Facebook if they want it.  I'm not surprised you don't see any growth where ever you live.  That doesn't mean growth isn't happening.

You very well may be right...

And not to be rude...but I am going to guess that the average FB user in the "West" is going to be worth orders of magnitude more in advertising & revenue than the average FB user in India or other 3rd world countries.

So what is this growth in India really worth?
Title: Re: FB - Facebook
Post by: Liberty on April 02, 2018, 04:26:58 AM
Hey all:

The hits just keep coming for FB.

I don't think there is any question that these scandals are bad and have damaged FB.

The question is how much damage and will it be permanent.

I got rid of my Facebook account YEARS ago.

A few years from now, you could see new competitors gains strength, and/or people start to drift away from it.

Most of the people that I am close to have NO FB account, OR it is dormant, OR it is low usage for them.  Obviously not everybody, just most of the people I am close to.  Nobody I know is saying, "I've got to get on the Facebook, and be more active!".  The few people I hear discussing it, are mainly discussing it in a negative fashion.

The only people that are saying "I've got to get on the Facebook and be more active" are in India.  Everyone in the developed country has Facebook if they want it.  I'm not surprised you don't see any growth where ever you live.  That doesn't mean growth isn't happening.

You very well may be right...

And not to be rude...but I am going to guess that the average FB user in the "West" is going to be worth orders of magnitude more in advertising & revenue than the average FB user in India or other 3rd world countries.

So what is this growth in India really worth?

There's a slide each quarter showing the ARPUs around the world. But the idea is to skate where the puck is going. And as they say, at some point a big enough quantitative difference makes a qualitative difference... There are so many users outside of NA and Europe that even at lower ARPUs they add up to a lot, and since there's a lot of room for growth left in ARPUs and in unconnected users (millions join the internet every month still), that's runway.
Title: Re: FB - Facebook
Post by: cameronfen on April 02, 2018, 06:05:02 AM
Hey all:

The hits just keep coming for FB.

I don't think there is any question that these scandals are bad and have damaged FB.

The question is how much damage and will it be permanent.

I got rid of my Facebook account YEARS ago.

A few years from now, you could see new competitors gains strength, and/or people start to drift away from it.

Most of the people that I am close to have NO FB account, OR it is dormant, OR it is low usage for them.  Obviously not everybody, just most of the people I am close to.  Nobody I know is saying, "I've got to get on the Facebook, and be more active!".  The few people I hear discussing it, are mainly discussing it in a negative fashion.

The only people that are saying "I've got to get on the Facebook and be more active" are in India.  Everyone in the developed country has Facebook if they want it.  I'm not surprised you don't see any growth where ever you live.  That doesn't mean growth isn't happening.

You very well may be right...

And not to be rude...but I am going to guess that the average FB user in the "West" is going to be worth orders of magnitude more in advertising & revenue than the average FB user in India or other 3rd world countries.

So what is this growth in India really worth?

There's a slide each quarter showing the ARPUs around the world. But the idea is to skate where the puck is going. And as they say, at some point a big enough quantitative difference makes a qualitative difference... There are so many users outside of NA and Europe that even at lower ARPUs they add up to a lot, and since there's a lot of room for growth left in ARPUs and in unconnected users (millions join the internet every month still), that's runway.

To second Liberty, ARPU is indeed low in India, but India is growing at 7% a year.  Just like in the BRICs how you could bet on multinational US companies or big local companies to copy their US playbook in foriegn locals and expect the rising tide of GDP to do the work for you, you can do the same thing with Facebook in India.  ARPU is $2.5 versus $26 in North America and somewhat concerning $8.50 in Europe.  Facebook also is the dominant player in India but only has 280 million MAU versus the population of 1.3 billion.  You may view low ARPU as a negative, but I consider that to be a huge asset which will allow future price increases. 
Title: Re: FB - Facebook
Post by: cameronfen on April 02, 2018, 06:31:19 AM
Additionally, I think another hidden asset is Whatsup.  Whatsapp has more than 1.5 billion MAU and if you layer on top the 1 billion MAU on messenger (some people have both so you can't just add them) thats a huge portion of the Earths population on these OTT apps.  Most of Whatsapps users are in developing coutries/continents like India, Africa, South America where penetration still has room to grow and ARPU does as well.  Whatsapp is not being seriously monetized right now, which is the right move in my mind.  It's more important to get as many users as possible to create an network effect which no other firm can disrupt.  This will mean no other OTT firms will be able to compete with Whatsapp as everyone is on Whatsapp so no one will want to leave as they will lose all their contacts. 

However, it really isn't a question of if FB will monetize Whatsapp its when.  Why?  Because Tencent has already demonstrated the correct way to monetize this asset with their ecosystem around Wechat.  Tencent is a 500 billion dollar company built entirely around the ecosystem of Wechat and Whatsapp has 50% more users than Tencent in many countries with lower penetration and development than China.  So when FB chooses to monetize wechat (as they are starting to roll out) they copy Tencent's playbook.  Offer payment, ads, stickers, ride hailing and games all through the Whatsapp ecosystem.  The reason Wechat is such a money making machine is because you can do everything on it.  And because you can do everything on it, whenever a new idea comes up in China (like say Uber), Tencent has an inborn advantage over everyone else, because everyone is already spending all there time on the Wechat ecosystem doing everything else and they just put one more product up.  In 2015 HSBC estimated Wechat to be worth 80 billion and half of Tencents then market cap.  Now Tencent has a valuation of 500 billion with much of the growth driven by Wechat monitization.  Facebook is already starting to execute Tencents' playbook by hiring Tencent management and implementing payments and upgrades for small businesses for example. 
Title: Re: FB - Facebook
Post by: Liberty on April 02, 2018, 07:01:29 AM
Zuckerberg interview with Ezra Klein:

https://overcast.fm/+F_9F-g8iA
Title: Re: FB - Facebook
Post by: Jerry Capital on April 02, 2018, 07:43:06 PM
Attack of the micro brands.

Pretty easy for me to see a "buy now with one click button" that is now off-patent from Amazon integrated with hyper targeted advertising generating some interesting sales on the instagram platform.

https://medium.com/positiveslope/attack-of-the-micro-brands-c0b7835c3633
Title: Re: FB - Facebook
Post by: Liberty on April 05, 2018, 05:59:38 AM
Transcript of Zuckerberg's press conference yesterday:

https://newsroom.fb.com/news/2018/04/hard-questions-protecting-peoples-information/
Title: Re: FB - Facebook
Post by: vinod1 on April 05, 2018, 09:55:26 AM
I have been dead wrong about Facebook. I was wrong even about the reasons why I was wrong about Facebook. So take my comments with a pinch of salt.

I believed that people would be concerned about privacy and some random event would at some point bring this to the forefront for for the people. And that this would slowly reduce what people share on social media. This in turn would limit Facebook potential.

What the recent episode Cambridge Analytica in fact shows is that people dont give a whit about privacy. If "Donald Trump" was not part of this, this would have received very little attention of the public. So sort of like the Financial Crisis which sort of stress tested the moat of Moody's, this event provides a good stress test of Facebook's moat.

It looks like FB would end up with an even stronger moat as a consequence of this episode.

Vinod
Title: Re: FB - Facebook
Post by: rishig on April 05, 2018, 09:59:00 AM
I have been dead wrong about Facebook. I was wrong even about the reasons why I was wrong about Facebook.

Can you provide more context on these two statements. I am curious to hear why you say this.
Title: Re: FB - Facebook
Post by: vinod1 on April 05, 2018, 08:02:53 PM
I have been dead wrong about Facebook. I was wrong even about the reasons why I was wrong about Facebook.

Can you provide more context on these two statements. I am curious to hear why you say this.

It would take several pages to explain my errors but I would hit the highlights.

To me the three key drivers/risks of Facebook are:

1. User engagement. How much its users enagage with FB in terms of minutes spent on the site.

You probably are aware of Skinner's Operating Conditioning model and how powerful it is when combined with a variable rewards that is common feature to many of the social media apps. I understood this but still underestimated its addictive power. The expected decline in user engagement never came.

2. User willingness to keep sharing their personal information.

It is amazing how much personal information people were willing to share on FB. The proliferation of FB likes buttons and using FB login as an identify mechanism across the web was way beyond what I expected.

3. User tolerance for advertisements on FB.

I expected there would be a greater resistance to advertisements from its user base. On google your intent is clear and ads that are relevant enhance the user experience. On FB I thought ads would be a tough sell and that many companies would pull back on the ads as they would be effective. On Mobile I expected this to be even worse.

But we now know that ads are very effective and mobile is tailor made for FB and the rocket engine on which to deploy its moat.

So overall I could not have been more wrong about the company.

Vinod
Title: Re: FB - Facebook
Post by: vinod1 on April 05, 2018, 08:17:25 PM
On an slightly off topic note, the hunter gathers never had this constant stimuli of a mobile app like Facebook. So humans have not evolved to handle such stimuli well. So we behave like the lab rats in this experiment (replace the lever with Facebook app):

https://www.huffingtonpost.com/david-j-linden/compass-pleasure_b_890342.html

In the 1930s, the psychologist B. F. Skinner devised the operant conditioning chamber, or “Skinner box,” in which a lever press by an animal triggered either a reinforcing stimulus, such as delivery of food or water, or a punishing stimulus, such as a painful foot shock. Rats placed in a Skinner box will rapidly learn to press a lever for a food reward and to avoid pressing a lever that delivers the shock.

In the 1950s, the psychologists James Olds and Peter Milner modified the chamber so that a lever press would deliver direct brain stimulation through deep implanted electrodes. What resulted was perhaps the most dramatic experiment in the history of behavioral neuroscience: Rats would press the lever as many as 7,000 times per hour to stimulate their brains. This was a pleasure center, a reward circuit, the activation of which was much more powerful than any natural stimulus.

A series of subsequent experiments revealed that rats preferred pleasure circuit stimulation to food (even when they were hungry) and water (even when they were thirsty). Self-stimulating male rats would ignore a female in heat and would repeatedly cross foot-shock-delivering floor grids to reach the lever. Female rats would abandon their newborn nursing pups to continually press the lever. Some rats would self-stimulate as often as 2000 times per hour for 24 hours, to the exclusion of all other activities. They had to be unhooked from the apparatus to prevent death by self-starvation. Pressing that lever became their entire world.


Vinod


Title: Re: FB - Facebook
Post by: Jurgis on April 05, 2018, 09:39:57 PM
(replace the lever with Facebook app CoBF)

There. Corrected that for you.  8)
Title: Re: FB - Facebook
Post by: LongTermView on April 05, 2018, 09:47:36 PM
3. User tolerance for advertisements on FB.

I expected there would be a greater resistance to advertisements from its user base. On google your intent is clear and ads that are relevant enhance the user experience. On FB I thought ads would be a tough sell and that many companies would pull back on the ads as they would be effective. On Mobile I expected this to be even worse.

But we now know that ads are very effective and mobile is tailor made for FB and the rocket engine on which to deploy its moat.

I like the ads because the targeting is effective. Knowing that I'm a hiking and running enthusiast, FB shows me enjoyable ads related to these activities. This makes the experience much better than tv where annoying and off-topic ads are all over the place.
Title: Re: FB - Facebook
Post by: Spekulatius on April 06, 2018, 05:25:59 PM
Call me a convert since I never owned FB until recently. If you believe that thr FB thesis is intact (I don’t see a reason why not), FB stock from a fundamental analysis POV is actually cheaper than it has ever been and relatively cheap compared to the market, if you consider growth potential and fundamentals.

It feels surprising to write this, as I found the stock ridiculously valued at the IPO, but they have proven themselves and churned  out numbers that make the current price look cheap.
Title: Re: FB - Facebook
Post by: chrispy on April 06, 2018, 05:49:12 PM
Everyone is upset but no one I've talked to is closing their account
Title: Re: FB - Facebook
Post by: gjangal on April 06, 2018, 06:20:25 PM
Does anyone know if they disclose the split between FB, Instagram and their Facebook Audience network in terms of growth rates.

 I think everyone is talking about how ad load on FB is saturated. i wonder if that includes the facebook audience network.
Title: Re: FB - Facebook
Post by: Jerry Capital on April 06, 2018, 06:39:30 PM
You mean revenue growth split?
Title: Re: FB - Facebook
Post by: LR1400 on April 06, 2018, 08:03:06 PM
Call me a convert since I never owned FB until recently. If you believe that thr FB thesis is intact (I don’t see a reason why not), FB stock from a fundamental analysis POV is actually cheaper than it has ever been and relatively cheap compared to the market, if you consider growth potential and fundamentals.

It feels surprising to write this, as I found the stock ridiculously valued at the IPO, but they have proven themselves and churned  out numbers that make the current price look cheap.

I tend to agree. I don’t own it and never looked at it until recently, but the numbers are fascinating. It’s a much better business than 90% of other businesses.
Title: Re: FB - Facebook
Post by: siddharth18 on April 06, 2018, 08:51:37 PM
Call me a convert since I never owned FB until recently. If you believe that thr FB thesis is intact (I don’t see a reason why not), FB stock from a fundamental analysis POV is actually cheaper than it has ever been and relatively cheap compared to the market, if you consider growth potential and fundamentals.

It feels surprising to write this, as I found the stock ridiculously valued at the IPO, but they have proven themselves and churned  out numbers that make the current price look cheap.

I think that's a respectable point of view. Changing your opinion as the facts change is a sign of wisdom. A pre-IPO investor in FB recently posted on Twitter that the valuation right now is the most attractive he's seen (in terms of risk/reward) ever since he invested.
Title: Re: FB - Facebook
Post by: frommi on April 07, 2018, 02:33:12 AM
Given all the uncertainty in technology, what do you guys think are the odds that facebook/instagram will still be used like today 20 years from now? And whats the difference to something like myspace.com in 2006-2008?
Title: Re: FB - Facebook
Post by: Spekulatius on April 07, 2018, 04:45:18 AM
Given all the uncertainty in technology, what do you guys think are the odds that facebook/instagram will still be used like today 20 years from now? And whats the difference to something like myspace.com in 2006-2008?

I think the risk that FB is replaced by a bigger mousetrap is higher than with GOOG to name one example. I do think that a lot of people underestimate the IP and know how within FB and how easy it would be to replicate. I think this is another part of the moat, beyond just the net work effects. Just like with GOOG, I think their real edge is Adsense and monetization rather than be the best search engine, I think FB is best in class how they grow social networks and monetize them. FB may be getting in the mature phase in the US, but it is still growing in terms of monetization elsewhere like weed, and then there is Instagram and Whatsup, which barely scratch the surface in terms of monetization or have not started at all.

I also feel that Zuckerberg is a very strong CEO with a long term view on the business and will be regarded on par with Bill Gates and Bezos down the road. Yes, he does poorly in the media right now with the scandal, but I think he will learn to do this better or hire someone who does, because FB right now is  more important for the public than TV networks have been in their hey days.
Title: Re: FB - Facebook
Post by: Jerry Capital on April 07, 2018, 05:57:17 AM
Reading through some material from Sequoia I picked up on a good heuristic. Evidence of failed competition, in many of Sequoias investments it seems to be one of the first things they mention, and an empirical way to test a moat.

I believe it's Buffet who says "if you gave me 100 billion dollars could I recreate this company." In my opinion we have seen clear evidence this is not the case with Google + (failed) and Google has the ultimate financial resources to compete.

There are also of course many other examples of less capitalized competitors getting crushed, Snap and Twitter. If Facebook didn't have a very strong moat (as well as a team of engineers who execute flawlessly) then Snap would be what Instagram is today. Instagram crushing Snap is similar to Facebook crushing Google + a few years back.

Does Google have a wider moat? I believe that's obvious buy owning the most popular OS worldwide (Android), does Facebook have more room for revenue, earnings, and subsequently cash flow growth? Absolutely.

I have bought shares in Google every year for 13 years (yes I'm boasting, but it helps prove my point re Facebook shares), but at these prices for Facebook my traditional yearly allocation to the perennial undervalued Google shares will be shifted to Facebook. In a similar vane to owning both Visa and Mastercard and counting them as "one position" I will now be doing the same with my allocation to Google and Facebook. This year Facebook represents a much better risk reward (albeit higher risk with a potentially higher reward).
Title: Re: FB - Facebook
Post by: LongTermView on April 07, 2018, 10:59:41 AM
And whats the difference to something like myspace.com in 2006-2008?

FB has made serious mistakes and they've gotten a lot of press on their shortcomings recently but MySpace was a trainwreck.

Some of the MySpace issues were mentioned by rishig here a year ago: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/fb-facebook/msg292904/?topicseen#msg292904
Quote
It's important to understand why MySpace fizzled out as a social network. When one builds a platform, it is very important to enforce rules that discourage or even ban users from bad behavior. MySpace completely lacked this - they focused on vanity metrics like user growth at any cost. And they ignored the bad behaviors (trolling, porn etc). The ads that became prevalent also started going downstream.

Unlike MySpace, Facebook was always focused on engagement, which is driven by things you mentioned - user experience, features, method of communicating, reputation, fads etc. More on this topic here if you are open to evidence that may be disconfirming to what you think: http://a16z.com/2016/07/16/network-effects-event/
Title: Re: FB - Facebook
Post by: reader on April 07, 2018, 11:37:35 AM
Jerry Capital,
Kudos on your GOOG success. me too started a position in FB yesterday.
however, as I see it the biggest threats to both moat are obviously  regulatory(break GOOG, FB )
and on the competitive side something completely new, game-changing, as they were when Larry and Sergei, and Zuck
came out of academia and swept the market.something that could justify venturing out of their ecosystem.
just from my personal experience( and friends), Google's search is not the wonder it used to be. I think they are over monetizing it and under-investing in keeping up with the expansion of the web. good luck finding stuff posted in blogs.
Title: Re: FB - Facebook
Post by: JRM on April 07, 2018, 12:24:29 PM
Most people seem to be missing the big picture here.  Facebook is not just some tool to connect people and share information at the user level. It is a completely unregulated, unrestricted, addictive, and habit forming echo chamber.  The reason Facebook is trying to focus on engagement is because they are trying to re-inforce the behavior that makes their platform addictive, in the most literal sense.  People get a dopamine hit every time somebody "likes" or comments positively on something they post.  if a person is feeling down or depressed they may post something in order to elicit a response to feel better.  For example, someone who is recently single may post risqué photos to attract "likes" in an attempt to boost their self-esteem.  I see this behavior all the time.

Facebook and other social media are habit forming and people allow their kids unlimited access to it.  Targeted advertising and social engineering is just the tip of the iceberg.  Just wait until the democrats get ahold of Facebook (and Google) in the next mid-term elections. 

In my opinion, people are greatly underestimating the regulatory risk here.  Do regulations possibly make FB moat stronger?  I would say yes, but how much could potential regulations impact profitability?
Title: Re: FB - Facebook
Post by: LounginMKL on April 07, 2018, 01:06:46 PM
Wow, came here this morning and got a strong dose of confirmation bias for myself.

In my opinion, people are greatly underestimating the regulatory risk here.  Do regulations possibly make FB moat stronger?  I would say yes, but how much could potential regulations impact profitability?

The consensus at this moment is that regulation is going to limit data mobility, making incumbent (GOOG/FB) stronger. As a result, future digital ad dollars will continue to flow to these two ecosystems. If anyone has a bearish variant on regulation, I'd love to hear them. I think the chance for FB to get regulated like an utility is small (not essential our livelihood). How else can regulation torpedo the current business model?
Title: Re: FB - Facebook
Post by: JRM on April 07, 2018, 01:52:34 PM
I don't really care about regulations in terms of advertisement placement or data scraping.  I think most people don't care, for the most part.  Could be wrong.  I'm interested to see if society starts to view social media platforms as a detrimental, behavior altering, and an addictive medium; similar to drugs or alcohol.  I know it sounds excessive, but the current trend for young people is to escape cyberspace and interact in person and have real world experiences.  Sounds crazy, I know.

Facebook is the perfect combination of addictive and highly profitable.  Twitter, Instagram, and SnapChat don't have the latter (at least not yet).  I think FB is a near perfect company from an investment perspective.  I'm trying to think through the downside, so please don't take my angle as completely negative.

Microsoft had a lost decade in the 2000's after anti-trust trials and the tech bubble.  I'm trying to figure out if history is going to repeat itself, or if I'm falling victim to recency bias.
Title: Re: FB - Facebook
Post by: LounginMKL on April 07, 2018, 02:30:17 PM
There are many things in society that are addictive and potentially detrimental- corn syrup, sugar, soda, junk food, cigarettes, online gaming, coffee, porn, 24hrs news cycle- and society doesn't reject them. I'm not that worried about user exodus. After checking up on my friends, I noticed only 1-2% have deactivated their accounts.

I'm also trying to flesh out any downside regulation risks- what's the worst likely scenario?

On another hand, I can't help but to think about FB in relation to Munger's "Turning $2M into $2T" speech. In turning Coca-Cola into what it is today, it must have faced similiar questions- am I going to be regulated by distributing this addictive drink to the mass? once people recognize the negative health effects, are they going to stop drink coke? Perhaps I've digressed and took some liberty in connecting the two cases.
Title: Re: FB - Facebook
Post by: walt373 on April 07, 2018, 04:48:57 PM
What about antitrust? FB and GOOG seem to be the rare cases where their competitive positions are so strong that getting stronger might become a negative. However, I'd expect Amazon to be targeted first. We know how Trump feels about Bezos, and Amazon is still in the process of destroying its competition. FB and Google aren't killing many competitors because they've already won. One argument against antitrust is that these modern monopolies are mostly benefiting consumers instead of exploiting them, which is what antitrust laws were created to protect against. Of course, FB has lost a lot of goodwill in this regard recently.
Title: Re: FB - Facebook
Post by: JRM on April 07, 2018, 04:57:18 PM
Anti-trust laws are in place to prevent companies from squashing competition; which Amazon, Google, and Facebook are all doing in similar ways Microsoft did in the 1990's.  Eventually the monopoly could turn against the consumer, but at this stage of the game the consumer loves the products these company provide.  The consumer is insouciant to the fact the any legitimate competition is squelched without a second thought.  Of course customers love Amazon.  They provide the ultimate customer experience.  But at what cost to society?
Title: Re: FB - Facebook
Post by: rishig on April 08, 2018, 07:22:00 AM
Sequoia fund buys FB in Q1:
https://www.sequoiafund.com/Download.aspx?ID=e13ac0a9-f76b-4a45-a2a7-2e760f7f025e&Name=Q1_2018_-_Investor_Letter
Title: Re: FB - Facebook
Post by: Liberty on April 08, 2018, 12:01:36 PM
Sequoia fund buys FB in Q1:
https://www.sequoiafund.com/Download.aspx?ID=e13ac0a9-f76b-4a45-a2a7-2e760f7f025e&Name=Q1_2018_-_Investor_Letter

Bill Nygren added it too:

https://www.oakmark.com/Commentary/Oakmark/Oakmark-Fund-Commentary-First-Quarter-2018.htm
Title: Re: FB - Facebook
Post by: dutchman on April 08, 2018, 12:10:15 PM
Liberty, do you own it?
Title: Re: FB - Facebook
Post by: vinod1 on April 08, 2018, 01:46:10 PM
Anti Trust would be difficult to apply to Facebook and Google as the services these companies offer are free to consumers.

As far as harm to consumers is concerned (more along the lines of addiction) it is an par with Coca Cola. I do not think the vast majority of the people are too concerned about it. Ironically, the Trump episode proves this point. Lots of people (as measured in percentage of the population) are pissed off that Trump might have benefited from this and not because of concerns about privacy.

As far as another network replacing FB is concerned, I think FB has reached the point where this is very unlikely. Lots of good points by rishig on why FB is unlikely to go the way of myspace. In addition, on myspace, people only had the relationship information and not much else. So once some people started trying out FB, they moved as well. FB has added a lot of other services and people now have a lot of data as well on FB. So not only their friend network has to move all the content has to move as well. This makes it more sticky.

One way FB could be attacked is if people actually get paid by the social network for being a consumer. There are interesting things going on in Blockchain which makes this possible. See the article below

https://www.nytimes.com/2018/01/16/magazine/beyond-the-bitcoin-bubble.html

This has the added benefit that the data about consumers owned by consumer. But it is doubtful if this ever going to take off.

Vinod

 
Title: Re: FB - Facebook
Post by: rb on April 08, 2018, 05:37:21 PM
As far as another network replacing FB is concerned, I think FB has reached the point where this is very unlikely. Lots of good points by rishig on why FB is unlikely to go the way of myspace. In addition, on myspace, people only had the relationship information and not much else. So once some people started trying out FB, they moved as well. FB has added a lot of other services and people now have a lot of data as well on FB. So not only their friend network has to move all the content has to move as well. This makes it more sticky.

One way FB could be attacked is if people actually get paid by the social network for being a consumer. There are interesting things going on in Blockchain which makes this possible. See the article below
The thing with tech is that you just don't know. What you've wrote above could have easily been said about Yahoo circa 1999.
Title: Re: FB - Facebook
Post by: vinod1 on April 08, 2018, 06:10:55 PM
What about tax law change in USA and the proposed one in Europe? If these laws are enacted, likely they will be impacted in other countries as well?

Anti Trust would be difficult to apply to Facebook and Google as the services these companies offer are free to consumers.

As far as harm to consumers is concerned (more along the lines of addiction) it is an par with Coca Cola. I do not think the vast majority of the people are too concerned about it. Ironically, the Trump episode proves this point. Lots of people (as measured in percentage of the population) are pissed off that Trump might have benefited from this and not because of concerns about privacy.

As far as another network replacing FB is concerned, I think FB has reached the point where this is very unlikely. Lots of good points by rishig on why FB is unlikely to go the way of myspace. In addition, on myspace, people only had the relationship information and not much else. So once some people started trying out FB, they moved as well. FB has added a lot of other services and people now have a lot of data as well on FB. So not only their friend network has to move all the content has to move as well. This makes it more sticky.

One way FB could be attacked is if people actually get paid by the social network for being a consumer. There are interesting things going on in Blockchain which makes this possible. See the article below

https://www.nytimes.com/2018/01/16/magazine/beyond-the-bitcoin-bubble.html

This has the added benefit that the data about consumers owned by consumer. But it is doubtful if this ever going to take off.

Vinod

It is not a big change, especially with the lower tax rate in US due to recent changes.

Vinod
Title: Re: FB - Facebook
Post by: vinod1 on April 08, 2018, 06:22:50 PM
As far as another network replacing FB is concerned, I think FB has reached the point where this is very unlikely. Lots of good points by rishig on why FB is unlikely to go the way of myspace. In addition, on myspace, people only had the relationship information and not much else. So once some people started trying out FB, they moved as well. FB has added a lot of other services and people now have a lot of data as well on FB. So not only their friend network has to move all the content has to move as well. This makes it more sticky.

One way FB could be attacked is if people actually get paid by the social network for being a consumer. There are interesting things going on in Blockchain which makes this possible. See the article below
The thing with tech is that you just don't know. What you've wrote above could have easily been said about Yahoo circa 1999.

For years I had exactly the same thought as you. I kept thinking why is this different than Dell, AOL or Yahoo?

It took me quite a bit of study to change my mind. To displace FB it needs some form of Government intervention or users need to be sufficiently concerned about their privacy to stop sharing their information with FB.

It is more possible that user engagement could decrease by something new - for example what if FB is not able to buy Instagram or WhatsApp? But given its user base, it is in a good position to copy like Microsoft did way back in 1990s and crush competition.

I know I would probably sound like someone chasing the hot tech fad to you, just like I would have thought a little while back if someone else is talking about FB. :) There might be a comment like that somewhere on this board by me.

Vinod
Title: Re: FB - Facebook
Post by: vinod1 on April 08, 2018, 06:27:59 PM
One way FB could be attacked is if people actually get paid by the social network for being a consumer. There are interesting things going on in Blockchain which makes this possible. See the article below

https://www.nytimes.com/2018/01/16/magazine/beyond-the-bitcoin-bubble.html

This has the added benefit that the data about consumers owned by consumer. But it is doubtful if this ever going to take off.

Vinod

WSJ just posted an article related to this:

https://www.wsj.com/articles/a-better-way-to-make-facebook-pay-1523209483

Techies have an expression for Facebook’s model. It’s “free as in beer”—in the sense of costing no money. You pay in other ways. I propose a simple fix. Let’s flip the whole thing—make it about property rights, 21st-century style. America was built on property rights. Congress can deliberate for 90 seconds and then pass the Make the Internet Great Again Act. The bill would contain five words: “Users own their private data.” Finis.

....

What would the world look like under the Make the Internet Great Again Act? If you upload to Facebook photos from your last beach vacation—though please don’t—you still own them. But if I go to your page, zoom in to see whom you’re drinking with, click on a nearby ad, message you about it, or even “Like” it, that information about me should remain private too. I should still own it. Same for whatever I search on Google or buy on Amazon. I control it.

Facebook would store this info in a virtual locker, and users would control access. The social network already has this data. It simply needs to corral it into two billion virtual lockers. It’d take an overnight hackathon to implement, really. Each user could then share or not.

But if you don’t share, Facebook can’t do its magic and provide a robust News Feed. It will be all cat videos, all the time. Similarly, Google can’t provide pertinent search results, which, like prizes on “The Newlywed Game,” are selected especially for you.

You’re going to want to share. Here’s the good news: Facebook is going to pay you to share. Then they’ll turn around and charge you a similar amount to cover the cost of servers, electricity, coders and Mark Zuckerberg’s hoodies. This way they can still show Wall Street the profits it expects. Worth it? Your call.

...

This is where it gets fun. Facebook would provide a sliding scale for sharing. The more information you deem shareable, the more you earn. In effect, it becomes a revenue-sharing arrangement with advertisers that want to reach you. If you don’t mind the barrage of ads, share away and a virtual wallet inside your virtual locker grows and grows, probably to be spent on new Facebook services like games, music or videos. Real competition in a real marketplace, rather than the charade of today.


I do not think this is easy to implement. Each of the board members would end up owning their comments on the CoBF board, as they would with all consumer reporting firms, etc. Might be easy for the big tech but not for others.

Vinod
Title: Re: FB - Facebook
Post by: Liberty on April 08, 2018, 06:33:07 PM
It's easy to dream things up, but implementation/execution is where 99.9% of ideas fail. People don't realize what is required for something like Facebook to even exist at the scale it currently operates.
Title: Re: FB - Facebook
Post by: rishig on April 08, 2018, 06:43:39 PM
One type of regulation that could made a dent in FB's business is the following:

Change the default setting for all users to be reduced functionality with minimal use of personal data.

So an example, may be, that FB can only use your age, sex, and city for doing targeted advertising by default. Obviously, with such high level targeting, your attention is of very little value to FB's advertising business. In exchange, FB may only offer you reduced functionality by default.

Say, you can use your FB, only 10 mins a day by default. For additional functionality, you have to explicitly opt-in to allow FB to use additional data for more personalized targeting. However, regulation again get FB here by requiring FB to show you all the opt-in choices with easy to understand checkboxes. When users go through these explicit choices, system 2 kicks-in and, may be, a lot of users may decide that 10 mins a day may be good enough for them, given how much data FB really needs from you.

Another way to think about this is that a lot of the addictive usage and engagement comes from FB's ability to appeal to our system one thinking. Any regulation that forces FB to let users pause and think may cause a real damage to engagement over the long-term.

Two questions: (1) how motivated are regulators globally to enforce such harsh measures?  (2) if they are motivated to do something like this, are the possible outcomes drastic to the business? 

Thoughts?
Title: Re: FB - Facebook
Post by: vinod1 on April 08, 2018, 07:02:04 PM
One type of regulation that could made a dent in FB's business is the following:

Change the default setting for all users to be reduced functionality with minimal use of personal data.

So an example, may be, that FB can only use your age, sex, and city for doing targeted advertising by default. Obviously, with such high level targeting, your attention is of very little value to FB's advertising business. In exchange, FB may only offer you reduced functionality by default.

Say, you can use your FB, only 10 mins a day by default. For additional functionality, you have to explicitly opt-in to allow FB to use additional data for more personalized targeting. However, regulation again get FB here by requiring FB to show you all the opt-in choices with easy to understand checkboxes. When users go through these explicit choices, system 2 kicks-in and, may be, a lot of users may decide that 10 mins a day may be good enough for them, given how much data FB really needs from you.

Another way to think about this is that a lot of the addictive usage and engagement comes from FB's ability to appeal to our system one thinking. Any regulation that forces FB to let users pause and think may cause a real damage to engagement over the long-term.

Two questions: (1) how motivated are regulators globally to enforce such harsh measures?  (2) if they are motivated to do something like this, are the possible outcomes drastic to the business? 

Thoughts?

I think majority of the users would be willing to share data.

1. Look at the impact of cambridge analytica episode on actual users. We need to see in next couple of quarters but so far seems limited.

2. Look at sales of home assistant devices from Amazon and Google. They are in living room hearing you continuously. I think the market is now at 30 million households and going up pretty fast. Users are fully aware in this case.

3. Look at other schemes where users are willing to share a lot of data for a small prize.

But the user willingness to keep sharing data is the key factor that one needs to keep an eye on.

Vinod
Title: Re: FB - Facebook
Post by: rishig on April 08, 2018, 07:23:16 PM
One type of regulation that could made a dent in FB's business is the following:

Change the default setting for all users to be reduced functionality with minimal use of personal data.

So an example, may be, that FB can only use your age, sex, and city for doing targeted advertising by default. Obviously, with such high level targeting, your attention is of very little value to FB's advertising business. In exchange, FB may only offer you reduced functionality by default.

Say, you can use your FB, only 10 mins a day by default. For additional functionality, you have to explicitly opt-in to allow FB to use additional data for more personalized targeting. However, regulation again get FB here by requiring FB to show you all the opt-in choices with easy to understand checkboxes. When users go through these explicit choices, system 2 kicks-in and, may be, a lot of users may decide that 10 mins a day may be good enough for them, given how much data FB really needs from you.

Another way to think about this is that a lot of the addictive usage and engagement comes from FB's ability to appeal to our system one thinking. Any regulation that forces FB to let users pause and think may cause a real damage to engagement over the long-term.

Two questions: (1) how motivated are regulators globally to enforce such harsh measures?  (2) if they are motivated to do something like this, are the possible outcomes drastic to the business? 

Thoughts?

I think majority of the users would be willing to share data.

1. Look at the impact of cambridge analytica episode on actual users. We need to see in next couple of quarters but so far seems limited.

2. Look at sales of home assistant devices from Amazon and Google. They are in living room hearing you continuously. I think the market is now at 30 million households and going up pretty fast. Users are fully aware in this case.

3. Look at other schemes where users are willing to share a lot of data for a small prize.

But the user willingness to keep sharing data is the key factor that one needs to keep an eye on.

Vinod

I agree that users are willing to share data today. How much of our willingness to share data comes from default settings and appeal to system one thinking. Question is if regulations force platforms to allow system two thinking of users to kick-in, will we be willing to do the same.
Title: Re: FB - Facebook
Post by: longinvestor on April 09, 2018, 03:41:53 AM
FB, GOOG et al need to worry about Murdoch and Cable more than John Doe. Regulations come from profit protection, not privacy protection.
Title: Re: FB - Facebook
Post by: Spekulatius on April 09, 2018, 04:05:33 AM
1) Once data is out there and shared, you can’t put it back into a “storage locker”
2) It would be nice to have a “data protection “ law that governs thr use of data by corporations and the government government
3) The first thing thwt needs to go is the Patriot Act. The Patriot Act was one of the  biggest landgraps  for individual data ever and is similar to what many totalitarian regimes have available. If people accept a Patriot Act, I doubt they care about sharing data on FB.
Title: Re: FB - Facebook
Post by: vinod1 on April 09, 2018, 04:19:28 AM
One type of regulation that could made a dent in FB's business is the following:

Change the default setting for all users to be reduced functionality with minimal use of personal data.

So an example, may be, that FB can only use your age, sex, and city for doing targeted advertising by default. Obviously, with such high level targeting, your attention is of very little value to FB's advertising business. In exchange, FB may only offer you reduced functionality by default.

Say, you can use your FB, only 10 mins a day by default. For additional functionality, you have to explicitly opt-in to allow FB to use additional data for more personalized targeting. However, regulation again get FB here by requiring FB to show you all the opt-in choices with easy to understand checkboxes. When users go through these explicit choices, system 2 kicks-in and, may be, a lot of users may decide that 10 mins a day may be good enough for them, given how much data FB really needs from you.

Another way to think about this is that a lot of the addictive usage and engagement comes from FB's ability to appeal to our system one thinking. Any regulation that forces FB to let users pause and think may cause a real damage to engagement over the long-term.

Two questions: (1) how motivated are regulators globally to enforce such harsh measures?  (2) if they are motivated to do something like this, are the possible outcomes drastic to the business? 

Thoughts?

I think majority of the users would be willing to share data.

1. Look at the impact of cambridge analytica episode on actual users. We need to see in next couple of quarters but so far seems limited.

2. Look at sales of home assistant devices from Amazon and Google. They are in living room hearing you continuously. I think the market is now at 30 million households and going up pretty fast. Users are fully aware in this case.

3. Look at other schemes where users are willing to share a lot of data for a small prize.

But the user willingness to keep sharing data is the key factor that one needs to keep an eye on.

Vinod

I agree that users are willing to share data today. How much of our willingness to share data comes from default settings and appeal to system one thinking. Question is if regulations force platforms to allow system two thinking of users to kick-in, will we be willing to do the same.

I think even with default settings and a questionnaire to answer, it would be difficult to get system 2 to kick in.

If people do not care really all that much about digital privacy and FB is going to take away (FB limiting functionality in some way if users do not share some data) something they do care about (a lot of the FB functionality), it would seem to me to be a system 1 decision for most people.

Especially when FB can now say "We do not share your individual information with anyone, it would only be used to help us identify relevant content for you" or something along those lines.

We do see that already with apps and some video games. Dont accept terms at first, then you try it out and it does not work, you go back and accept all the terms. If all that stands between a very addictive behavior that people are used to are going to be a few clicks of FB terms, do you think people would stop and ponder about the terms?

Think about warning labels on tobacco products.

Vinod
Title: Re: FB - Facebook
Post by: longinvestor on April 09, 2018, 05:14:33 AM
One type of regulation that could made a dent in FB's business is the following:

Change the default setting for all users to be reduced functionality with minimal use of personal data.

So an example, may be, that FB can only use your age, sex, and city for doing targeted advertising by default. Obviously, with such high level targeting, your attention is of very little value to FB's advertising business. In exchange, FB may only offer you reduced functionality by default.

Say, you can use your FB, only 10 mins a day by default. For additional functionality, you have to explicitly opt-in to allow FB to use additional data for more personalized targeting. However, regulation again get FB here by requiring FB to show you all the opt-in choices with easy to understand checkboxes. When users go through these explicit choices, system 2 kicks-in and, may be, a lot of users may decide that 10 mins a day may be good enough for them, given how much data FB really needs from you.

Another way to think about this is that a lot of the addictive usage and engagement comes from FB's ability to appeal to our system one thinking. Any regulation that forces FB to let users pause and think may cause a real damage to engagement over the long-term.

Two questions: (1) how motivated are regulators globally to enforce such harsh measures?  (2) if they are motivated to do something like this, are the possible outcomes drastic to the business? 

Thoughts?
I believe that your prescription is quite likely to play out. And I believe that it could well be broader than that. It is quite a silly assumption that society won’t mind being advertised to, as the default. Well heeled users of the internet are ready, now, to pay for a walled garden internet.

Not much different from the cloud services that businesses seem to be embracing. And I believe, as I understood Steve Jobs ‘s vision was exactly that. Your data is your data. Period.
Title: Re: FB - Facebook
Post by: Gardener on April 09, 2018, 05:59:25 AM
One type of regulation that could made a dent in FB's business is the following:

Change the default setting for all users to be reduced functionality with minimal use of personal data.

So an example, may be, that FB can only use your age, sex, and city for doing targeted advertising by default. Obviously, with such high level targeting, your attention is of very little value to FB's advertising business. In exchange, FB may only offer you reduced functionality by default.

Say, you can use your FB, only 10 mins a day by default. For additional functionality, you have to explicitly opt-in to allow FB to use additional data for more personalized targeting. However, regulation again get FB here by requiring FB to show you all the opt-in choices with easy to understand checkboxes. When users go through these explicit choices, system 2 kicks-in and, may be, a lot of users may decide that 10 mins a day may be good enough for them, given how much data FB really needs from you.

Another way to think about this is that a lot of the addictive usage and engagement comes from FB's ability to appeal to our system one thinking. Any regulation that forces FB to let users pause and think may cause a real damage to engagement over the long-term.

Two questions: (1) how motivated are regulators globally to enforce such harsh measures?  (2) if they are motivated to do something like this, are the possible outcomes drastic to the business? 

Thoughts?
I believe that your prescription is quite likely to play out. And I believe that it could well be broader than that. It is quite a silly assumption that society won’t mind being advertised to, as the default. Well heeled users of the internet are ready, now, to pay for a walled garden internet.

Not much different from the cloud services that businesses seem to be embracing. And I believe, as I understood Steve Jobs ‘s vision was exactly that. Your data is your data. Period.

I actually don't think mass regulation is likely to play out in the future. There are tons of businesses that could be crushed if the government steps in and takes drastic steps, yet the likeliness of getting crushed by regulation is rather minimal for most companies imo. Apart from some (minor) taxes on Coca-Cola for instance, the government still allows selling it. It's not like we expect Coca-Cola to let you sign a huge disclaimer or something before you can buy a drink.

People are smart enough to know and understand the deal: you use Facebook, they use your data. Almost all people I know simply don't care.

What I can see happening is more regulation and control on the "right to be forgotten", i.e. when you delete your profile FB confirms that they delete your data.
Title: Re: FB - Facebook
Post by: rishig on April 09, 2018, 07:15:07 AM
One type of regulation that could made a dent in FB's business is the following:

Change the default setting for all users to be reduced functionality with minimal use of personal data.

So an example, may be, that FB can only use your age, sex, and city for doing targeted advertising by default. Obviously, with such high level targeting, your attention is of very little value to FB's advertising business. In exchange, FB may only offer you reduced functionality by default.

Say, you can use your FB, only 10 mins a day by default. For additional functionality, you have to explicitly opt-in to allow FB to use additional data for more personalized targeting. However, regulation again get FB here by requiring FB to show you all the opt-in choices with easy to understand checkboxes. When users go through these explicit choices, system 2 kicks-in and, may be, a lot of users may decide that 10 mins a day may be good enough for them, given how much data FB really needs from you.

Another way to think about this is that a lot of the addictive usage and engagement comes from FB's ability to appeal to our system one thinking. Any regulation that forces FB to let users pause and think may cause a real damage to engagement over the long-term.

Two questions: (1) how motivated are regulators globally to enforce such harsh measures?  (2) if they are motivated to do something like this, are the possible outcomes drastic to the business? 

Thoughts?

I think majority of the users would be willing to share data.

1. Look at the impact of cambridge analytica episode on actual users. We need to see in next couple of quarters but so far seems limited.

2. Look at sales of home assistant devices from Amazon and Google. They are in living room hearing you continuously. I think the market is now at 30 million households and going up pretty fast. Users are fully aware in this case.

3. Look at other schemes where users are willing to share a lot of data for a small prize.

But the user willingness to keep sharing data is the key factor that one needs to keep an eye on.

Vinod

I agree that users are willing to share data today. How much of our willingness to share data comes from default settings and appeal to system one thinking. Question is if regulations force platforms to allow system two thinking of users to kick-in, will we be willing to do the same.

I think even with default settings and a questionnaire to answer, it would be difficult to get system 2 to kick in.

If people do not care really all that much about digital privacy and FB is going to take away (FB limiting functionality in some way if users do not share some data) something they do care about (a lot of the FB functionality), it would seem to me to be a system 1 decision for most people.

Especially when FB can now say "We do not share your individual information with anyone, it would only be used to help us identify relevant content for you" or something along those lines.

We do see that already with apps and some video games. Dont accept terms at first, then you try it out and it does not work, you go back and accept all the terms. If all that stands between a very addictive behavior that people are used to are going to be a few clicks of FB terms, do you think people would stop and ponder about the terms?

Think about warning labels on tobacco products.

Vinod

Fair point. I agree with you. I have been thinking of regulations that would cause a meaningful damage to user engagement and I really don't know if there is anything short of shutting down.

Thanks
Title: Re: FB - Facebook
Post by: glorysk87 on April 09, 2018, 07:58:16 AM
It's absolutely mind blowing that so many people here (and everywhere else) are so tunnel-visioned on recent events and the potential for regulation of Facebook, yet no one is actually discussing the core business trends.

Take regulation, cambridge analytica, user privacy, etc all out of the picture, and look at the core business.

1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

2) Engagement rates are the absolute most important metric to measure the health of the Facebook platform. Facebook wants users to engage as frequently as possible, and to increase their engagements over time. Engagement drives everything - the audience size, the effectiveness of their ad targeting algos, etc. Engagement declined last quarter for the first time ever, both in the sense of DAUs/MAUs and in the sense of total minutes per user on the platform, and indications are that trend is continuing.

3) Consensus estimates appear WAY too high. The global digital advertising market is expected to grow 13% to $198B this year. FB is estimated to grow their advertising revenues 37% from $39.9B to $54.6B. So consensus estimates expect Facebook to capture 60% to 70% of ALL incremental digital spend across the entire world AFTER they've spent two years first maxing out their ad loads and then pushing pricing to a tipping point. (h/t @fullysynergized for tweeting some of those metrics out). That seems ridiculous to me, especially because you now have Amazon ramping their advertising platform off a very low base, and over 75% of advertisers currently spend ZERO dollars on Amazon's advertising platform. I'm extremely skeptical they'll be able to come anywhere close to consensus numbers, unless they find a way to self-inflict more damage to their competitive position simply for the sake of growth.

I have no position in FB - but considering the above, I just find it pretty unbelievable that people are so myopically focused on the cambridge analytica stuff and using it as air cover to justify being max long FB - yet no one seems to be actually looking at the core business.
Title: Re: FB - Facebook
Post by: longinvestor on April 09, 2018, 08:22:33 AM
It's absolutely mind blowing that so many people here (and everywhere else) are so tunnel-visioned on recent events and the potential for regulation of Facebook, yet no one is actually discussing the core business trends.

Take regulation, cambridge analytica, user privacy, etc all out of the picture, and look at the core business.

1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

2) Engagement rates are the absolute most important metric to measure the health of the Facebook platform. Facebook wants users to engage as frequently as possible, and to increase their engagements over time. Engagement drives everything - the audience size, the effectiveness of their ad targeting algos, etc. Engagement declined last quarter for the first time ever, both in the sense of DAUs/MAUs and in the sense of total minutes per user on the platform, and indications are that trend is continuing.

3) Consensus estimates appear WAY too high. The global digital advertising market is expected to grow 13% to $198B this year. FB is estimated to grow their advertising revenues 37% from $39.9B to $54.6B. So consensus estimates expect Facebook to capture 60% to 70% of ALL incremental digital spend across the entire world AFTER they've spent two years first maxing out their ad loads and then pushing pricing to a tipping point. (h/t @fullysynergized for tweeting some of those metrics out). That seems ridiculous to me, especially because you now have Amazon ramping their advertising platform off a very low base, and over 75% of advertisers currently spend ZERO dollars on Amazon's advertising platform. I'm extremely skeptical they'll be able to come anywhere close to consensus numbers, unless they find a way to self-inflict more damage to their competitive position simply for the sake of growth.

I have no position in FB - but considering the above, I just find it pretty unbelievable that people are so myopically focused on the cambridge analytica stuff and using it as air cover to justify being max long FB - yet no one seems to be actually looking at the core business.
The global ad business is around $500 billion.

What no one is talking about the effectiveness of the ads. Meaning target customers actually becoming customers. For example some mention here about WhatsApp as a potential monetizing route. The vast majority of people using Whatsapp likely never will buy anything advertised to them. If another “free” platform emerges that is where they’ll move to.
Title: Re: FB - Facebook
Post by: Liberty on April 09, 2018, 08:39:36 AM
It's absolutely mind blowing that so many people here (and everywhere else) are so tunnel-visioned on recent events and the potential for regulation of Facebook, yet no one is actually discussing the core business trends.

Take regulation, cambridge analytica, user privacy, etc all out of the picture, and look at the core business.

1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

As FB's ad tech improves, ROIs improve too. Through the auction mechanism , when inventory supply doesn't go up, prices do (FB doesn't set prices, it uses the same kind of auction as Google does). But it's possible for prices to go up slower than ROIs and to still have an improving competitive position. You can't judge from pricing alone. In the end, the only thing that matters to advertisers is ROI, and it seems to be doing well there:

https://twitter.com/JerryCap/status/979104232572891140

(https://pbs.twimg.com/media/DZZ6CXUV4AAKFV3.jpg:large)

Quote
2) Engagement rates are the absolute most important metric to measure the health of the Facebook platform. Facebook wants users to engage as frequently as possible, and to increase their engagements over time. Engagement drives everything - the audience size, the effectiveness of their ad targeting algos, etc. Engagement declined last quarter for the first time ever, both in the sense of DAUs/MAUs and in the sense of total minutes per user on the platform, and indications are that trend is continuing.

They changed their algo to favor certain kind of interactions over others (friends & family over videos). Of course videos will give you more time on the platform, but the quality of the engagement is lower.

Quote
3) Consensus estimates appear WAY too high. The global digital advertising market is expected to grow 13% to $198B this year. FB is estimated to grow their advertising revenues 37% from $39.9B to $54.6B. So consensus estimates expect Facebook to capture 60% to 70% of ALL incremental digital spend across the entire world AFTER they've spent two years first maxing out their ad loads and then pushing pricing to a tipping point. (h/t @fullysynergized for tweeting some of those metrics out). That seems ridiculous to me, especially because you now have Amazon ramping their advertising platform off a very low base, and over 75% of advertisers currently spend ZERO dollars on Amazon's advertising platform. I'm extremely skeptical they'll be able to come anywhere close to consensus numbers, unless they find a way to self-inflict more damage to their competitive position simply for the sake of growth.

I think the advertising pie is being expanded by a lot of these moves. A lot of small businesses that might not have advertised on TV or in print can now advertise on platforms like FB and Google, and now Amazon. It's the whole advertising pie, globally, that you have to look at, don't split between digital and non-digital. It's all competing together, and it's clear who's out-competing who. ARPUs are very low outside NA and Europe, and I think they'll keep going up at a decent clip at the global middle class keeps emerging and advertising in those regions become more sophisticated.

On top of that, how are you valuing Instagram, Whatsapp, and Messenger?
Title: Re: FB - Facebook
Post by: Liberty on April 09, 2018, 08:42:14 AM
https://www.cnbc.com/2018/04/09/congress-released-mark-zuckerbergs-prepared-testimony-ahead-of-wednesdays-hearing.html
Title: Re: FB - Facebook
Post by: Gardener on April 09, 2018, 09:02:00 AM
It's absolutely mind blowing that so many people here (and everywhere else) are so tunnel-visioned on recent events and the potential for regulation of Facebook, yet no one is actually discussing the core business trends.

Take regulation, cambridge analytica, user privacy, etc all out of the picture, and look at the core business.

1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

2) Engagement rates are the absolute most important metric to measure the health of the Facebook platform. Facebook wants users to engage as frequently as possible, and to increase their engagements over time. Engagement drives everything - the audience size, the effectiveness of their ad targeting algos, etc. Engagement declined last quarter for the first time ever, both in the sense of DAUs/MAUs and in the sense of total minutes per user on the platform, and indications are that trend is continuing.

3) Consensus estimates appear WAY too high. The global digital advertising market is expected to grow 13% to $198B this year. FB is estimated to grow their advertising revenues 37% from $39.9B to $54.6B. So consensus estimates expect Facebook to capture 60% to 70% of ALL incremental digital spend across the entire world AFTER they've spent two years first maxing out their ad loads and then pushing pricing to a tipping point. (h/t @fullysynergized for tweeting some of those metrics out). That seems ridiculous to me, especially because you now have Amazon ramping their advertising platform off a very low base, and over 75% of advertisers currently spend ZERO dollars on Amazon's advertising platform. I'm extremely skeptical they'll be able to come anywhere close to consensus numbers, unless they find a way to self-inflict more damage to their competitive position simply for the sake of growth.

I have no position in FB - but considering the above, I just find it pretty unbelievable that people are so myopically focused on the cambridge analytica stuff and using it as air cover to justify being max long FB - yet no one seems to be actually looking at the core business.
The global ad business is around $500 billion.

What no one is talking about the effectiveness of the ads. Meaning target customers actually becoming customers. For example some mention here about WhatsApp as a potential monetizing route. The vast majority of people using Whatsapp likely never will buy anything advertised to them. If another “free” platform emerges that is where they’ll move to.

Just on the point of Whatsapp as 'sticky', no I don't think customers will just leave to another platform. Even my parents are slowly moving away from 'normal' text messaging and towards Whatsapp. This is huge! We will still be using Whatsapp for a very long time...
Title: Re: FB - Facebook
Post by: rohitc99 on April 09, 2018, 09:50:17 AM
It's absolutely mind blowing that so many people here (and everywhere else) are so tunnel-visioned on recent events and the potential for regulation of Facebook, yet no one is actually discussing the core business trends.

Take regulation, cambridge analytica, user privacy, etc all out of the picture, and look at the core business.

1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

2) Engagement rates are the absolute most important metric to measure the health of the Facebook platform. Facebook wants users to engage as frequently as possible, and to increase their engagements over time. Engagement drives everything - the audience size, the effectiveness of their ad targeting algos, etc. Engagement declined last quarter for the first time ever, both in the sense of DAUs/MAUs and in the sense of total minutes per user on the platform, and indications are that trend is continuing.

3) Consensus estimates appear WAY too high. The global digital advertising market is expected to grow 13% to $198B this year. FB is estimated to grow their advertising revenues 37% from $39.9B to $54.6B. So consensus estimates expect Facebook to capture 60% to 70% of ALL incremental digital spend across the entire world AFTER they've spent two years first maxing out their ad loads and then pushing pricing to a tipping point. (h/t @fullysynergized for tweeting some of those metrics out). That seems ridiculous to me, especially because you now have Amazon ramping their advertising platform off a very low base, and over 75% of advertisers currently spend ZERO dollars on Amazon's advertising platform. I'm extremely skeptical they'll be able to come anywhere close to consensus numbers, unless they find a way to self-inflict more damage to their competitive position simply for the sake of growth.

I have no position in FB - but considering the above, I just find it pretty unbelievable that people are so myopically focused on the cambridge analytica stuff and using it as air cover to justify being max long FB - yet no one seems to be actually looking at the core business.
The global ad business is around $500 billion.

What no one is talking about the effectiveness of the ads. Meaning target customers actually becoming customers. For example some mention here about WhatsApp as a potential monetizing route. The vast majority of people using Whatsapp likely never will buy anything advertised to them. If another “free” platform emerges that is where they’ll move to.

Just on the point of Whatsapp as 'sticky', no I don't think customers will just leave to another platform. Even my parents are slowly moving away from 'normal' text messaging and towards Whatsapp. This is huge! We will still be using Whatsapp for a very long time...

In NA, we under-estimate how embedded whatsapp is. in india its a defacto communication channel now. its used to make calls with data rates dropping ( 10 dollars for 80 Gb), conduct business etc. I use it to keep in touch with family and friends. i cannot think of what will make everyone move to something else for some time. the penetration for whatsapp is only increasing with mobile penetration going up
Title: Re: FB - Facebook
Post by: cameronfen on April 09, 2018, 10:50:31 AM
It's absolutely mind blowing that so many people here (and everywhere else) are so tunnel-visioned on recent events and the potential for regulation of Facebook, yet no one is actually discussing the core business trends.

Take regulation, cambridge analytica, user privacy, etc all out of the picture, and look at the core business.

1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

2) Engagement rates are the absolute most important metric to measure the health of the Facebook platform. Facebook wants users to engage as frequently as possible, and to increase their engagements over time. Engagement drives everything - the audience size, the effectiveness of their ad targeting algos, etc. Engagement declined last quarter for the first time ever, both in the sense of DAUs/MAUs and in the sense of total minutes per user on the platform, and indications are that trend is continuing.

3) Consensus estimates appear WAY too high. The global digital advertising market is expected to grow 13% to $198B this year. FB is estimated to grow their advertising revenues 37% from $39.9B to $54.6B. So consensus estimates expect Facebook to capture 60% to 70% of ALL incremental digital spend across the entire world AFTER they've spent two years first maxing out their ad loads and then pushing pricing to a tipping point. (h/t @fullysynergized for tweeting some of those metrics out). That seems ridiculous to me, especially because you now have Amazon ramping their advertising platform off a very low base, and over 75% of advertisers currently spend ZERO dollars on Amazon's advertising platform. I'm extremely skeptical they'll be able to come anywhere close to consensus numbers, unless they find a way to self-inflict more damage to their competitive position simply for the sake of growth.

I have no position in FB - but considering the above, I just find it pretty unbelievable that people are so myopically focused on the cambridge analytica stuff and using it as air cover to justify being max long FB - yet no one seems to be actually looking at the core business.
The global ad business is around $500 billion.

What no one is talking about the effectiveness of the ads. Meaning target customers actually becoming customers. For example some mention here about WhatsApp as a potential monetizing route. The vast majority of people using Whatsapp likely never will buy anything advertised to them. If another “free” platform emerges that is where they’ll move to.

Just on the point of Whatsapp as 'sticky', no I don't think customers will just leave to another platform. Even my parents are slowly moving away from 'normal' text messaging and towards Whatsapp. This is huge! We will still be using Whatsapp for a very long time...

In NA, we under-estimate how embedded whatsapp is. in india its a defacto communication channel now. its used to make calls with data rates dropping ( 10 dollars for 80 Gb), conduct business etc. I use it to keep in touch with family and friends. i cannot think of what will make everyone move to something else for some time. the penetration for whatsapp is only increasing with mobile penetration going up

I mentioned Whatsapp before on this thread which may be the post you were referring too.  Whatsapp benefits from the same network effects (i.e. moat) that Facebook have, the more people have Whatsapp the harder it is for you to leave to some other messaging company.  Thus Facebooks Stratagy of increasing users and not monetizing right now is the correct strategy IMO.  Whatsapp already has 50% more MAU than Wechat, and is the dominant player in India and most African/South American countries (along with Facebook Messenger).   No one is going to move from Whatsapp to another service if they start serving monetizing because all your friends are on Whatsapp.  Thus, even if it would be beneficial for everyone to move you have a coordination problem which stops it from happening.  This is the moat for both Facebook and Whatsapp. 
Title: Re: FB - Facebook
Post by: cameronfen on April 09, 2018, 10:58:06 AM
It's absolutely mind blowing that so many people here (and everywhere else) are so tunnel-visioned on recent events and the potential for regulation of Facebook, yet no one is actually discussing the core business trends.

Take regulation, cambridge analytica, user privacy, etc all out of the picture, and look at the core business.

1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

2) Engagement rates are the absolute most important metric to measure the health of the Facebook platform. Facebook wants users to engage as frequently as possible, and to increase their engagements over time. Engagement drives everything - the audience size, the effectiveness of their ad targeting algos, etc. Engagement declined last quarter for the first time ever, both in the sense of DAUs/MAUs and in the sense of total minutes per user on the platform, and indications are that trend is continuing.

3) Consensus estimates appear WAY too high. The global digital advertising market is expected to grow 13% to $198B this year. FB is estimated to grow their advertising revenues 37% from $39.9B to $54.6B. So consensus estimates expect Facebook to capture 60% to 70% of ALL incremental digital spend across the entire world AFTER they've spent two years first maxing out their ad loads and then pushing pricing to a tipping point. (h/t @fullysynergized for tweeting some of those metrics out). That seems ridiculous to me, especially because you now have Amazon ramping their advertising platform off a very low base, and over 75% of advertisers currently spend ZERO dollars on Amazon's advertising platform. I'm extremely skeptical they'll be able to come anywhere close to consensus numbers, unless they find a way to self-inflict more damage to their competitive position simply for the sake of growth.

I have no position in FB - but considering the above, I just find it pretty unbelievable that people are so myopically focused on the cambridge analytica stuff and using it as air cover to justify being max long FB - yet no one seems to be actually looking at the core business.

To respond to all your points for Facebook, it doesn't matter that engagement in US trends down slightly or the global advertising market is going to grow slower than trend, or that monetization will slow growth, what matters is North America has an ARPU of $26, while Europe is at $9, and developing countries are at $2.  All those risks you highlight (all developed country problems) could be mild headwinds (no one I think is saying that ARPU or users will drop more than a couple of percent a year at the worst) but if ARPU and MAU in developing countries (which is the majority of FB users) catches up to Europe or North America over the next 10-20 years, you should make a lot of money even if all those things you say are true. 
Title: Re: FB - Facebook
Post by: philly value on April 09, 2018, 12:02:55 PM
It's absolutely mind blowing that so many people here (and everywhere else) are so tunnel-visioned on recent events and the potential for regulation of Facebook, yet no one is actually discussing the core business trends.

Take regulation, cambridge analytica, user privacy, etc all out of the picture, and look at the core business.

1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

2) Engagement rates are the absolute most important metric to measure the health of the Facebook platform. Facebook wants users to engage as frequently as possible, and to increase their engagements over time. Engagement drives everything - the audience size, the effectiveness of their ad targeting algos, etc. Engagement declined last quarter for the first time ever, both in the sense of DAUs/MAUs and in the sense of total minutes per user on the platform, and indications are that trend is continuing.

3) Consensus estimates appear WAY too high. The global digital advertising market is expected to grow 13% to $198B this year. FB is estimated to grow their advertising revenues 37% from $39.9B to $54.6B. So consensus estimates expect Facebook to capture 60% to 70% of ALL incremental digital spend across the entire world AFTER they've spent two years first maxing out their ad loads and then pushing pricing to a tipping point. (h/t @fullysynergized for tweeting some of those metrics out). That seems ridiculous to me, especially because you now have Amazon ramping their advertising platform off a very low base, and over 75% of advertisers currently spend ZERO dollars on Amazon's advertising platform. I'm extremely skeptical they'll be able to come anywhere close to consensus numbers, unless they find a way to self-inflict more damage to their competitive position simply for the sake of growth.

I have no position in FB - but considering the above, I just find it pretty unbelievable that people are so myopically focused on the cambridge analytica stuff and using it as air cover to justify being max long FB - yet no one seems to be actually looking at the core business.

Your top down framing of revenue growth makes a lot of sense and is also how I look at it, but I disagree with the #s. I think it is very unlikely world online advertising spend will only grow by 13% in 2018, particularly since we're talking about spend measured in USD and for the first half of the year we are benefiting from a 10%+ depreciation in the USD vs GBP and EUR, and in the second half, benefiting from a smaller but still substantial mid-to-high single digit depreciation in the USD vs GBP/EUR. If for the year we end up seeing a ~10% benefit from FX on the EUR and GBP, and let's say that for the world ad market spend is ~25% Europe as it was for FB in 2017, then that is a 2.5% bump, which is meaningful. That means that in order for online ad growth to be 13% in USD, it needs to be ~10% in local currencies.

We've seen accelerating transition of spend online (% of total ad spend that goes online each year), and are only at ~40% right now. There will eventually be a limit, but advertiser discussion of relative returns on ad spend suggest to me that that transition is not nearly complete yet. Further, the UK is an example of a market that is further ahead of the U.S./world on the transition of spend to digital, so you can study that for another sanity check.

The world ad market in constant FX will likely grow something on the order of ~3% or so, so keep that in mind when considering the 10%. If we go from 40% penetration to 44% penetration (slightly less penetration growth than in '17, which would be a reversal of the trend FWIW) and growth is 3% constant FX, that'd get us to ~3% + (44/40 = 10.0%) = 13.3% + 2.5% FX = 15.8%, or ~16%.

Facebook has been taking ~50% of incremental digital ad spend, so ~$200bn * 16% = $32bn growth * ~50% = $16 billion of Facebook revenue growth, slightly more than consensus.

You can disagree +/- a bit, and I agree Amazon is a risk, but I think the consensus #s are very reasonable, and FWIW in the past have proven consistently conservative. As have "consensus" high-level predictions for digital ad growth, such as the 13% you mention.

Engagement is extremely important, but so is advertiser return on spend. If advertiser return on spend is very high on Facebook, they increase ad dollars allocated to Facebook, and even if ad load is constant and engagement flat, the price per ad will rise so supply equals demand. It is market-determined pricing. As long as advertisers continue to feel return on spend is strong, which per my checks they do, I will not be concerned.

Also, keep in mind that while Facebook engagement has slowed quite a bit, Instagram trends remain very positive, and Instagram is a very important part of the business.
Title: Re: FB - Facebook
Post by: siddharth18 on April 09, 2018, 02:44:36 PM
1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

Fair point regarding ad load. But you're misunderstanding "increasing pricing." You have to understand that FB ad prices are not set by FB, they're set by demand. And demand is set by the advertisers' ROI.

The nature of ad auction means that as more and more advertisers enter the ecosystem, the more each advertiser (in general) has to pay in order to outbid the other advertisers. In fact, as ad platforms like Adwords and FB Ads grow, advertisers over the years have had to increase their bids simply to keep their volume stable. Think about that for a moment. This means that (assuming same product and sales funnel), the advertisers must sacrifice their ROI just to buy the same number of clicks. What does this mean? It means that all the monetary benefits from the advertising accrue to the ad platform simply because advertisers keep outbidding each other.

Let me give you a simple example.

For the keyword "car insurance" in Google, imagine there's only 1 advertiser bidding on this term in US. What will he pay? Likely $0.01 since that's the lowest allowed bid on Adwords and there's no competitors. After spending some money, this advertiser realizes each visit originating from the ad with keyword "car insurance" brings in an incremental profit of $10. This is obviously amazing since he's capturing most of the incremental profit ($9.99 in this case and only has to share $0.01 with Google).


Then imagine an identical competitor with identical economics also decides to advertise on Google. He understands search advertising is extremely profitable and is happy to outbid the first advertiser by bidding $0.02. He's hence outbidding the original advertiser and captures all the traffic. His incremental profit is now $9.98 per click.

The first advertiser then realizes he's being outbid by his competitor and decides he'll increase his bid to $0.03 because he'd rather profit $9.97 rather than lose all the traffic and not profit at all. This increased bidding war goes on and on until both players successively increase their bids until such point that most of the incremental profit per click accrues to the ad platform (Google) in the form of increased click prices simply because the bidding war in online ad ecosystem is a race to the bottom for the advertisers.


This dynamic intensifies as more and more advertisers join the bidding pool and the more they optimize their funnel the wring out more revenue from each click. This underlines the fact that as ad platforms become more efficient, all the incremental benefits are passed back to ad platforms in the form of increased ad prices without meaningful benefits to any advertiser in particular. For example, if inflation or lax regulations increase profitability of insurers, their profit per customer will increase. This will increase their ability to pay more per customer acquisition/click. But since EVERYONE's profitability goes up, EVERYONE will increase their bid prices but no particular advertiser will capture any incremental benefits from inflation or lax regulations. The only entity to benefit is the ad platform.


Hence, the overall revenue per user gets a boost from these 3 things:
1. Increased competition (more advertisers entering the game)
2. Increased efficiencies/conversion rate from click to sale (this involves landing page optimization, funnel optimization which drives more sales from same number of clicks).
3. Increased prevalence of eCommerce (more users get comfortable purchasing online).

Also, read this: https://www.wired.com/2015/09/facebook-doesnt-make-much-money-couldon-purpose/ (https://www.wired.com/2015/09/facebook-doesnt-make-much-money-couldon-purpose/)
Title: Re: FB - Facebook
Post by: Broeb22 on April 09, 2018, 04:24:52 PM
Related to Siddharth's point, I have heard complaints from business owners with Facebook pages that they are being "forced" to advertise (for products, events, etc.), even if they could promote themselves adequately based on their own organic traffic.

Does anyone have first-hand experience of this type of tactic from Facebook?

If this is occurring, does it seem like FB is too aggressively monetizing its user base, and putting people in a position where they would be more than happy to switch to another platform if one were to arise? I guess at the end of the day, all businesses go where the most users/eyeballs are, so as long as FB's policies don't begin to push out users, the businesses advertising will cry foul but still ultimately pay for the ads.

I'm just bringing this point up because Siddharth made it sound so simple and clean and easy, and that this is all about simple supply and demand. Based on some anecdotes I've heard, maybe Facebook has the ability (and perhaps willingness) to exploit its users and force small advertisers to advertise.

Disclosure: Long FB
Title: Re: FB - Facebook
Post by: Liberty on April 09, 2018, 05:59:18 PM
Don Graham post on Zuckerberg:

https://m.facebook.com/ppalliser/posts/10156076011846469
Title: Re: FB - Facebook
Post by: LR1400 on April 09, 2018, 06:20:24 PM
I despise these idiot politicians who run their mouths and do largely nothing. Who are they to tell companies how they need to be run.

I’m more pro - Trump than 99% of the people on here but he is also an idiot (obviously). What I really despise is his discussion regarding Amazon and “leveling the playing field”. Did any politician discuss this when Wal Mart was crushing every Mom and Pop in America?

If Trump tries to regulate Amazon in some manner, he is nothing more than an anti-capitalist.

In my view Facebook will slide through this like all other companies that have had issues with data.
Title: Re: FB - Facebook
Post by: cameronfen on April 09, 2018, 06:30:03 PM
1) The company has put up extremly high growth numbers over the past few years. First, via increasing ad loads. Second, via increasing pricing. This is a trend that is not sustainable, and sooner rather than later will impact advertiser ROIs negatively. This is antithetical to the typical idea of a "quality business" like Amazon or Google, who typically extract cost advantages from their scale and then pass that on to the customer in the form of lower pricing. Instead, Facebook extracts growth at the expense of their customers rather than passing the benefits along.

Fair point regarding ad load. But you're misunderstanding "increasing pricing." You have to understand that FB ad prices are not set by FB, they're set by demand. And demand is set by the advertisers' ROI.

The nature of ad auction means that as more and more advertisers enter the ecosystem, the more each advertiser (in general) has to pay in order to outbid the other advertisers. In fact, as ad platforms like Adwords and FB Ads grow, advertisers over the years have had to increase their bids simply to keep their volume stable. Think about that for a moment. This means that (assuming same product and sales funnel), the advertisers must sacrifice their ROI just to buy the same number of clicks. What does this mean? It means that all the monetary benefits from the advertising accrue to the ad platform simply because advertisers keep outbidding each other.

Let me give you a simple example.

For the keyword "car insurance" in Google, imagine there's only 1 advertiser bidding on this term in US. What will he pay? Likely $0.01 since that's the lowest allowed bid on Adwords and there's no competitors. After spending some money, this advertiser realizes each visit originating from the ad with keyword "car insurance" brings in an incremental profit of $10. This is obviously amazing since he's capturing most of the incremental profit ($9.99 in this case and only has to share $0.01 with Google).


Then imagine an identical competitor with identical economics also decides to advertise on Google. He understands search advertising is extremely profitable and is happy to outbid the first advertiser by bidding $0.02. He's hence outbidding the original advertiser and captures all the traffic. His incremental profit is now $9.98 per click.

The first advertiser then realizes he's being outbid by his competitor and decides he'll increase his bid to $0.03 because he'd rather profit $9.97 rather than lose all the traffic and not profit at all. This increased bidding war goes on and on until both players successively increase their bids until such point that most of the incremental profit per click accrues to the ad platform (Google) in the form of increased click prices simply because the bidding war in online ad ecosystem is a race to the bottom for the advertisers.


This dynamic intensifies as more and more advertisers join the bidding pool and the more they optimize their funnel the wring out more revenue from each click. This underlines the fact that as ad platforms become more efficient, all the incremental benefits are passed back to ad platforms in the form of increased ad prices without meaningful benefits to any advertiser in particular. For example, if inflation or lax regulations increase profitability of insurers, their profit per customer will increase. This will increase their ability to pay more per customer acquisition/click. But since EVERYONE's profitability goes up, EVERYONE will increase their bid prices but no particular advertiser will capture any incremental benefits from inflation or lax regulations. The only entity to benefit is the ad platform.


Hence, the overall revenue per user gets a boost from these 3 things:
1. Increased competition (more advertisers entering the game)
2. Increased efficiencies/conversion rate from click to sale (this involves landing page optimization, funnel optimization which drives more sales from same number of clicks).
3. Increased prevalence of eCommerce (more users get comfortable purchasing online).

Also, read this: https://www.wired.com/2015/09/facebook-doesnt-make-much-money-couldon-purpose/ (https://www.wired.com/2015/09/facebook-doesnt-make-much-money-couldon-purpose/)


This is good.  However one point, these auctions are designed so that people bid their actual reservation wage.  For example from a one bidder case, there is a reservation wage so a single bidder can't get an ad for cheap, and if you are the winning bidder, and you outbid the reservation wage, you pay the 2nd highest bid (i.e. the reservation wage for a single bidder), so you have no incentive not to bid as high as you are willing to pay.  So theoretically no matter what anyone does or if you have more bidders, unless the new bidders have a higher maximum wage (which is probably small as there is a large population already bidding), generally you will not get more per ad. 
Title: Re: FB - Facebook
Post by: cameronfen on April 09, 2018, 06:38:14 PM
Related to Siddharth's point, I have heard complaints from business owners with Facebook pages that they are being "forced" to advertise (for products, events, etc.), even if they could promote themselves adequately based on their own organic traffic.

Does anyone have first-hand experience of this type of tactic from Facebook?

If this is occurring, does it seem like FB is too aggressively monetizing its user base, and putting people in a position where they would be more than happy to switch to another platform if one were to arise? I guess at the end of the day, all businesses go where the most users/eyeballs are, so as long as FB's policies don't begin to push out users, the businesses advertising will cry foul but still ultimately pay for the ads.

I'm just bringing this point up because Siddharth made it sound so simple and clean and easy, and that this is all about simple supply and demand. Based on some anecdotes I've heard, maybe Facebook has the ability (and perhaps willingness) to exploit its users and force small advertisers to advertise.

Disclosure: Long FB

I started a couple of organization pages and Facebook doesn't allow people to see you pages posts without changing a setting (which is off by default).  Thus basically no one sees an organization pages without paying for it.  Note you can see group posts which are different than organization pages. 
Title: Re: FB - Facebook
Post by: Jurgis on April 10, 2018, 07:09:12 AM
One way FB could be attacked is if people actually get paid by the social network for being a consumer. There are interesting things going on in Blockchain which makes this possible. See the article below

https://www.nytimes.com/2018/01/16/magazine/beyond-the-bitcoin-bubble.html

This has the added benefit that the data about consumers owned by consumer. But it is doubtful if this ever going to take off.

Vinod

WSJ just posted an article related to this:

https://www.wsj.com/articles/a-better-way-to-make-facebook-pay-1523209483

Techies have an expression for Facebook’s model. It’s “free as in beer”—in the sense of costing no money. You pay in other ways. I propose a simple fix. Let’s flip the whole thing—make it about property rights, 21st-century style. America was built on property rights. Congress can deliberate for 90 seconds and then pass the Make the Internet Great Again Act. The bill would contain five words: “Users own their private data.” Finis.

....

What would the world look like under the Make the Internet Great Again Act? If you upload to Facebook photos from your last beach vacation—though please don’t—you still own them. But if I go to your page, zoom in to see whom you’re drinking with, click on a nearby ad, message you about it, or even “Like” it, that information about me should remain private too. I should still own it. Same for whatever I search on Google or buy on Amazon. I control it.

Facebook would store this info in a virtual locker, and users would control access. The social network already has this data. It simply needs to corral it into two billion virtual lockers. It’d take an overnight hackathon to implement, really. Each user could then share or not.

But if you don’t share, Facebook can’t do its magic and provide a robust News Feed. It will be all cat videos, all the time. Similarly, Google can’t provide pertinent search results, which, like prizes on “The Newlywed Game,” are selected especially for you.

You’re going to want to share. Here’s the good news: Facebook is going to pay you to share. Then they’ll turn around and charge you a similar amount to cover the cost of servers, electricity, coders and Mark Zuckerberg’s hoodies. This way they can still show Wall Street the profits it expects. Worth it? Your call.

...

This is where it gets fun. Facebook would provide a sliding scale for sharing. The more information you deem shareable, the more you earn. In effect, it becomes a revenue-sharing arrangement with advertisers that want to reach you. If you don’t mind the barrage of ads, share away and a virtual wallet inside your virtual locker grows and grows, probably to be spent on new Facebook services like games, music or videos. Real competition in a real marketplace, rather than the charade of today.


I do not think this is easy to implement. Each of the board members would end up owning their comments on the CoBF board, as they would with all consumer reporting firms, etc. Might be easy for the big tech but not for others.

Vinod

This set of ideas have been talked about for ages in the libre tech circles (MIT, Richard Stallman, etc.). IMO beyond the pure idea, there are numerous issues of how to get there and whether it would work from technical, societal and business points of view.

I probably don't want to get into detailed discussion about the possibilities and issues, since ultimately the proof is in the pudding: either someone will figure out a working whole based on the principles described or not. But:

- When you post on the forum, even if you "own" your posting, you are still sharing it with certain audience. Attaching rights to every post and controlling how it's shared/not shared/scraped/forwarded/etc. is complicated and costly. Likely more costly than the "revenue" of your rights in the first place.

...

Gotta go. Maybe more later.  8)
Title: Re: FB - Facebook
Post by: nkp007 on April 10, 2018, 07:18:18 AM
If you don't want your data shared, don't use their services.

Or maybe they should have a $9.99 per month subscription plan for "full-privacy". I bet less than 1% of people would take that option. 
Title: Re: FB - Facebook
Post by: longinvestor on April 10, 2018, 07:45:02 AM
If you don't want your data shared, don't use their services.

Or maybe they should have a $9.99 per month subscription plan for "full-privacy". I bet less than 1% of people would take that option.

I will bet that there’s way more than 1% pay for full privacy. I personally will pay more than that if what I get is assurance that advertisers don’t see how I use the internet. Also I despise how my pretty daughter’s picture is on a global billboard. We are being naive talking about advertisers and such while the users of FB etc are sitting ducks. There’s likely far uglier things to happen. To the younger, gullible section of society.
Title: Re: FB - Facebook
Post by: fuluvu on April 10, 2018, 08:01:57 AM
Comment from Oakmark fund
Facebook, Inc.
Facebook controls the world's most dominant social networking platforms, Facebook and Instagram. The company's unprecedented global reach and infamous ad-targeting capabilities have made Facebook one of the most sought after and effective advertising platforms ever created. More recently, a considerable amount of negative press has surrounded the company, as has happened occasionally in the past. Facebook's business has repeatedly withstood these historical setbacks, due in part to its superior products, powerful network effect and track record of out-innovating, replicating or acquiring its would-be competitors.
Without ascribing value to the company's non-earning assets, which include messaging platforms WhatsApp and Messenger (among others), Facebook is trading at less than 15x next year's earnings (excluding net cash), a discount to the S&P 500 Index. This is a very attractive valuation for a company that is projected to grow its revenue well in excess of 20% for the foreseeable future. We believe that Facebook's normalized operating margin is substantially higher than what it reports, as the company continues to invest heavily in a variety of growth initiatives.
Title: Re: FB - Facebook
Post by: LounginMKL on April 10, 2018, 04:54:11 PM
Orrin Hatch: Now, Mr. Zuckerberg, I remember well your first visit to Capitol Hill back in 2010 ... You said back then that Facebook would always be free. Is that still your objective?

Zuckerberg: Senator, yes. There will always be a version of Facebook that is free ... We’re committed to doing that.

Hatch: Well, if so, how do you sustain a business model in which users don’t pay for your service?

Zuck: (Blinks.) Senator, we run ads. (Smirks.)

 ;D

https://www.theatlantic.com/technology/archive/2018/04/the-strangest-moments-from-the-zuckerberg-testimony/557672/
Title: Re: FB - Facebook
Post by: Liberty on April 10, 2018, 06:37:51 PM
Orrin Hatch: Now, Mr. Zuckerberg, I remember well your first visit to Capitol Hill back in 2010 ... You said back then that Facebook would always be free. Is that still your objective?

Zuckerberg: Senator, yes. There will always be a version of Facebook that is free ... We’re committed to doing that.

Hatch: Well, if so, how do you sustain a business model in which users don’t pay for your service?

Zuck: (Blinks.) Senator, we run ads. (Smirks.)

 ;D

https://www.theatlantic.com/technology/archive/2018/04/the-strangest-moments-from-the-zuckerberg-testimony/557672/

"Sen: Mr. Zuckerberg, suppose for a second your house was ransacked by thugs, your family was tied up in the basement with socks in their mouths, you try to open the door but there's too much blood on the knob

Z: What is your question?

Sen: My question is about privacy, sir"

https://twitter.com/RobynUrback/status/983800229886644225

"Senator: 'Is it or is it not true that Facebook uses deep unsupervised necromancy to alchemize poke data into consumer cloud big digitalia?'
Zuck: 'What now?'"

https://twitter.com/primalpoly/status/983842359120084997
Title: Re: FB - Facebook
Post by: fareastwarriors on April 11, 2018, 08:55:35 AM
Instagram Looks Like Facebook’s Best Hope

With lawmakers and users on the warpath, the photo-sharing app could be Mark Zuckerberg’s way out of the latest data scandal.

https://www.bloomberg.com/news/features/2018-04-10/instagram-looks-like-facebook-s-best-hope (https://www.bloomberg.com/news/features/2018-04-10/instagram-looks-like-facebook-s-best-hope)
Title: Re: FB - Facebook
Post by: oddballstocks on April 11, 2018, 08:59:46 AM
I wish someone would ask the elephant in the room.

Senator "I just want to confirm, even if you pretend to collect less data from users that you'll still be collecting and shipping the full amount to the CIA and NSA correct?"

Zuck "Yes.."
Title: Re: FB - Facebook
Post by: Jurgis on April 11, 2018, 09:08:21 AM
Senator:
You're walking in the woods.
There's no one around,
And your phone is dead.
Out of the corner of your eye you spot him...

Zuck: Shia Labeouf


------------------------------------------------
https://www.youtube.com/watch?v=o0u4M6vppCI
Title: Re: FB - Facebook
Post by: rkbabang on April 11, 2018, 09:35:25 AM
Of course congress is too busy trying to understand the internets and how all this new fangled technology the young people are using these days works to ask the real questions about the real issues:

Facebook CEO Mark Zuckerberg Says He ‘Was Human’ (https://www.inverse.com/article/37656-mark-zuckerberg-was-human)

‘I am not a lizard’: Mark Zuckerberg is latest celebrity asked about reptilian conspiracy (https://www.washingtonpost.com/news/morning-mix/wp/2016/06/15/i-am-not-a-lizard-mark-zuckerberg-is-latest-celebrity-asked-about-reptilian-conspiracy/?noredirect=on&utm_term=.80427af0c7de)  (isn't that exactly what a lizard would say?)

People Are Wondering If Mark Zuckerberg Is Actually A Robot (http://www.ladbible.com/community/viral-weird-people-are-wondering-if-mark-zuckerberg-is-actually-a-robot-20180411)
Title: Re: FB - Facebook
Post by: LongTermView on April 11, 2018, 02:48:19 PM
I like this example that Zuckerberg gave yesterday at the Senate hearing (https://www.washingtonpost.com/news/the-switch/wp/2018/04/10/transcript-of-mark-zuckerbergs-senate-hearing/?utm_term=.00e7a5d693f4):
Quote
ZUCKERBERG: So let's say you have — you're an app developer, and you — your goal is you want to get more people to install your app. You could bid in the ad system and say I will pay $3 anytime someone installs this app.

And then we basically calculate on — on our side which ads are going to be relevant for people, and we have an incentive to show people ads that are going to be relevant because we only get paid when it delivers a business result, and — and that's how the system works.

CAPITO: So it — it could be one — you could be paid for the advertisement. I mean for the sale.

ZUCKERBERG: We — we get paid when the action of the advertiser wants to — to happen, happens.

Title: Re: FB - Facebook
Post by: longinvestor on April 14, 2018, 08:57:13 AM
https://www.washingtonpost.com/news/the-fix/wp/2018/04/14/would-you-pay-18-75-for-ad-free-facebook/?utm_term=.dc704128bbd3

Drag Google and others into a subscription fee based model?

And this, thoughtful essay from an early insider / investor in FB

https://washingtonmonthly.com/magazine/january-february-march-2018/how-to-fix-facebook-before-it-fixes-us/
Title: Re: FB - Facebook
Post by: Liberty on April 16, 2018, 07:30:52 AM
https://www.wired.com/story/sigh-of-relief-inside-facebook/
Title: Re: FB - Facebook
Post by: vinod1 on April 16, 2018, 08:10:14 AM

And this, thoughtful essay from an early insider / investor in FB

https://washingtonmonthly.com/magazine/january-february-march-2018/how-to-fix-facebook-before-it-fixes-us/

This is a really good article.

Hope some of the recommendations are put into practice. The two below would be a good starting point to promote greater competition:

Second, the platforms should not be allowed to make any acquisitions until they have addressed the damage caused to date, taken steps to prevent harm in the future, and demonstrated that such acquisitions will not result in diminished competition.

Seventh, consumers, not the platforms, should own their own data. In the case of Facebook, this includes posts, friends, and events—in short, the entire social graph. Users created this data, so they should have the right to export it to other social networks.


Vinod

Title: Re: FB - Facebook
Post by: Jurgis on April 16, 2018, 09:11:18 AM
Seventh, consumers, not the platforms, should own their own data. In the case of Facebook, this includes posts, friends, and events—in short, the entire social graph. Users created this data, so they should have the right to export it to other social networks. [/i]

This may be well intentioned but really meaningless.

Show me a single social network or forum or whatever that allows you to export your data (ah, btw Facebook does allow you to export your data haha 8)) in a way that is then importable somewhere else and it just works... Right. Crickets.

People who write these articles probably think that if they write it, someone will just magically do what they suggest and world will be a better place (TM). In reality, the "magically" part is really really hard. And unless there's a huge strong push by a visionary team, none of it is going to happen. Especially when suggestions require interoperability, portability, etc.

Edit: homework assignment for the talented people everywhere: if I export my data from CoBF, which clearly refers to other people in CoBF, their posts, threads, etc., how exactly this can be imported into some-CoBF-clone-forum-social-network without losing most of its meaning? Bonus question: how do you preserve context without violating rights of others?
Edit2: I forgot: the solution is to put everything on blockchain. There.  8)  ::)  ;D

Color me skeptical.  8)

But I am all for world peace, rainbow unicorns, and users owning their data.
Title: Re: FB - Facebook
Post by: vinod1 on April 16, 2018, 10:00:09 AM
Seventh, consumers, not the platforms, should own their own data. In the case of Facebook, this includes posts, friends, and events—in short, the entire social graph. Users created this data, so they should have the right to export it to other social networks. [/i]

This may be well intentioned but really meaningless.

Show me a single social network or forum or whatever that allows you to export your data (ah, btw Facebook does allow you to export your data haha 8)) in a way that is then importable somewhere else and it just works... Right. Crickets.

People who write these articles probably think that if they write it, someone will just magically do what they suggest and world will be a better place (TM). In reality, the "magically" part is really really hard. And unless there's a huge strong push by a visionary team, none of it is going to happen. Especially when suggestions require interoperability, portability, etc.

Edit: homework assignment for the talented people everywhere: if I export my data from CoBF, which clearly refers to other people in CoBF, their posts, threads, etc., how exactly this can be imported into some-CoBF-clone-forum-social-network without losing most of its meaning? Bonus question: how do you preserve context without violating rights of others?
Edit2: I forgot: the solution is to put everything on blockchain. There.  8)  ::)  ;D

Color me skeptical.  8)

But I am all for world peace, rainbow unicorns, and users owning their data.

Instagram. It was able to grow by being able to import from Twitter social graph. Now all of them wised up. But it has been done in the past.

Forget data. Just being able to export your social network. One way to implement would be to come up with a unique ID for each person at Facebook level. So nothing personally identifiable would be exported but just this unique facebook ID of friends relationship would be exported. That way you can recreate the relationships in another competing network.

Count me  skeptical as well that this would happen.

I am skeptical in the existence of God. But I think it would be terrific to have a God. So something like that.

The combination of Facebook not being able to buy any more social companies + export of social graph would help a great deal to incent startups in this space. May or may not make a dent in Facebook but it would be a way to promote competition.

Vinod
Title: Re: FB - Facebook
Post by: Liberty on April 16, 2018, 10:09:31 AM
The fact that a phone's contacts are accessible to other apps is the way that most of these bootstrap.

The social graph is ok for some types of networks (messaging), and was ok back in the early days of social networking, when most people were starting from almost zero, but at this point, if you just ported the social graph but didn't bring over all the content (personal photos, videos, posts, etc) I think a lot of people wouldn't find that enough. Even if you decide to make a move, it's hard to break the habits of everyone else in your graph and have them post their stuff and message you somewhere else too. The land grab part of this might be over.
Title: Re: FB - Facebook
Post by: Jurgis on April 16, 2018, 10:29:40 AM
If you want to pwn Facebook, heavy regulation would work much more than theoretical data portability. China did it. Europe might do - a lesser version of - it.

I don't care about it much either way. I now have some money invested in FB, so I'm immediately biased, but overall I don't care much. I think the whole data ownership and portability is not very workable, not very useful and not gonna improve anything (much), but if people want to work on it, power to them. Maybe they'll do something useful, who knows.  8)
Title: Re: FB - Facebook
Post by: vinod1 on April 16, 2018, 05:27:12 PM
I am pretty much in agreement with both of you guys.

Given the scale FB has reached - along with all the content it has, ensures that no other social network is likely to displace it anytime soon. What data portability offers along with closing of acquisitions for FB, is to allow other social networks to grow/survive in future. Think what it would have been like if Instagram and WhatsApp are still independent. Not that it is a magic bullet. The fact that Google itself has thrown the towel, is all the proof we need.
 
At the end of the day, it is only regulation along many dimensions - data portability, privacy rules, limitations on acquisitions, etc have a chance of working. I do not think Chinese style regulation would be accepted in US. So it has to be little more subtle.

Vinod
Title: Re: FB - Facebook
Post by: Liberty on April 16, 2018, 07:28:05 PM
Not only that, but the mass of existing content is useful for the user experience (which we tend to forget in these days of data scandal).

So in theory, a new social network will little content but lots of people would probably be a worse experience than one where your newsfeed is optimized for you based on lots and lots of past shown preferences (ie. they can show you updates from friend X straight to the top because they know every time you've seen one in the past you left a comment, and show you articles about electric cars because you always click through to read those, but not to show you anything from that stupid uncle because even though he's in your graph, you've muted him, etc). A newer social network would kind of have to throw things at you more randomly and the average experience wouldn't be as good/personalized.
Title: Re: FB - Facebook
Post by: SlowAppreciation on April 19, 2018, 08:27:20 PM
https://www.bloomberg.com/news/articles/2018-04-18/facebook-is-forming-a-team-to-design-its-own-chips
Title: Re: FB - Facebook
Post by: Liberty on April 25, 2018, 08:39:42 AM
https://stratechery.com/2018/open-closed-and-privacy/

Title: Re: FB - Facebook
Post by: Liberty on April 25, 2018, 01:21:09 PM
Q1:

Quote
First Quarter 2018 Operational and Other Financial Highlights
Daily active users (DAUs) – DAUs were 1.45 billion on average for March 2018, an increase of 13% year-over-year.
Monthly active users (MAUs) – MAUs were 2.20 billion as of March 31, 2018, an increase of 13% year-over-year.
Mobile advertising revenue – Mobile advertising revenue represented approximately 91% of advertising revenue for the first quarter of 2018, up from approximately 85% of advertising revenue in the first quarter of 2017.
Capital expenditures – Capital expenditures for the first quarter of 2018 were $2.81 billion.
Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $43.96 billion at the end of the first quarter of 2018.
Headcount – Headcount was 27,742 as of March 31, 2018, an increase of 48% year-over-year.
In April 2018, we increased the amount authorized under our share repurchase program by an additional $9.0 billion. Our board of directors originally authorized repurchases of up to $6.0 billion of our Class A common stock under the repurchase program, and this increase is incremental to the original authorization.
Title: Re: FB - Facebook
Post by: Spekulatius on April 25, 2018, 05:30:30 PM
FB numbers are stellar, IMO.

As I mentioned in another thread, I started investing in 1982.If someone had told me that there would be a company in 2018 that would grow their revenue from $8B to $12B or 50% YOY, while making $5.6B in operating profit and having FCF left to buy back stock at the same time, I would have thought he would be nuts.

Even more so, if he had told me that I can buy this for roughly 20x earnings.
Title: Re: FB - Facebook
Post by: LongTermView on April 25, 2018, 07:21:23 PM
If someone had told me that there would be a company in 2018 that would grow their revenue from $8B to $12B or 50% YOY, while making $5.6B in operating profit and having FCF left to buy back stock at the same time, I would have thought he would be nuts.

Even more so, if he had told me that I can buy this for roughly 20x earnings.

I agree.
Title: Re: FB - Facebook
Post by: Jerry Capital on April 25, 2018, 07:37:08 PM
Julian Robertson agrees (fifth largest position from what I can see Q4 2017)

This is from September 2017:

KELLY EVANS: All right. Let me ask you about a couple of particular companies, just thinking about Apple, for example, which has a lot of cash overseas.

You were a holder of that going back a couple of years, and they have a big event today and are launching a bunch of new products. But has it just become too expensive for you guys, is it not -- or would you look at investing in Apple again?

JULIAN ROBERTSON: No, I think we should definitely look at Apple. Apple is not that expensive of a stock. There are a lot of disadvantages of being an old goat. One of the few advantages is the fact that we've seen all this a little bit before. And right now the Apples, the Facebooks, the Googles, those great growth companies are priced cheaper than they would have ever been in the '60 s , '70 s , and '80 s .

KELLY EVANS: Hmm.

JULIAN ROBERTSON: And I don't think a lot of people realize that.

KELLY EVANS: Well, you're trimming your positions in Facebook, and Google, and you're not in Apple right now.

JULIAN ROBERTSON: Well, I don't think I've . . . I kind of trade Facebook and those things a little bit. And I consider myself kind of a long-term player of Facebook.

KELLY EVANS: Even though you think the markets overall are expensive, these emblematic tech same names you actually don't think are that expensive?

JULIAN ROBERTSON: Correct.

KELLY EVANS: And we've spoken about Netflix before, too, which then you said that one might maybe got a little out of reach.

JULIAN ROBERTSON: That might be a little out of reach, but that one is awfully tempting to me because it's run by really good people and -- and I love it, too.

[LAUGHTER]

JULIAN ROBERTSON: Anybody that doesn't like Netflix, that's like saying you hate Santa Claus.

KELLY EVANS: Do you have a favorite show right now?

JULIAN ROBERTSON: No, but I just . . . I like all of them.
Title: Re: FB - Facebook
Post by: LongTermView on April 28, 2018, 11:43:32 AM
Wrote a new article: https://seekingalpha.com/article/4167059-facebook-alphabet-bright-prospects

If anyone knows the specifics on growth vs maintenance in their capex then I'd like to hear about the details.
Title: Re: FB - Facebook
Post by: Liberty on May 01, 2018, 10:34:18 AM
Looks like FB is getting into online dating:

https://www.cnbc.com/2018/05/01/facebook-is-launching-a-dating-app.html
Title: Re: FB - Facebook
Post by: Liberty on May 09, 2018, 08:21:22 AM
Re-org:

https://techcrunch.com/2018/05/08/one-family-under-cox/
Title: Re: FB - Facebook
Post by: cameronfen on May 09, 2018, 08:46:16 AM
Wrote a new article: https://seekingalpha.com/article/4167059-facebook-alphabet-bright-prospects

If anyone knows the specifics on growth vs maintenance in their capex then I'd like to hear about the details.

Someone like Baidu spends only 5% of revenue on capex.  They have capex heavy moonshots like Google and Facebook, but much less.  Facebook generates revenue in a similar model (ads on websites) and 39 billion out of 41 billion comes from adds.  So you can attribute 2 billion to maintenance on the website (idk how much to attribute to other businesses like Oculus), which may even be conservative. 
Title: Re: FB - Facebook
Post by: LongTermView on May 09, 2018, 12:55:16 PM
Wrote a new article: https://seekingalpha.com/article/4167059-facebook-alphabet-bright-prospects

If anyone knows the specifics on growth vs maintenance in their capex then I'd like to hear about the details.

Someone like Baidu spends only 5% of revenue on capex.  They have capex heavy moonshots like Google and Facebook, but much less.  Facebook generates revenue in a similar model (ads on websites) and 39 billion out of 41 billion comes from adds.  So you can attribute 2 billion to maintenance on the website (idk how much to attribute to other businesses like Oculus), which may even be conservative.

Thanks, cameronfen. After talking with folks over the weekend, it sounds like the Depreciation and amortization line is pretty close to maintenance/replacement capex for FB.
Title: Re: FB - Facebook
Post by: nickenumbers on May 21, 2018, 02:04:05 PM
I took a long term position in Facebook [FB] stock and a medium term position with options in FB, today.

Over the last couple of weeks I have been reviewing, Facebook, Amazon, Apple, Netflix, Google, Microsoft and Oracle.  Twitter and Snap.  Revenue, Rev Growth Rates, Net Income, NI Growth Rates and Margins, with Margin Growth rates.  The story that that data tells is pretty interesting.

I have also been thinking about the intangibles of the products.  Facebook based on current prices and current product offerings is a high probability treasure, I believe.  Plus they still have room to grow.  FB is not so large that there is no more room to grow.  [Apple and Google have his problem of being too big, little room left.]

Not only does it own the FB platform, but it has Instagram, WhatsApp, and the messenger products.  It has the Story component of Insta, and its products are very very sticky.  There are not real substitutes for what it does.  And when everyone is using a platform, FB, Insta, it forces everyone to use it even more.  Becomes a self fulfilling prophecy.  Network Effect.  Zucker is young and fanatical for what he does...  almost maniacal..  That is actually a good combination.

FB should not be priced as low as it is with the growth rates that it has.  I think the political risk and Zucker testifying in front of congress is freaking everyone out.  So, there is some political and regulatory risk.  [Event Driven opportunity for us.]

I think it has a couple of years to continue to grow and I feel pretty good about it over the next 12-18 months..
Title: Re: FB - Facebook
Post by: LongTermView on May 21, 2018, 02:25:36 PM
FB should not be priced as low as it is with the growth rates that it has.

Agreed.
Title: Re: FB - Facebook
Post by: walkie518 on May 22, 2018, 07:57:52 AM
Wrote a new article: https://seekingalpha.com/article/4167059-facebook-alphabet-bright-prospects

If anyone knows the specifics on growth vs maintenance in their capex then I'd like to hear about the details.

Someone like Baidu spends only 5% of revenue on capex.  They have capex heavy moonshots like Google and Facebook, but much less.  Facebook generates revenue in a similar model (ads on websites) and 39 billion out of 41 billion comes from adds.  So you can attribute 2 billion to maintenance on the website (idk how much to attribute to other businesses like Oculus), which may even be conservative.

Thanks, cameronfen. After talking with folks over the weekend, it sounds like the Depreciation and amortization line is pretty close to maintenance/replacement capex for FB.

D&A cannot be capex.  I would have to dig into the statements, but equipment like switches and data center equipment can be put on a 3 year schedule. 

A smart CFO would likely try to squeeze every dollar out of the taxable box, and considering the company's tax efficiency, I don't see that as an unlikely scenario. 

The income statement shows $622m for the last Q of provision for income taxes and the cash flow statement shows $47m.  FB is on a run-rate close to $11B of property and equipment spending which will translate into an additional $3.67B of D&A next year. 

Some of that figure will replace the current d&a of $1B/quarter but as FB buys more switches etc to accommodate demand, and it seems as though spending is going up for p&e rather than buying securities, d&a increases but spending to maintain the data centers is very different from discretionary growth spending.

My guess is FB pays for 3 new data centers a quarter...
Title: Re: FB - Facebook
Post by: LongTermView on May 23, 2018, 05:06:58 PM
D&A cannot be capex.  I would have to dig into the statements

walkie518, I'm curious to know your thoughts on the percent of capex that is maintenance/replacement vs growth if you dig into the statements.

On another note, here are follow-up questions from EP: https://www.facebook.com/facebookbrussels/posts/1769490786430772

This part caught my eye:
Quote
5. European courts have demanded the separation of users' data between Facebook and WhatsApp. Will you promise there won't be any exchange of users' personal data between the two services?
No, because we will share data between Facebook and WhatsApp in order for Facebook to provide services like tools and analytics to WhatsApp and to help fight abuse on our services. For example, when we receive reports of a bad actor sending unwanted messages — like spam or abusive content — on either WhatsApp or Facebook, we can share information and can take action including blocking them across both services. We are not currently sharing European users' WhatsApp account information to improve people's product and ads experience on Facebook. If we do choose to do this in the future, we will do so in accordance with GDPR, working with the Irish Data Protection Commissioner and in a way that is transparent to people. More information is available here.
Title: Re: FB - Facebook
Post by: walkie518 on May 24, 2018, 01:11:07 PM
D&A cannot be capex.  I would have to dig into the statements

walkie518, I'm curious to know your thoughts on the percent of capex that is maintenance/replacement vs growth if you dig into the statements.

On another note, here are follow-up questions from EP: https://www.facebook.com/facebookbrussels/posts/1769490786430772

This part caught my eye:
Quote
5. European courts have demanded the separation of users' data between Facebook and WhatsApp. Will you promise there won't be any exchange of users' personal data between the two services?
No, because we will share data between Facebook and WhatsApp in order for Facebook to provide services like tools and analytics to WhatsApp and to help fight abuse on our services. For example, when we receive reports of a bad actor sending unwanted messages — like spam or abusive content — on either WhatsApp or Facebook, we can share information and can take action including blocking them across both services. We are not currently sharing European users' WhatsApp account information to improve people's product and ads experience on Facebook. If we do choose to do this in the future, we will do so in accordance with GDPR, working with the Irish Data Protection Commissioner and in a way that is transparent to people. More information is available here.

LTV,

Unfortunately, that link doesn't work.

I should note that I'm basing my views on knowledge of other cloud providers. 

It could be that the life of a Facebook's data center is different from Amazon, Azure, Google, etc which can be based on factors that don't show up in the statements. 

If I were on Facebook's data center team, and I had incentive to make decisions in the best interest of the company, I would be thinking about overall cost, longevity of parts, and performance.

Increasing the amount of hosted video content, for example, would likely bring up the question of how and where to source the right acceleration solutions. Typically FPGAs are more cost-effective to implement than buying from graphics cards providers because they can be tailored to suit client demand.

If/when buying or even designing switches, for example, a simple decision of using more durable materials would yield better returns on investment over time and the switch would depreciate on the statements no different from a wholesale, out-of-the-box solution. 

In both of these examples, Facebook might get away with equipment depreciation, but the parts far outlast. 
Title: Re: FB - Facebook
Post by: Liberty on May 29, 2018, 10:36:53 AM
Whatsapp payment service may launch in India soon:

https://www.livemint.com/Industry/46X6nJ5X47gWryYKVGCLTO/WhatsApp-payment-service-may-launch-in-India-next-week.html

(via @Bluegrasscap)
Title: Re: FB - Facebook
Post by: Spekulatius on May 29, 2018, 10:48:54 AM
Payment is a huge market for any large untapped social network company and I expect FB to get into this in a significant way. I think Visa and MC will be competition eventually.
Title: Re: FB - Facebook
Post by: nickenumbers on May 29, 2018, 12:46:07 PM
FB is smart, well capitalized, and it is run by a great owner/operator, who happens to be very young and competitive.

They have cash coming out of their ears.  To hear that they are going to grow an Indian Payment revenue stream just makes me smile.!!

I wonder if purchasing Twitter or Snap is in the cards or some other such acquisition.  Else, they could just buy or create a competing product and use their cash cow to take over.  Something like an Amazon model of assault.

I get so excited I want to take of my shoes and wiggle my toes... 
Title: Re: FB - Facebook
Post by: cameronfen on May 29, 2018, 12:49:53 PM
Payment is a huge market for any large untapped social network company and I expect FB to get into this in a significant way. I think Visa and MC will be competition eventually.

The big competition is native apps like paytm backed by softbank and alibaba, payU backed by Naspers, Tez by google as well a host of homegrown apps.  I think right now visa and mastercard is the least of facebooks worries.  This is by no means necassarily low hanging fruit.  Although they do have the advantage of being the dominant ott messaging app. 
Title: Re: FB - Facebook
Post by: LongTermView on May 29, 2018, 01:05:47 PM
The March 2018 https://www.bloomberg.com/news/articles/2018-03-13/whatsapp-stirs-up-india-market-with-push-into-digital-payments
article says the pilot WhatsApp Pay opened to
rave reviews in India. It shows the December 2017 UPI transaction volumes:
52% Google Tez
23% Paytm
15% PhonePe
10% Others

Like Liberty and @Bluegrasscap said, the https://www.bloomberg.com/news/articles/2018-05-29/whatsapp-is-said-to-hasten-payments-push-for-200-million-indians article from today is noteworthy:
Quote
Facebook Inc. is set to offer its WhatsApp payment services to the whole of India as early as next week in an attempt to win market share, even though its partners aren’t all ready, said people familiar with the matter.

The messaging app will partner HDFC Bank Ltd., ICICI Bank Ltd. and Axis Bank Ltd. to process the transfers, and State Bank of India will join once it has the necessary systems in place, the people said.
Title: Re: FB - Facebook
Post by: cameronfen on May 29, 2018, 01:20:11 PM
The March 2018 https://www.bloomberg.com/news/articles/2018-03-13/whatsapp-stirs-up-india-market-with-push-into-digital-payments
article says the pilot WhatsApp Pay opened to
rave reviews in India. It shows the December 2017 UPI transaction volumes:
52% Google Tez
23% Paytm
15% PhonePe
10% Others

Like Liberty and @Bluegrasscap said, the https://www.bloomberg.com/news/articles/2018-05-29/whatsapp-is-said-to-hasten-payments-push-for-200-million-indians article from today is noteworthy:
Quote
Facebook Inc. is set to offer its WhatsApp payment services to the whole of India as early as next week in an attempt to win market share, even though its partners aren’t all ready, said people familiar with the matter.

The messaging app will partner HDFC Bank Ltd., ICICI Bank Ltd. and Axis Bank Ltd. to process the transfers, and State Bank of India will join once it has the necessary systems in place, the people said.

I think the big money is in B2P and not P2P.  I think it will be relatively easy for FB to win the P2P market with the inborn advantage of whatsapp.  But anyone who uses venmo knows Paypal makes no money with venmo basically.  The real prize is the B2P which P2P is the natural moat for and that will be much more difficult because having the largest messaging platform is less of an advantage when paying merchants. 
Title: Re: FB - Facebook
Post by: Liberty on May 30, 2018, 11:49:25 AM
Interview with Mike Schroepfer and Sheryl Sandberg (47min at Code conference):

https://www.youtube.com/watch?v=i3QBy5T0qxw
Title: Re: FB - Facebook
Post by: Liberty on June 04, 2018, 12:21:36 PM
You've probably heard about this:

https://www.nytimes.com/interactive/2018/06/03/technology/facebook-device-partners-users-friends-data.html

I think there's an interesting nuance to be added:

https://newsroom.fb.com/news/2018/06/why-we-disagree-with-the-nyt/
Title: Re: FB - Facebook
Post by: wisowis on June 05, 2018, 03:51:34 PM
Apple deploying ITP2 (https://webkit.org/blog/8311/intelligent-tracking-prevention-2-0/) on the iPhone: https://www.theguardian.com/technology/2018/jun/05/apple-escalates-war-against-facebook-but-doesnt-mention-it-at-wwdc

This might materially hurt Facebook's revenues (>90% of which is mobile)?
Title: Re: FB - Facebook
Post by: wisowis on June 05, 2018, 05:30:16 PM
The tension between WhatsApp and Facebook on how to monetize WhatsApp: https://www.wsj.com/articles/behind-the-messy-expensive-split-between-facebook-and-whatsapps-founders-1528208641
Title: Re: FB - Facebook
Post by: Liberty on June 06, 2018, 07:08:10 AM
Apple deploying ITP2 (https://webkit.org/blog/8311/intelligent-tracking-prevention-2-0/) on the iPhone: https://www.theguardian.com/technology/2018/jun/05/apple-escalates-war-against-facebook-but-doesnt-mention-it-at-wwdc

This might materially hurt Facebook's revenues (>90% of which is mobile)?

This will affect all adtech companies. Those that will benefit are those that are relatively stronger than the others and have their own sources of info rather than only third-party tracking. ie. Google and Facebook.
Title: Re: FB - Facebook
Post by: cameronfen on June 06, 2018, 10:26:39 AM
Apple deploying ITP2 (https://webkit.org/blog/8311/intelligent-tracking-prevention-2-0/) on the iPhone: https://www.theguardian.com/technology/2018/jun/05/apple-escalates-war-against-facebook-but-doesnt-mention-it-at-wwdc

This might materially hurt Facebook's revenues (>90% of which is mobile)?

This will affect all adtech companies. Those that will benefit are those that are relatively stronger than the others and have their own sources of info rather than only third-party tracking. ie. Google and Facebook.

Even if it might benefit Google and Facebook relative to the competition (which I agree with: if you visit a site every 30 days it doesn't effect you as much), it might shrink the entire pie.  I don't think this in itself is a huge problem especially for FB at this point.  This could be much more damaging to Youtube (Google) as much of their content is embedded in other websites.  Also perhaps customers would be fed up by the continuous pop ups which may force Apple to roll back this update (although I assume they have performed some sort of A/B testing). 
Title: Re: FB - Facebook
Post by: Liberty on June 07, 2018, 12:59:39 PM
10-min mini documentary about how FB is thinking about content filtering and the tools it's using. Some interesting stuff on a very difficult problem they have to deal with:

https://newsroom.fb.com/news/category/inside-feed/
Title: Re: FB - Facebook
Post by: Jurgis on June 14, 2018, 04:01:57 PM
Not directly about FB, but related and I did not want to start a new thread:

https://www.theverge.com/2018/6/13/17446660/mozilla-firefox-pocket-recommendations-ceo-nate-weiner-interview-converge-podcast

I use Firefox Pocket recos and it's pretty good and interesting. (Some links I posted came from there). Not perfect, but not bad so far.

How it works: https://help.getpocket.com/article/1142-firefox-new-tab-recommendations-faq
Title: Re: FB - Facebook
Post by: Liberty on June 20, 2018, 11:02:43 AM
Instagram hit 1billion users:

https://www.cnbc.com/2018/06/20/instagram-is-taking-on-youtube-with-long-form-video.html

They hit 800m MAU on September 25, 2017. That’s 25% growth in about 9 months…

https://techcrunch.com/2017/09/25/instagram-now-has-800-million-monthly-and-500-million-daily-active-users/
Title: Re: FB - Facebook
Post by: DTEJD1997 on July 04, 2018, 10:56:13 AM
Hey all:

I wonder if it is my lifestyle or the groups I associate with....but is anybody else noticing an INSANE amount of advertising for Facebook?

This has been going on for a few weeks.

Before this barrage of advertising, I don't recall EVER seeing advertising for Facebook.

All this advertising can't be cheap...
Title: Re: FB - Facebook
Post by: wisowis on July 15, 2018, 06:30:16 PM
The path to 1000$/share? Courtesy of @hardcorevalue
https://www.youtube.com/watch?v=8VnFVs1I8Ik
Title: Re: FB - Facebook
Post by: BG2008 on July 25, 2018, 02:53:53 PM
Anyone watching the price action and listening to the call?  FB is down 25% and trading at $164.7
Title: Re: FB - Facebook
Post by: winjitsu on July 25, 2018, 03:37:29 PM
Anyone watching the price action and listening to the call?  FB is down 25% and trading at $164.7

Insane.
Title: Re: FB - Facebook
Post by: Spekulatius on July 25, 2018, 03:48:32 PM
Added some more at $165 and change. Looks like a few people need to change their underwear all of a sudden.
Title: Re: FB - Facebook
Post by: Liberty on July 25, 2018, 06:54:36 PM
Transcript now available for those curious:

https://s21.q4cdn.com/399680738/files/doc_financials/2018/Q2/Q218-earnings-call-transcript.pdf
Title: Re: FB - Facebook
Post by: Spekulatius on July 25, 2018, 07:52:38 PM
Looks like revenue growth in the 20% range and expense growth much faster than revenues until 2019 at least. FB takes a long term view here apperntly and this comes at a cost.
Title: Re: FB - Facebook
Post by: BG2008 on July 25, 2018, 10:03:02 PM
Added some more at $165 and change. Looks like a few people need to change their underwear all of a sudden.

You got a better fill than me.  I picked up some at $166-167. 
Title: Re: FB - Facebook
Post by: BG2008 on July 25, 2018, 10:03:49 PM
Has anyone been using groups on FB lately?  I joined the Instant Pot Group and Peloton Group.  It is engaging as heck.
Title: Re: FB - Facebook
Post by: LongTermView on July 25, 2018, 10:05:41 PM
Not sure what to make of some of the things David said:
Quote
Our total revenue growth rate decelerated approximately 7 percentage points in Q2 compared to Q1. Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single digit percentages from prior quarters sequentially in both Q3 and Q4.
Title: Re: FB - Facebook
Post by: winjitsu on July 25, 2018, 11:14:10 PM
Looks like revenue growth in the 20% range and expense growth much faster than revenues until 2019 at least. FB takes a long term view here apperntly and this comes at a cost.

My two take-aways are that they see op margins going from 45% -> 35% over the next several years, and costs will grow faster than revenues in the interim, so EPS will decrease.
Title: Re: FB - Facebook
Post by: SlowAppreciation on July 26, 2018, 04:19:56 AM
Looks like revenue growth in the 20% range and expense growth much faster than revenues until 2019 at least. FB takes a long term view here apperntly and this comes at a cost.

My two take-aways are that they see op margins going from 45% -> 35% over the next several years, and costs will grow faster than revenues in the interim, so EPS will decrease.

Decrease? Or just decelerate?
Title: Re: FB - Facebook
Post by: Spekulatius on July 26, 2018, 04:31:53 AM
Right think earnings/share growth will decelerate or go close to zero, but not going negative. if the operating margin declines from 44% to 35%, that’s is an ~20% decline in margins. In order to compensate for this with higher revenues, they will need to increase their revenues by 25%, which seems doable. This very much will depend on thr ramp for the expense spent and how revenues develop.
Title: Re: FB - Facebook
Post by: nickenumbers on July 26, 2018, 05:59:22 AM
Listening to everyone talk about rev growth, and the calculus around growth rates decelerating...  I love it!

It is like soft porn for a finance person..  It would be better if you whispered it with some 70s bass guitar..

"facebook margins growth is going to slow..."

Title: Re: FB - Facebook
Post by: Packer16 on July 26, 2018, 06:01:23 AM
Aren't you guys concerned about forced data portability & network connection by the EU and other governments regulating Facebook? This is getting traction in the EU & if it happens in the RoW and the US, Facebook will loose its monopoly and up to this point exclusive networking capability.  This could lead to lower CPMs & lower user growth which would be a reversal of historic patterns that have lead to FB's current valuation.  FB adds very little value add, the content is mostly the users & FB is monetizing someone else's content not their own.  If content is king, at some point FB will have to face the competitive piper with governments' encouraging competition faster than the market would on its own.

Packer
Title: Re: FB - Facebook
Post by: rogermunibond on July 26, 2018, 08:07:15 AM
https://www.americanactionforum.org/print/?url=https://www.americanactionforum.org/insight/data-portability-act-might-not-effective-policy-path/

It seems like social graph portability has lost favor among those in the US discussing ways to regulate FB, GOOG, etc.

Title: Re: FB - Facebook
Post by: Jurgis on July 26, 2018, 08:38:34 AM
https://www.americanactionforum.org/print/?url=https://www.americanactionforum.org/insight/data-portability-act-might-not-effective-policy-path/

It seems like social graph portability has lost favor among those in the US discussing ways to regulate FB, GOOG, etc.

Good paper. Hits quite a few important points that some people don't consider when they talk about data portability and/or FB/GOOGL regulation.
Title: Re: FB - Facebook
Post by: Packer16 on July 26, 2018, 08:46:24 AM
I think the argument is pretty weak.  FB can charge premium prices because of the monopoly it has not because of the technology it has.  The EU is forcing data portability and if they stick to their guns (& I have no reason to doubt them) then the landscape changes.  I think the assumption some folks are under is that FB will continue to grow despite a robust portability scheme which I skeptical of.  If Europe can develop an enforceable data portability standard why wouldn't the US also insist on this.  Saying this will stifle investment is hogwash as the return on investment for FB is higher than any other competitive market based return & also leads into its current valuation.

Packer
Title: Re: FB - Facebook
Post by: merkhet on July 26, 2018, 08:56:30 AM
I think the idea of data portability leading to FB weakness is worth discussing, but is the focus correctly on "now people can take their data, friend map, whatever, and leave"? Where would they go? MySpace?

It is surprisingly hard to get the network effect going for another social network. This might reduce some frictions, but will it really make it easy enough for a threat to emerge? There is a concerted action problem that is rather difficult to solve.
Title: Re: FB - Facebook
Post by: nickenumbers on July 26, 2018, 08:59:56 AM
Today I am buying 2 year LEAPs on 210 Facebook Call options.  FB- 177 today, and 217 yesterday.

Thesis-  Market is down 18-20%, and the option values are down significantly more.  In 6-12 months the stock will be up to 200, and maybe 210.  FB is a powerhouse with a wide moat and able managers.  And I am giving myself a 24 month runway. 

In the word of Mohnish Pabrahi I think it is a "heads I win, tails I don't lose much."


Mr. Market is in a panic today..  I will buy from him.
Title: Re: FB - Facebook
Post by: Liberty on July 26, 2018, 09:07:11 AM
I think the idea of data portability leading to FB weakness is worth discussing, but is the focus correctly on "now people can take their data, friend map, whatever, and leave"? Where would they go? MySpace?

It is surprisingly hard to get the network effect going for another social network. This might reduce some frictions, but will it really make it easy enough for a threat to emerge? There is a concerted action problem that is rather difficult to solve.

Ben Thompson argued that data portability will tend to favor the biggest aggregators. They'll suck in data from any interesting new entrant, making them strongers, while new entrants will still have high barriers to entry (now including things like GDPR and other bureaucratic burdens), and getting a network effect started is still very hard (proof: apps have been able to use phone contacts to boostrap social networks for a long time, yet we're not seeing many flourish).
Title: Re: FB - Facebook
Post by: Jurgis on July 26, 2018, 09:11:37 AM
I'm just gonna grab popcorn and watch how any company will try to compete with FB data portability or not.

What may happen is data slurping by big cos like LinkedIn/FB?/Google?/etc. already do with your email contacts. "Give us your FB social graph, we gonna spam people you may know to get connected to you on NotReallyNewSocialNetwork". Oh wait, doesn't the privacy laws preclude that? Doesn't person Y have anything to say when you "port" the fact that you are connected to them?

And BTW, this has been attempted multiple times via email harvesting. I've been invited to a bunch of NewSocialNetworks by relative/friend spam when they "port" their email data to some crappy/spam social net wannabe. Good luck.  ::)

Not that FB should rest on laurels. Like the paper said rightly, social network dies because it falls behind, is not used, UI sucks, etc. It's definitely not a "do nothing and collect checks" business. But then almost nothing is.

Edit: what Liberty and merkhet said too.
Title: Re: FB - Facebook
Post by: Packer16 on July 26, 2018, 09:24:18 AM
I have no problem with large networks but what is needed in competition.  Most likely it would be the larger networks anyway, Google & SNAP.  You can measure competition by CPM rates.  If CPM rates are falling then you have a competitive market.  If they are rising you do not.  I would be interesting to see FB's growth rate in a declining CPM environment & what valuation that would support.

In terms of multiple players, other internet spaces like travel & hotels appear to have multiple competing players.  IMO the issue with social networking companies is the incentives are wrong.  The incentive should be to create useful features for users not ways to monetize the user base.  Since these businesses are capital light they do not need monetize their bases to the max.  If the business is more capital intensive, I can understand the rationale more.  IMO this is why Google Finance has turned into a wasteland.  When you focus is monetization the results can be pretty bad because the monetary incentive clashes with what the right thing to do is.  That is manifest in all the privacy issues we hear about.     

Packer 
Title: Re: FB - Facebook
Post by: Liberty on July 26, 2018, 09:33:07 AM
I have no problem with large networks but what is needed in competition.  Most likely it would be the larger networks anyway, Google & SNAP.  You can measure competition by CPM rates.  If CPM rates are falling then you have a competitive market.  If they are rising you do not.  I would be interesting to see FB's growth rate in a declining CPM environment & what valuation that would support.

Packer

Google already tried to compete with FB. It was called Google+.
Title: Re: FB - Facebook
Post by: Schwab711 on July 26, 2018, 09:38:13 AM
Competition is every website online that lets you advertise, right? FB is just one option of many options to advertise on. FB just happens to have a relative advantage to other websites in user engagement. In general, folks are spending more time online relative to legacy uses of leisure time. User engagement with ads on FB tends to be much higher relative to most other places people spend time on when online. Thus, CPM's are generally climbing and GOOG/FB CPM's are climbing faster.
Title: Re: FB - Facebook
Post by: rogermunibond on July 26, 2018, 10:09:05 AM
COFB and these boards are a competitor to FB.  They engage eyeballs for a niche audience of people with shared interests.  And Parsad is generous is using a membership model as opposed to harvesting our data or feeding us ads.

The competition for FB is that niche networks or groups evolve into true wide social networks.  Reddit, 4Chan, discord, Twitch etc.
Title: Re: FB - Facebook
Post by: bathtime on July 26, 2018, 10:18:50 AM
Today I am buying 2 year LEAPs on 210 Facebook Call options.  FB- 177 today, and 217 yesterday.

Thesis-  Market is down 18-20%, and the option values are down significantly more.  In 6-12 months the stock will be up to 200, and maybe 210.  FB is a powerhouse with a wide moat and able managers.  And I am giving myself a 24 month runway. 

In the word of Mohnish Pabrahi I think it is a "heads I win, tails I don't lose much."


Mr. Market is in a panic today..  I will buy from him.

Asking out of ignorance, would the LEAPS have a volatility premium today in higher implied volatility because of the big drop?
Title: Re: FB - Facebook
Post by: Packer16 on July 26, 2018, 10:33:57 AM
I agree that CoBF is a competitor in its niche & engagement is high here.  I am glad Sanjeev has not tried to monitize this to the max as this would annoy me & it is not needed to run the site.  It is not needed for FB either it is just that the expectations set by investors are creating incentives that are in opposition to its users.  This conflict can be overcome over short periods of time by folks doing the right thing but eventually the incentives overcome the good behavior & you get Google Finance, a marketing website that has some content/tools versus a content/tool website that has some marketing.

Packer
Title: Re: FB - Facebook
Post by: Schwab711 on July 26, 2018, 11:03:58 AM
I agree that there will always be a concern of over-supplying ads in an attempt to goose short-term earnings. FB just started monetizing the platform in earnest in the past 3-4 years though. I remember when FB IPO'd and I thought it had peaked in popularity. Now here we are at 1.4B+ DAUs. The numbers say FB is roughly as popular as SNAP (from the POV of time spent on the platform/day) while being a magnitude larger and having an older user base (I suppose just about any network of scale has an older user base relative to SNAP). FB is an incredible platform/network/whatever term gets the highest multiple now.

I think Google Finance (and Yahoo Finance, Morningstar, ect before them) is a more specific issue. When the SMF excel add-in that was still popular, it seemed like every site that was suggested to pull data from ultimately changed their UI to make the task much more difficult or impossible as folks adopted. Eventually, Google Finance also changed. I think these sites had an issue of too many people pulling data that was priced on a per-use basis without visiting the site and generating off-setting advertisement dollars. The example is still relevant to keep in my because it may be applicable to FB at some point but I think it is a unique issue relative to FB at present.

I really don't like to use FB but I am very impressed by the anecdotal ROI claims of marketing campaigns for various types of and sizes of businesses on their core site that I've collected. It's interesting that many users on core FB actually like to see ads and that % of users increases with respect to Instagram. Another example of FB's effectiveness at segmenting and defining their users' interests is the 2016 campaign. Roughly $1b was spent on FB across local, state, and federal campaigns in 2016. In 2012, a de minimis amount was spent. In 2016, Trump's campaign showed the raw potential of FB data analysis + a well-prepared advertising campaign. I expect the 2018 elections will result in roughly similar or higher spending relative to 2016 and that 2020 elections will blow 2016 out of the water. I'm not sure if FB or GOOGL is better at categorizing their users but they are both much better than any other advertising platform out there.

Edit: I never expected to be a FB bull but I think 20x ex-cash earnings that assume drastically decelerating growth and 1,000 bp decline in EBIT margins is a pretty darn good deal right now, considering what else is available. FB could be overly pessimistic on operating expenses, monetization of stories or IG/WhatsApp. Monetization of Asia/RoW users could continue for a long period of time. I think there's relatively high visibility to earnings over the next few years and a strong company, though more mature, from that point. FB today feels like WMT in 2015 when McMillon said earnings would decline for 2 years as they increased investment and re-positioned the company. It's not a homerun investment but it feels like there's outperformance from here in the intermediate term.
Title: Re: FB - Facebook
Post by: Gregmal on July 26, 2018, 11:43:32 AM
I think the bounce 165-180 was a dead cat driven largely by this glamour stock's reputation as such. Short term, the outlook is hideous, and at the least will be a cloud over the company. This also has regulatory issues, and has been/become a political whipping boy. Enough to keep me away, I think we're back under 170 in not too distant future. Just my 2c though.
Title: Re: FB - Facebook
Post by: GregS on July 26, 2018, 11:48:33 AM
It seems to me a lot of investors don't particularly like using Facebook so there's a lot of doubt about whether they can sustain users and engagement.  Yet nearly every "normie" I know is addicted to the website, and when I see people they ask me about that trip or whatever else is going on that my wife posted about.  Even with data portability I don't think people start suddenly fleeing the website because Facebook is where everyone already is.  It's where most people keep up with everyone and with things/news you care about.  Users/engagement is going to slow just because of the already large numbers, but I'm doubtful we see a meaningful reversal.   And just about every Facebook non-user I know uses Instagram instead.  Talk to teens.

As for monetization, it was thought some time ago that Twitter might have an advantage because they have our interests even if Facebook has our identity.  The FB ads I would see were crap for years.  But over time as I've added pages and groups to my FB feed (skiing, investing in my case) the ads have become incredibly more relevant.  Light users aren't likely to see this because more data = better targeting.  Considering how many people, places, groups, orgs, businesses, etc have built their presence on this platform and connected to others, I really don't think that gets replicated easily.  Every interaction says something about your interests as a person and consumer and only the other tech behemoths like Google and Amazon can match it.
Title: Re: FB - Facebook
Post by: clutch on July 26, 2018, 12:03:26 PM
I don't know about you guys, but myself and many of my friends / families now use chat apps (group chats, specifically) to stay connected. I think people use FB mainly for entertainment values or news, not necessarily as a social network. Whether that can be a moat, I'm not sure, but the nature of competitors to FB seems to be changing.
Title: Re: FB - Facebook
Post by: longinvestor on July 26, 2018, 12:15:09 PM
The sharp market reaction is because of some sense of an existential threat rather than a decline in growth rates or margin decline.
Title: Re: FB - Facebook
Post by: walkie518 on July 26, 2018, 12:20:10 PM
I would say they have built an effective and wonderful advertising business.  At the same time, Instagram and other acquisitions have likely been the source of user gains. 

There are only so many people in the world who have access to internet either via a computer or cell phone.  Last I checked, China doesn't allow for facebook and the great unwashed likely don't use VPNs to get to Facebook.

FB's market cap may be greater than this year's total ad spend in the US.  Does this make sense? 

Oculus might be really cool, but when will that investment bear fruit that's material to the business? 

To me, it seems that Instagram and WeChat are keeping FB afloat.  Does anyone know if FB can triple-count users?

Setting aside bogus accounts for a moment, should someone be a MAU of Facebook, Instagram, and WeChat, does this count 3x? 
Title: Re: FB - Facebook
Post by: cmlber on July 26, 2018, 12:36:49 PM
Instagram and other acquisitions have likely been the source of user gains. 
....
Setting aside bogus accounts for a moment, should someone be a MAU of Facebook, Instagram, and WeChat, does this count 3x?

a) the MAU count is for Facebook only, so no, Instagram hasn't been the source of user gains.
b) the newly disclosed "family" MAU # (2.5Bn) is based on users who use at least one of the services, so no double counting.
Title: Re: FB - Facebook
Post by: DCG on July 26, 2018, 12:43:41 PM
As for monetization, it was thought some time ago that Twitter might have an advantage because they have our interests even if Facebook has our identity. 


Twitter's ad targeting is mind-blowingly terrible. They showed me an add yesterday for cat food. I haven't owned a cat in like 10 years, and never tweeted or liked a tweet remotely related to cats.


Facebook has so much useful data about users (although it sounds like users might be able to hide some/more of that data from advertisers in the future).


It sounds like Facebook is focusing on keeping users for the long-term, even if it means lower earnings in the near-term. While investors with the attention span of a gnat don't like that, it's probably the right thing to do for the long-term viability of the company.
Title: Re: FB - Facebook
Post by: Shooter MacGavin on July 26, 2018, 12:45:03 PM
I would say they have built an effective and wonderful advertising business.  At the same time, Instagram and other acquisitions have likely been the source of user gains. 

There are only so many people in the world who have access to internet either via a computer or cell phone.  Last I checked, China doesn't allow for facebook and the great unwashed likely don't use VPNs to get to Facebook.

FB's market cap may be greater than this year's total ad spend in the US.  Does this make sense? 

Oculus might be really cool, but when will that investment bear fruit that's material to the business? 

To me, it seems that Instagram and WeChat are keeping FB afloat.  Does anyone know if FB can triple-count users?

Setting aside bogus accounts for a moment, should someone be a MAU of Facebook, Instagram, and WeChat, does this count 3x?

you know that WeChat isn't owned by Facebook right?
Title: Re: FB - Facebook
Post by: merkhet on July 26, 2018, 01:19:53 PM
I think he means WhatsApp
Title: Re: FB - Facebook
Post by: blainehodder on July 26, 2018, 01:40:29 PM

FB's market cap may be greater than this year's total ad spend in the US.  Does this make sense? 


Why not?
Title: Re: FB - Facebook
Post by: DooDiligence on July 26, 2018, 02:26:53 PM
I agree that CoBF is a competitor in its niche & engagement is high here.  I am glad Sanjeev has not tried to monitize this to the max as this would annoy me & it is not needed to run the site.  It is not needed for FB either it is just that the expectations set by investors are creating incentives that are in opposition to its users.  This conflict can be overcome over short periods of time by folks doing the right thing but eventually the incentives overcome the good behavior & you get Google Finance, a marketing website that has some content/tools versus a content/tool website that has some marketing.

Packer

I'm quite sure that the monetization of CoBF comes in the form of robust discussions, both public and private, which enrich Sanjeev and all of us.

To paraphrase an earlier idea you posted, "make your platform (self) valuable to others and it (you) will become valuable."

The universe feeds altruism (mostly...)
Title: Re: FB - Facebook
Post by: Parsad on July 26, 2018, 02:32:09 PM
I agree that CoBF is a competitor in its niche & engagement is high here.  I am glad Sanjeev has not tried to monitize this to the max as this would annoy me & it is not needed to run the site.  It is not needed for FB either it is just that the expectations set by investors are creating incentives that are in opposition to its users.  This conflict can be overcome over short periods of time by folks doing the right thing but eventually the incentives overcome the good behavior & you get Google Finance, a marketing website that has some content/tools versus a content/tool website that has some marketing.

Packer

I'm quite sure that the monetization of CoBF comes in the form of robust discussions, both public and private, which enrich Sanjeev and all of us.

To paraphrase an earlier idea you posted, "make your platform (self) valuable to others and it (you) will become valuable."

The universe feeds altruism (mostly...)

That's quite correct!  The board has added tremendous value to my life...not in investment ideas (because I'm looking for stuff that you guys generally aren't) or ad revenue (I've never spent much time trying to grow it...in fact it has been stagnant for about 4 years). 

The value has come from knowing all of you, the friendships, the conversations, the perspectives (including Cardboard's political views) and the richness all of that adds to our day to day existence as investment nerds!  Cheers!
Title: Re: FB - Facebook
Post by: DooDiligence on July 26, 2018, 02:33:12 PM
As for monetization, it was thought some time ago that Twitter might have an advantage because they have our interests even if Facebook has our identity. 


Twitter's ad targeting is mind-blowingly terrible. They showed me an add yesterday for cat food. I haven't owned a cat in like 10 years, and never tweeted or liked a tweet remotely related to cats.


Facebook has so much useful data about users (although it sounds like users might be able to hide some/more of that data from advertisers in the future).


It sounds like Facebook is focusing on keeping users for the long-term, even if it means lower earnings in the near-term. While investors with the attention span of a gnat don't like that, it's probably the right thing to do for the long-term viability of the company.

Cat's are ubiquitous.

Apparently, Twitter thinks I'd like a goofy hat.
Title: Re: FB - Facebook
Post by: JayGatsby on July 26, 2018, 03:13:54 PM
Their MAU and DAU metrics are fairly meaningless in my opinion. Seems like you'd want something more like Nielsen ratings... how much are people actually using it? They've massively increased ad load, but it's impossible to tell if that's peanut buttering over declining engagement. Pricing should continue to be a positive for them... most people I talk to still find it one of the cheapest ways of advertising local businesses / events.
Title: Re: FB - Facebook
Post by: walkie518 on July 26, 2018, 03:53:22 PM
Instagram and other acquisitions have likely been the source of user gains. 
....
Setting aside bogus accounts for a moment, should someone be a MAU of Facebook, Instagram, and WeChat, does this count 3x?

a) the MAU count is for Facebook only, so no, Instagram hasn't been the source of user gains.
b) the newly disclosed "family" MAU # (2.5Bn) is based on users who use at least one of the services, so no double counting.

Sorry, didn't mean WeChat but WhatsApp...

ok, so on b the "family" is based on one email account or on IPs?  I would think that IP-based would be problematic since you can have multiple users on one IP.  I assume they wouldn't use browser finger-printing, but they might match users on email or "sign on using facebook" type of hooks.

in other words, there could be double counting should someone wish to have an email account linked to fbook that's a junk email but hte intagram account is legit?  Don't most people have more than one email address that may (or may not) forward and/or be used to filter messages? 
Title: Re: FB - Facebook
Post by: DooDiligence on July 26, 2018, 05:29:17 PM
Their MAU and DAU metrics are fairly meaningless in my opinion. Seems like you'd want something more like Nielsen ratings... how much are people actually using it? They've massively increased ad load, but it's impossible to tell if that's peanut buttering over declining engagement. Pricing should continue to be a positive for them... most people I talk to still find it one of the cheapest ways of advertising local businesses / events.

FaceBook or Twitter?
Title: Re: FB - Facebook
Post by: Liberty on July 30, 2018, 07:31:37 AM
Ben Thompson on the recent Q:

https://stratechery.com/2018/facebook-lenses/
Title: Re: FB - Facebook
Post by: LongTermView on July 30, 2018, 06:34:53 PM
Looking at the top line numbers by geography, I don't understand why the 2Q18 call caused the stock to drop so much:

  2Q16     1Q17     2Q17    1Q-2Q        YoY
$3,212   $3,968   $4,556    14.8%   41.8%   US & Canada
$1,585   $1,905   $2,242    17.7%   41.5%   Europe
$1,025   $1,375   $1,569    14.1%   53.1%   Asia-Pacific
   $614      $784      $954    21.7%   55.4%   Rest of World
--------   --------   --------
$6,436    $8,032   $9,321    16.0%   44.8%

  2Q17       1Q18      2Q18    1Q-2Q        YoY
$4,556     $5,667    $6,251    10.3%   37.2%   US & Canada
$2,242     $3,036    $3,302      8.8%   47.3%   Europe
$1,569     $2,091    $2,316    10.8%   47.6%   Asia-Pacific
   $954     $1,172    $1,362    16.2%   42.8%   Rest of World
--------   ---------   ---------
$9,321    $11,966   $13,231   10.6%   41.9%

Coming into force on May 25th, GDPR was only a factor for a little more than 1/3rd of Q2. Hopefully the Q3 numbers will be solid.
Title: Re: FB - Facebook
Post by: cameronfen on July 31, 2018, 01:49:42 AM
Looking at the top line numbers by geography, I don't understand why the 2Q18 call caused the stock to drop so much:

  2Q16     1Q17     2Q17    1Q-2Q        YoY
$3,212   $3,968   $4,556    14.8%   41.8%   US & Canada
$1,585   $1,905   $2,242    17.7%   41.5%   Europe
$1,025   $1,375   $1,569    14.1%   53.1%   Asia-Pacific
   $614      $784      $954    21.7%   55.4%   Rest of World
--------   --------   --------
$6,436    $8,032   $9,321    16.0%   44.8%

  2Q17       1Q18      2Q18    1Q-2Q        YoY
$4,556     $5,667    $6,251    10.3%   37.2%   US & Canada
$2,242     $3,036    $3,302      8.8%   47.3%   Europe
$1,569     $2,091    $2,316    10.8%   47.6%   Asia-Pacific
   $954     $1,172    $1,362    16.2%   42.8%   Rest of World
--------   ---------   ---------
$9,321    $11,966   $13,231   10.6%   41.9%

Coming into force on May 25th, GDPR was only a factor for a little more than 1/3rd of Q2. Hopefully the Q3 numbers will be solid.

The stock only dropped 7 or 8% after the numbers. it was the conference call with the forecast of slowing of growth to around low 30 high 20% YoY and margin compression to 35ish% that caused most of the drop. 
Title: Re: FB - Facebook
Post by: Liberty on July 31, 2018, 08:57:19 AM
Interesting piece on FB:

https://www.gurufocus.com/news/714561/thinking-about-facebook
Title: Re: FB - Facebook
Post by: Shooter MacGavin on July 31, 2018, 09:10:41 AM
Looking at the top line numbers by geography, I don't understand why the 2Q18 call caused the stock to drop so much:

  2Q16     1Q17     2Q17    1Q-2Q        YoY
$3,212   $3,968   $4,556    14.8%   41.8%   US & Canada
$1,585   $1,905   $2,242    17.7%   41.5%   Europe
$1,025   $1,375   $1,569    14.1%   53.1%   Asia-Pacific
   $614      $784      $954    21.7%   55.4%   Rest of World
--------   --------   --------
$6,436    $8,032   $9,321    16.0%   44.8%

  2Q17       1Q18      2Q18    1Q-2Q        YoY
$4,556     $5,667    $6,251    10.3%   37.2%   US & Canada
$2,242     $3,036    $3,302      8.8%   47.3%   Europe
$1,569     $2,091    $2,316    10.8%   47.6%   Asia-Pacific
   $954     $1,172    $1,362    16.2%   42.8%   Rest of World
--------   ---------   ---------
$9,321    $11,966   $13,231   10.6%   41.9%

Coming into force on May 25th, GDPR was only a factor for a little more than 1/3rd of Q2. Hopefully the Q3 numbers will be solid.

You're looking at the wrong numbers.  2019 Consensus numbers were too high vs. Winley's margin guidance. So the algos just knocked the stock down based on that. Does it make sense from a valuation perspective?  No. not really. it's just the hedge fund/sell side quarterly earnings game.
Title: Re: FB - Facebook
Post by: walkie518 on July 31, 2018, 09:17:37 AM
Looking at the top line numbers by geography, I don't understand why the 2Q18 call caused the stock to drop so much:

  2Q16     1Q17     2Q17    1Q-2Q        YoY
$3,212   $3,968   $4,556    14.8%   41.8%   US & Canada
$1,585   $1,905   $2,242    17.7%   41.5%   Europe
$1,025   $1,375   $1,569    14.1%   53.1%   Asia-Pacific
   $614      $784      $954    21.7%   55.4%   Rest of World
--------   --------   --------
$6,436    $8,032   $9,321    16.0%   44.8%

  2Q17       1Q18      2Q18    1Q-2Q        YoY
$4,556     $5,667    $6,251    10.3%   37.2%   US & Canada
$2,242     $3,036    $3,302      8.8%   47.3%   Europe
$1,569     $2,091    $2,316    10.8%   47.6%   Asia-Pacific
   $954     $1,172    $1,362    16.2%   42.8%   Rest of World
--------   ---------   ---------
$9,321    $11,966   $13,231   10.6%   41.9%

Coming into force on May 25th, GDPR was only a factor for a little more than 1/3rd of Q2. Hopefully the Q3 numbers will be solid.

You're looking at the wrong numbers.  2019 Consensus numbers were too high vs. Winley's margin guidance. So the algos just knocked the stock down based on that. Does it make sense from a valuation perspective?  No. not really. it's just the hedge fund/sell side quarterly earnings game.
I was under the impression that the drop was likely the result of Facebook hitting a ceiling for MAU?   
Title: Re: FB - Facebook
Post by: bonkers on July 31, 2018, 10:30:45 AM
Can't speak for anybody else, but in my eyes it's all due to guidance.

The guidance changed FB's story dramatically, in fact so much, that the guidance is hard to believe.
If FB stock previously looked like a good deal at a higher price, it now looks uninteresting even with this much lower price.

The business is certainly strong. But trying to second-guess their guidance is too speculative for my taste.
Title: Re: FB - Facebook
Post by: LounginMKL on July 31, 2018, 11:02:41 AM
Playing Monday quarterback a bit- the plan to ramp up headcount can be seen in FB's aggressive approach in office space in SF. In a typical "move fast" fashion, Facebook went from minimal presence to being the 3rd largest tech tenant in SF. All in less than 12 months.

https://sf.curbed.com/2018/5/14/17353094/facebook-park-tower-250-howard-lease-sf

The quick calc is that the two major leases will provide 1.19M sqft, assuming 150 sqft/employee (open office layout), FB is planning capacity to add ~7,800 employees.
Title: Re: FB - Facebook
Post by: Parsad on July 31, 2018, 04:48:39 PM
It's a temporary blip...they are saying that higher security spending will decrease net margins...revenues will still be growing quite rapidly.  Within two years, margins will rebound as they probably won't be spending as much on security upgrades.  Of the FAANG stocks, Apple and Facebook are the only ones trading at a reasonable price.  Cheers!
Title: Re: FB - Facebook
Post by: gary17 on July 31, 2018, 05:18:41 PM
It's a temporary blip...they are saying that higher security spending will decrease net margins...revenues will still be growing quite rapidly.  Within two years, margins will rebound as they probably won't be spending as much on security upgrades.  Of the FAANG stocks, Apple and Facebook are the only ones trading at a reasonable price.  Cheers!

AGREED!
Title: Re: FB - Facebook
Post by: rb on July 31, 2018, 05:28:38 PM
It's a temporary blip...they are saying that higher security spending will decrease net margins...revenues will still be growing quite rapidly.  Within two years, margins will rebound as they probably won't be spending as much on security upgrades.  Of the FAANG stocks, Apple and Facebook are the only ones trading at a reasonable price.  Cheers!

AGREED!
I disagree. This is not a one time cleanup. The new costs are fixed costs and rebase costs at a higher level.

What you guys are talking about is that if revenues continue to grow then margins will grow again as operational leverage does it's thing. This bit I agree with. But if revenue is to continue to grow it probably would have grown anyway. With the new costs even if the margins will increase in the future they will still be lower then they would have been otherwise.

I agree with FB's decision to do this btw.
Title: Re: FB - Facebook
Post by: Spekulatius on July 31, 2018, 07:26:51 PM
It's a temporary blip...they are saying that higher security spending will decrease net margins...revenues will still be growing quite rapidly.  Within two years, margins will rebound as they probably won't be spending as much on security upgrades.  Of the FAANG stocks, Apple and Facebook are the only ones trading at a reasonable price.  Cheers!

AGREED!
I disagree. This is not a one time cleanup. The new costs are fixed costs and rebase costs at a higher level.

What you guys are talking about is that if revenues continue to grow then margins will grow again as operational leverage does it's thing. This bit I agree with. But if revenue is to continue to grow it probably would have grown anyway. With the new costs even if the margins will increase in the future they will still be lower then they would have been otherwise.

I agree with FB's decision to do this btw.

I think sooner or later, the security will be automated for the most part. A large part of their AI drive may go in this direction, It’s a few billion dollar of annual expenses and I am fairly sure, that AI sooner or later can do this better and faster than any human can.
Title: Re: FB - Facebook
Post by: sleepydragon on July 31, 2018, 07:42:57 PM
I just think FB’s moat is not deep at all. Look at MySpace. Disappeared. A few years from now difficult to say  can say if people will still be using Facebook or something else.
Title: Re: FB - Facebook
Post by: compoundvalue on July 31, 2018, 11:16:18 PM
I really like the fact that they are tackling this aggressively. I think that every dollar spent on safety and security now is a dollar well spent. It seems to me like they’re dead serious in addressing the issues without paying too much attention to the next quarter financials. That is the right thing to do and I hope they stick to it. With respect to FB’s moat, I think that they have an incredible moat. I  think that Google and Facebook have in advertising a competitive position similar to the one Visa and Mastercard have in payments. The network effect could be duplicated to other arenas outside of advertising (including payments...). And I think that the more regulated it gets the more entrenched they become
Title: Re: FB - Facebook
Post by: Spekulatius on August 01, 2018, 03:53:58 AM
I just think FB’s moat is not deep at all. Look at MySpace. Disappeared. A few years from now difficult to say  can say if people will still be using Facebook or something else.

I don’t think that MySpace ever had the same scale, depth and advertising tech and scale that FB had. MySpace was a first mover in the social media space,  but they didn’t have any depth other than some scale. FB does have that and in a way, you could say that the FB property itself is just the front for the advertising machine behind it. you can see FB management thinking along the same lines, because they use the same engine and apply it to Instagram and most likely whatever they want to monetize next.

The same can be said  about GOOG. Before GOOG, there was Altavista, which was delivering the best search experience,  it there was no ecosystem (Adsense etc) behind it to fuel further improvements.
Title: Re: FB - Facebook
Post by: walt373 on August 01, 2018, 08:35:15 AM
Seems like Myspace's failure is a permanent fixture in the minds of investors and has probably kept FB cheaper than it should've been during its entire existence.
Title: Re: FB - Facebook
Post by: Shooter MacGavin on August 01, 2018, 08:36:15 AM
Seems like Myspace's failure is a permanent fixture in the minds of investors and has probably kept FB cheaper than it should've been during its entire existence.

Don't forget friendster..the poor man's myspace.
Title: Re: FB - Facebook
Post by: Liberty on August 01, 2018, 08:37:52 AM
Seems like Myspace's failure is a permanent fixture in the minds of investors and has probably kept FB cheaper than it should've been during its entire existence.

Don't forget friendster..the poor man's myspace.

How is Orkut doing these days?
Title: Re: FB - Facebook
Post by: Jurgis on August 01, 2018, 09:58:47 AM
Seems like Myspace's failure is a permanent fixture in the minds of investors and has probably kept FB cheaper than it should've been during its entire existence.

Don't forget friendster..the poor man's myspace.

How is Orkut doing these days?

Google+?
Title: Re: FB - Facebook
Post by: fuluvu on August 01, 2018, 10:19:33 AM
I really like the fact that they are tackling this aggressively. I think that every dollar spent on safety and security now is a dollar well spent. It seems to me like they’re dead serious in addressing the issues without paying too much attention to the next quarter financials. That is the right thing to do and I hope they stick to it. With respect to FB’s moat, I think that they have an incredible moat. I  think that Google and Facebook have in advertising a competitive position similar to the one Visa and Mastercard have in payments. The network effect could be duplicated to other arenas outside of advertising (including payments...). And I think that the more regulated it gets the more entrenched they become

The digital evolution is still in its infancy. FB's capitalization is large, but it is still a very young company. it just grows fast. It has its growing pains. The privacy is one of them. The billions spend to addressing the problem will makes FB stronger and its moat wider. Scarifying short term profit to strengthen its business is good for the business long term.
Title: Re: FB - Facebook
Post by: winjitsu on August 01, 2018, 10:22:27 AM
Myspace had 76mm MAU at its PEAK. Orkut 300mm. Facebook has 2.23bn  8)

The value of a network grow exponentially with with its size (or so the VC's say :)) If you believe this, Facebook is WAY harder to kill than any of their past competitors.
Title: Re: FB - Facebook
Post by: Gregmal on August 01, 2018, 10:24:29 AM
I don't know if there is some secret pact or not, but Apple could very easily launch a social media ecosystem through it's platform. Integrate this through IOS. They already have Imessage, photos, Itunes, etc, all they'd need to do is seam them together. Not to mention you get rid of all the "issues" people have with FB in terms of advertising and data collecting. This is why I don't really believe FB has much of a moat. There aren't many companies that can disrupt them; I agree. But Apple could do it very easily.
Title: Re: FB - Facebook
Post by: Pauly on August 01, 2018, 10:28:39 AM
I don't know if there is some secret pact or not, but Apple could very easily launch a social media ecosystem through it's platform. Integrate this through IOS. They already have Imessage, photos, Itunes, etc, all they'd need to do is seam them together. Not to mention you get rid of all the "issues" people have with FB in terms of advertising and data collecting. This is why I don't really believe FB has much of a moat. There aren't many companies that can disrupt them; I agree. But Apple could do it very easily.

Didn't Google assume the same thing with Google+ ?
Title: Re: FB - Facebook
Post by: winjitsu on August 01, 2018, 10:33:06 AM
I don't know if there is some secret pact or not, but Apple could very easily launch a social media ecosystem through it's platform. Integrate this through IOS. They already have Imessage, photos, Itunes, etc, all they'd need to do is seam them together. Not to mention you get rid of all the "issues" people have with FB in terms of advertising and data collecting. This is why I don't really believe FB has much of a moat. There aren't many companies that can disrupt them; I agree. But Apple could do it very easily.

I don't see how this could happen. The other half of the world's phones are Android. This works with apple music and video since these are individual activities, but when we're talking about connecting with you friends, I can't see a network that leaves out half the population working.
Title: Re: FB - Facebook
Post by: Gregmal on August 01, 2018, 10:34:11 AM
I don't know if there is some secret pact or not, but Apple could very easily launch a social media ecosystem through it's platform. Integrate this through IOS. They already have Imessage, photos, Itunes, etc, all they'd need to do is seam them together. Not to mention you get rid of all the "issues" people have with FB in terms of advertising and data collecting. This is why I don't really believe FB has much of a moat. There aren't many companies that can disrupt them; I agree. But Apple could do it very easily.

Didn't Google assume the same thing with Google+ ?

Google doesn't own mobile the way Apple does. Apple puts millions of devices in people's hands every day. People live on their phones. Two totally different companies in this regard.
Title: Re: FB - Facebook
Post by: Gregmal on August 01, 2018, 10:40:32 AM
I don't know if there is some secret pact or not, but Apple could very easily launch a social media ecosystem through it's platform. Integrate this through IOS. They already have Imessage, photos, Itunes, etc, all they'd need to do is seam them together. Not to mention you get rid of all the "issues" people have with FB in terms of advertising and data collecting. This is why I don't really believe FB has much of a moat. There aren't many companies that can disrupt them; I agree. But Apple could do it very easily.

I don't see how this could happen. The other half of the world's phones are Android. This works with apple music and video since these are individual activities, but when we're talking about connecting with you friends, I can't see a network that leaves out half the population working.

It doesn't need to have everybody all at once. All I'm saying is that Apple could very easily do something like this and you can't say it wouldn't effect FB. I've heard of people ditching their current phones for Iphones simply because they want  to be able to Imessage with their friends. Having an AAPL social media network would throw a huge wrench into the equation for FB. I mean it's kind of silly even to say there is a moat when the bottom line is that there have been numerous instances of companies posing threats to FB. WHatsApp and Instagram to name a few. FB just happened to be smart enough to buy them.
Title: Re: FB - Facebook
Post by: Pauly on August 01, 2018, 12:09:18 PM
I don't know if there is some secret pact or not, but Apple could very easily launch a social media ecosystem through it's platform. Integrate this through IOS. They already have Imessage, photos, Itunes, etc, all they'd need to do is seam them together. Not to mention you get rid of all the "issues" people have with FB in terms of advertising and data collecting. This is why I don't really believe FB has much of a moat. There aren't many companies that can disrupt them; I agree. But Apple could do it very easily.

Didn't Google assume the same thing with Google+ ?

Google doesn't own mobile the way Apple does. Apple puts millions of devices in people's hands every day. People live on their phones. Two totally different companies in this regard.

Right, Apple is not an advertising company the way FB and Google are. So why would they pour resources into building a competing social network when they would then need to either sell ads (a very un-Apple thing to do), or just lose money on the whole venture (another un-Apple thing to do) and just hope they can convert enough people to iPhones to make it worth while. Could happen, but unseating a massive competitor like FB would definitely be expensive and definitely wouldn't be 'easy'.

I like Apple's strategy of giving users more control over their privacy since it chokes off FB's life blood, and burnishes Apple's reputation as a friend of the end user rather than an exploiter.


Title: Re: FB - Facebook
Post by: Shooter MacGavin on August 01, 2018, 12:35:55 PM
I don't know if there is some secret pact or not, but Apple could very easily launch a social media ecosystem through it's platform. Integrate this through IOS. They already have Imessage, photos, Itunes, etc, all they'd need to do is seam them together. Not to mention you get rid of all the "issues" people have with FB in terms of advertising and data collecting. This is why I don't really believe FB has much of a moat. There aren't many companies that can disrupt them; I agree. But Apple could do it very easily.

Didn't Google assume the same thing with Google+ ?

Google doesn't own mobile the way Apple does. Apple puts millions of devices in people's hands every day. People live on their phones. Two totally different companies in this regard.

Not in the US, but globally Android has larger market share of smartphone O/S.   
Title: Re: FB - Facebook
Post by: longinvestor on August 01, 2018, 04:11:09 PM
I don't know if there is some secret pact or not, but Apple could very easily launch a social media ecosystem through it's platform. Integrate this through IOS. They already have Imessage, photos, Itunes, etc, all they'd need to do is seam them together. Not to mention you get rid of all the "issues" people have with FB in terms of advertising and data collecting. This is why I don't really believe FB has much of a moat. There aren't many companies that can disrupt them; I agree. But Apple could do it very easily.

Didn't Google assume the same thing with Google+ ?

Google doesn't own mobile the way Apple does. Apple puts millions of devices in people's hands every day. People live on their phones. Two totally different companies in this regard.

Right, Apple is not an advertising company the way FB and Google are. So why would they pour resources into building a competing social network when they would then need to either sell ads (a very un-Apple thing to do), or just lose money on the whole venture (another un-Apple thing to do) and just hope they can convert enough people to iPhones to make it worth while. Could happen, but unseating a massive competitor like FB would definitely be expensive and definitely wouldn't be 'easy'.

I like Apple's strategy of giving users more control over their privacy since it chokes off FB's life blood, and burnishes Apple's reputation as a friend of the end user rather than an exploiter.

+1

I believe that this to be a real opportunity for Apple. One can throw in Microsoft in their corner. As AB 375, the California version of GDPR, gets firmed up, expect this to be in the menu of topics. For starters, Apple could make it a simple opt-in check box for data sharing on their ecosystem. That would hurt FB and GOOG. While reading up on how AB375 came into place, this simple checkbox opt-in has apparently been a mortal fear. Apple can make it happen.
Title: Re: FB - Facebook
Post by: JayGatsby on August 01, 2018, 09:45:50 PM
Their moat is just that they're the incumbent and everyone is on it. Building a knockoff facebook is easy, it's getting everyone with internet to be on it that's difficult.
Title: Re: FB - Facebook
Post by: Lakesider on August 01, 2018, 09:53:47 PM
Anyone else think their product is just getting worse and worse?

Its basically just a stream of ads to your face. when they changed from personal pages to a news stream type system I was gone.
Title: Re: FB - Facebook
Post by: Parsad on August 01, 2018, 11:28:46 PM
I just think FB’s moat is not deep at all. Look at MySpace. Disappeared. A few years from now difficult to say  can say if people will still be using Facebook or something else.

If you use that logic then Amazon's moat is about as strong as Overstock's.  MySpace had a peak user base of 75M...Facebook has 2.5B users and Instagram has over 800M and is still growing rapidly.  Cheers!
Title: Re: FB - Facebook
Post by: compoundvalue on August 02, 2018, 06:41:29 AM
I think that Instagram has more than 1bn users actually...
Title: Re: FB - Facebook
Post by: Liberty on August 02, 2018, 07:46:54 AM
I think that Instagram has more than 1bn users actually...

Yep

https://techcrunch.com/2018/06/20/instagram-1-billion-users/
Title: Re: FB - Facebook
Post by: Shooter MacGavin on August 02, 2018, 08:26:58 AM
I just think FB’s moat is not deep at all. Look at MySpace. Disappeared. A few years from now difficult to say  can say if people will still be using Facebook or something else.



If you use that logic then Amazon's moat is about as strong as Overstock's.  MySpace had a peak user base of 75M...Facebook has 2.5B users and Instagram has over 800M and is still growing rapidly.  Cheers!


Facebook's moat isn't impregnable, but it's at least been stress tested. Orkut, Google Plus, Snapchat, Pinterest, Twitter plus a handful of others.

It's not enough to have a ton of users.  Look at Yahoo!.  Yahoo had 900M daily visitors before it got sold to VZ/Aol and they didn't know how to make a profit on it with display advertising.  Their ad product sucked and they didn't have the know how to harvest the data and make it effective.
Title: Re: FB - Facebook
Post by: LongTermView on August 02, 2018, 08:44:22 AM
Good point about Yahoo, Shooter.
Title: Re: FB - Facebook
Post by: bonkers on August 02, 2018, 08:45:27 AM
FB's business is still here, let's leave that aside for now. However, I still want to get back to my original question on guidance.

It's a temporary blip...they are saying that higher security spending will decrease net margins...revenues will still be growing quite rapidly.  Within two years, margins will rebound as they probably won't be spending as much on security upgrades.  Of the FAANG stocks, Apple and Facebook are the only ones trading at a reasonable price.  Cheers!
AGREED!
I think sooner or later, the security will be automated for the most part. A large part of their AI drive may go in this direction, It’s a few billion dollar of annual expenses and I am fairly sure, that AI sooner or later can do this better and faster than any human can.

I would appreciate your opinion about the following statements:

CFO David M. Wehner:
"We continue to expect that full-year 2018 total expenses will grow [faster than revenue] in the range of 50% to 60% compared to last year. In addition to increases in core product development and infrastructure, this growth is driven by increasing investment in areas like safety and security, AR/VR, marketing, and content acquisition. Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019."

"Over the next several years, we would anticipate that our operating margins will trend towards the mid-30s on a percentage basis."

Are you saying:
  a) you know better than he does (recruiting needs, development of AI, etc.)
  b) he is just being conservative - in the extreme
  c) he is lying for some reason ?
Title: Re: FB - Facebook
Post by: Schwab711 on August 02, 2018, 08:56:13 AM
I think what he is saying is incremental operating margins will be ~35%. I think they wanted to avoid being overly specific and the market took it to mean overall operating margins will be 35% in 2020 or so. That may be true and that's what I'm preparing for, but I read it as incremental operating margins of 35% will drag overall margins down steadily. If the latter is the case then overall margins will be meaningfully higher than 35% in 2020 (pending your revenue growth assumptions).
Title: Re: FB - Facebook
Post by: walt373 on August 04, 2018, 10:05:50 AM
Tweetstorm on how FB's moat is widening: https://twitter.com/antoniogm/status/1022590019519664128
Title: Re: FB - Facebook
Post by: Liberty on August 10, 2018, 10:37:37 AM
Feature piece on Instagram stories:

https://www.recode.net/2018/8/8/17641256/instagram-stories-kevin-systrom-facebook-snapchat
Title: Re: FB - Facebook
Post by: Liberty on September 11, 2018, 06:37:14 AM
Profile of Zuckerberg in the New Yorker:

https://www.newyorker.com/magazine/2018/09/17/can-mark-zuckerberg-fix-facebook-before-it-breaks-democracy?currentPage=all
Title: Re: FB - Facebook
Post by: Liberty on September 25, 2018, 03:21:45 AM
https://instagram-press.com/blog/2018/09/24/statement-from-kevin-systrom-instagram-co-founder-and-ceo/

Ben Thompson on this:

https://stratechery.com/2018/instagrams-ceo/
Title: Re: FB - Facebook
Post by: pcm983 on September 25, 2018, 07:55:35 AM
https://www.newyorker.com/magazine/2018/09/17/can-mark-zuckerberg-fix-facebook-before-it-breaks-democracy

fascinating article
Title: Re: FB - Facebook
Post by: mwtorock on September 25, 2018, 08:08:00 AM
https://www.newyorker.com/magazine/2018/09/17/can-mark-zuckerberg-fix-facebook-before-it-breaks-democracy

fascinating article

it is very hard to post links before Liberty  ;)
Title: Re: FB - Facebook
Post by: LounginMKL on September 26, 2018, 05:34:04 PM
Facebook Dating- https://www.wired.com/story/facebook-dating-how-it-works/
Title: Re: FB - Facebook
Post by: pcm983 on September 26, 2018, 07:32:43 PM
https://www.forbes.com/sites/parmyolson/2018/09/26/exclusive-whatsapp-cofounder-brian-acton-gives-the-inside-story-on-deletefacebook-and-why-he-left-850-million-behind/
Title: Re: FB - Facebook
Post by: Liberty on September 27, 2018, 07:07:35 AM
https://stratechery.com/2018/whatsapp-founder-speaks-eu-deception-facebook-ideology/
Title: Re: FB - Facebook
Post by: mcliu on September 27, 2018, 07:13:46 AM
I think what he is saying is incremental operating margins will be ~35%. I think they wanted to avoid being overly specific and the market took it to mean overall operating margins will be 35% in 2020 or so. That may be true and that's what I'm preparing for, but I read it as incremental operating margins of 35% will drag overall margins down steadily. If the latter is the case then overall margins will be meaningfully higher than 35% in 2020 (pending your revenue growth assumptions).

It actually sounds like he's referring to overall margins, because he's saying expenses will be growing by 50% in 2018 and also growing faster than revenue in 2019.
Anyone else have a take on this?
Title: Re: FB - Facebook
Post by: atbed on September 27, 2018, 11:22:45 AM
I think what he is saying is incremental operating margins will be ~35%. I think they wanted to avoid being overly specific and the market took it to mean overall operating margins will be 35% in 2020 or so. That may be true and that's what I'm preparing for, but I read it as incremental operating margins of 35% will drag overall margins down steadily. If the latter is the case then overall margins will be meaningfully higher than 35% in 2020 (pending your revenue growth assumptions).

It actually sounds like he's referring to overall margins, because he's saying expenses will be growing by 50% in 2018 and also growing faster than revenue in 2019.
Anyone else have a take on this?

I would think they cleared up these concerns in post-earnings follow-up calls, and believe they meant 35% overall, but what do I know.
Title: Re: FB - Facebook
Post by: Schwab711 on September 27, 2018, 11:32:31 AM
I think what he is saying is incremental operating margins will be ~35%. I think they wanted to avoid being overly specific and the market took it to mean overall operating margins will be 35% in 2020 or so. That may be true and that's what I'm preparing for, but I read it as incremental operating margins of 35% will drag overall margins down steadily. If the latter is the case then overall margins will be meaningfully higher than 35% in 2020 (pending your revenue growth assumptions).

It actually sounds like he's referring to overall margins, because he's saying expenses will be growing by 50% in 2018 and also growing faster than revenue in 2019.
Anyone else have a take on this?

I would think they cleared up these concerns in post-earnings follow-up calls, and believe they meant 35% overall, but what do I know.

This is true, it is 35% overall in 2020. I think much of the increase expense is due to FB's expected large emerging market CapEx push due and changes in the new tax law related to R&D/CapEx. I've heard an interesting view on FB's planned investment in India over the next 2.5 years that likely reflects what FB is trying to do (faster page load times leads to higher engagement is the idea here) that I think makes a lot of sense. The new tax code makes it more attractive to pull-forward investments in data centers and such. I think FB is going to look quite attractive in 2020, though the digital ad market may not be the high-growth market at that point that it is right now.
Title: Re: FB - Facebook
Post by: Liberty on September 27, 2018, 12:21:54 PM
It's my impression too that they pulled forward a lot of future investments because it was politically convenient to take a bath now and re-set expectations.

If the stock is getting crushed, margins are going down, and they're investing so much in security that it's hurting, it feels like the company has been punished and is doing all that they can.

If margins are going up Q after Q, profits go up even faster, etc, then it attracts the political spotlight and it doesn't feel like they're doing enough (even if they're so profitable that they could've increased security a lot and not crushed margins this much with all this extra capex).
Title: Re: FB - Facebook
Post by: Liberty on September 28, 2018, 10:10:40 AM
https://newsroom.fb.com/news/2018/09/security-update/

Quote
On the afternoon of Tuesday, September 25, our engineering team discovered a security issue affecting almost 50 million accounts. We’re taking this incredibly seriously and wanted to let everyone know what’s happened and the immediate action we’ve taken to protect people’s security.
Title: Re: FB - Facebook
Post by: walkie518 on September 29, 2018, 11:51:09 AM
It's my impression too that they pulled forward a lot of future investments because it was politically convenient to take a bath now and re-set expectations.

If the stock is getting crushed, margins are going down, and they're investing so much in security that it's hurting, it feels like the company has been punished and is doing all that they can.

If margins are going up Q after Q, profits go up even faster, etc, then it attracts the political spotlight and it doesn't feel like they're doing enough (even if they're so profitable that they could've increased security a lot and not crushed margins this much with all this extra capex).

Maybe that's reading into it too much?  Facebook made a number of deals and not all of them were or will become Instagram. 

Share is being taken by Amazon and likely Google while Facebook moves from one scandal to another. 

And Sandberg keeps selling stock.  Maybe this is her window and she is restricted other times ... I would imagine that a key executive, who knows and understands the company, wouldn't sell at these prices if it's a reset? 
Title: Re: FB - Facebook
Post by: Liberty on October 02, 2018, 10:37:10 AM
https://stratechery.com/2018/data-factories/

Piece mostly about FB and GOOG.
Title: Re: FB - Facebook
Post by: John Hjorth on October 07, 2018, 03:02:24 AM
Yet another large datacenter to be built here in Denmark (https://www.fyens.dk/Danmark-Erhverv/Afsloering-Facebook-staar-bag-gigantisk-datacenter-i-Esbjerg/artikel/3290170) by Facebook, this time near Esbjerg [Western Denmark, near the coast at the North Sea]. This is an important project for the region and community there.
Title: Re: FB - Facebook
Post by: frommi on October 07, 2018, 03:30:47 AM
Yet another large datacenter to be built here in Denmark (https://www.fyens.dk/Danmark-Erhverv/Afsloering-Facebook-staar-bag-gigantisk-datacenter-i-Esbjerg/artikel/3290170) by Facebook, this time near Esbjerg [Western Denmark, near the coast at the North Sea]. This is an important project for the region and community there.

What i don`t get is why they do that at all. Whats the ROI on these datacenters? Can`t they simply pay a REIT doing this stuff and return the cash to shareholders?
Title: Re: FB - Facebook
Post by: John Hjorth on October 07, 2018, 04:04:01 AM
What i don`t get is why they do that at all. Whats the ROI on these datacenters? Can`t they simply pay a REIT doing this stuff and return the cash to shareholders?

I speculate that might eventually happen. Perhaps this way of doing it is about being in total control of the design and construction process [,after which to flip it, and lease it back]?

Recently, Mr. Flatt has in interviews expressed his regrets about not getting involved in this space so far. Personally I would not be surprised to see Brookfield [or some competitor] step in here at a later moment with investment in these datacenters, if Brookfield, as the first Danish investment by Brookfield ever.

As a sidenote, Google is also building a datacenter here in Denmark, in Fredericia, on the east coast of Jutland, where Esbjerg is on the west coast.

I have read somewhere, that a high capacity extention to the internet backbone is being planned [perhaps already under construction?] going out from exactly Esbjerg to hit the US east coast [I don't recall where], so I think the location of those datacenters here is actually closely related to that fact.

Those two FANGs are really pouring millions into tiny Denmark, generating economic activity, not only during the construction time span, but also long term steady jobs going forward for skilled people. - It's great!
Title: Re: FB - Facebook
Post by: Schwab711 on October 07, 2018, 05:47:52 AM
Yet another large datacenter to be built here in Denmark (https://www.fyens.dk/Danmark-Erhverv/Afsloering-Facebook-staar-bag-gigantisk-datacenter-i-Esbjerg/artikel/3290170) by Facebook, this time near Esbjerg [Western Denmark, near the coast at the North Sea]. This is an important project for the region and community there.

What i don`t get is why they do that at all. Whats the ROI on these datacenters? Can`t they simply pay a REIT doing this stuff and return the cash to shareholders?

Faster load times lead to higher engagement. FB is getting tax incentives to increase their network, which should increase ARPU. It expands the "moat" (if it's easier to use the word) and it's probably going to be pretty high ROIIC. We'll have to watch ARPU over the years.
Title: Re: FB - Facebook
Post by: John Hjorth on October 07, 2018, 06:40:05 AM
Globenewswire [January 15th 2018]: Aqua Comms Continues Investment in Subsea Cables and Announces North Atlantic Bridge (https://globenewswire.com/news-release/2018/01/15/1289274/0/en/Aqua-Comms-Continues-Investment-in-Subsea-Cables-and-Announces-North-Atlantic-Bridge.html).
Title: Re: FB - Facebook
Post by: Spekulatius on October 07, 2018, 07:29:08 AM
I suspect that John hit the nail on the head and FB ( and GOOG ) want to keep control of the design and hence likes to do own what they use.  They can at some point decide to spin this business off, but right now, they have a ton of cash and are not capital constraint, so i think it is the right decision. AMZN is capital constraints and they have been leasing warehouses and data centers,which makes sense for them.

FB is currently investing a lot in Capex, especially Asia, where the market is still in its infancy (per ARPU metrics), but thrthat nwany to first mover advantage andnthe best user experience.

I have personally noticed a lot more activity in FB marketplace (with craigslist still being the lead) and video.
Title: Re: FB - Facebook
Post by: doughishere on October 15, 2018, 01:41:29 PM
https://www.nytimes.com/2018/10/15/technology/myanmar-facebook-genocide.html

Myanmar’s Military Said to Be Behind Facebook Campaign That Fueled Genocide.

Not sure if this belongs here.