Facebook's Internet Philanthropy Also Is Strategic Genius

| About: Facebook (FB)


Facebook is engaged in a complex effort to bring the internet to the two-thirds of the world currently living in the dark.

It's efforts, through Internet.org and with regard to its plans involving satellites, drones and lasers, should help improve communities, the global society, economies and lives.

The effort may be seen by some as face time and by others as true good works, but I see it as pure strategic genius providing gains for shareholders.

Facebook (NASDAQ: FB) has a philanthropic effort underway in cooperation with internet.org to bring the internet to the two-thirds of the world's population who are currently unconnected. The social media giant, and others like it including Google (NASDAQ: GOOG) (NASDAQ:GOOGL), are actively working on this endeavor together. It's a kind gesture right? No! It's brilliant business strategy.

Out of the kindness of its collective hearts, Facebook created its Connectivity Lab, a team of talented, if not genius, individuals to work on solutions to the problem of digitally reaching people in faraway places via the most efficient manner. Facebook is investing in idea generation and likely satellites, drones and lasers to achieve this feat (Read Mark Zuckerberg's paper on the subject for all the details). Facebook will need all these technologies to manage the feat, since the two-thirds of the world that is not connected to the internet is mostly in the developing world and emerging markets, if not deeply buried in desolate places. But Facebook's plan is targeted to reach everyone, big and small, far and wide, in cities and in deserts.

It's a great thing, or it could be, depending on how people use the internet when they get it. As we have seen in places like Egypt and Libya, it can unseat a dictator, but in his place usher in instability and chaos. In places like poverty stricken Eastern Europe, full of brilliant minds but empty pockets and in some cases dark souls, it can give youth misguided hope who use it as a means to hack databases and to rob and steal. But as we've also seen, it can be used to raise millions of dollars for a good cause, like in the case of the Ice Bucket Challenge for ALS. The internet is full of opportunity for individuals without any other real means, to study and learn, and to build things and grow businesses and local economies. In the global economy, the Internet gives chance and opportunity to often otherwise impossible odds. So, yes, Facebook and Google and others involved in this effort are doing good work, but it's not without its potential rewards for Facebook.

The inspiration for this article came as I listened to Facebook's second quarter earnings conference call, through which it announced that it had delivered the internet to approximately 3 million previously unconnected individuals in the Philippines, Paraguay and Zambia. I thought, how wonderful this is for those poor souls. The conference call revealed something else extraordinary though.

Mark Zuckerberg, speaking about the immense opportunity open to Facebook, said that on average, people on Facebook in the U.S. spend about 40 minutes a day using the service. He added that they spend 1 in 5 minutes on the Facebook mobile app. But Mark didn't see that as adequate, given that American users spend approximately 9 hours a day on digital media via TV, phones and computers. That means Americans spend 7.4% of their total connected day on Facebook, not including the mobile usage, which is 20% of mobile connectivity time apparently.

That's massive internet market share. So, then, do you see why it benefits Facebook to get more people connected? It does not make sense for just any website to work toward this endeavor. For instance, WallStreetGreek.com or News.SeminalEvent.com would garner very little benefit from such effort, because of my sites' relative insignificance in terms of internet market share. But every time Facebook gets someone connected, it is rewarded with more than just face time for its good works, but rather real tangible economic victory.

Facebook garners larger numbers of new members and users because of its involvement in the process. Take note of this ingenious little application, the internet.org app. Since 85% of the world lives in areas with existing cellular coverage, but with just 30% accessing the internet, there's a great opportunity and an easier way to get people connected than via complicated drone and satellite systems. Facebook introduced this app, Internet.org, and works with governments, organizations and cellular providers to make it available for free or for very little cost to unconnected individuals. These organizations would do this as a good faith gesture, and to help improve local societies and economies, since the application provides them with access to necessities or essential services. I presume that it was through this app that cellular providers in the Philippines and Paraguay were able to connect 3 million people. Those newly connected folks get basic services, like the weather, access to job information and connections to Facebook, you know, so they can improve their lives. You read that right - Facebook is one of the services included.

I do not mean to be critical, because why shouldn't Facebook benefit from the good it does? Perhaps these people will be more productive during the 80% of their mobile internet connectivity time that is not spent on Facebook? Actually, given that the rest of their internet options are limited, they'll probably spend more time on Facebook than the average American does. For Facebook, that means more users, increased time spent per user and greater reach for advertisers on Facebook. In many cases, these people will have their first internet experience include Facebook. That goes a long way. Think about how long you used AOL (NYSE: AOL) or whatever service you first connected to the internet with. This is the reason so many people still traverse DrudgeReport.com daily. It's not because of its awesome look, but because they discovered it early in their life on the web and have become attached to it.

Facebook impresses me more and more each day, and has come a long way from its early start as a public company. I use to warn my readers that Facebook could someday be replaced, as MySpace was, by some sort of hologram social network. I guess the team reads me, or we think alike, because the acquisition of Oculus sure played well with me. Likewise, its Instagram investment and all the investments the company has made have my approval, because of how well they might help protect market share. I'm truly impressed.

I pounded the table on this stock when the market gave up on it and sent it to levels sub-$20, and I continued to recommend it ever since. And recently, as it traded much higher, I said it was worth $92 a share. Based on what I've just learned and written about, and the incredible leverage this company has to make money over its massive and well-guarded user base, I can hardly contain my enthusiasm. This is perhaps the greatest stock I've ever known, and a company I admire. I offer kudos to you Facebook, for your good works, and also for your excellent work managing the company. I write about Facebook and other interesting companies and market segments often, so readers may want to follow my column here.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.