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Facebook: Marketplace Is A Big $5 Billion Opportunity

L&F Capital Management profile picture
L&F Capital Management


  • Facebook continues to make its push into e-commerce with the launch of Marketplace, a Craigslist spin-off within the Facebook ecosystem that matches local buyers and sellers.
  • Just as it makes sense for corporations to allocate ad dollars to Facebook as the platform's reach grows, it makes equal sense for sellers to allocate listings to Marketplace.
  • Messenger recently acquired the ability to process payments natively, so we believe Marketplace will acquire the same ability in the near future.
  • An in-house payment processing system will turn Marketplace into a $5 billion-plus annual revenue opportunity for Facebook.

Facebook (NASDAQ:FB) recently launched Marketplace, a Craigslist spin-off within the Facebook ecosystem that matches local buyers and sellers. It's a build-out of Facebook's current buy-and-sell Group pages and a crucial component of Facebook's attempt to consolidate e-commerce. Although the expansion is in its infancy and far from a finished product, we identify Marketplace as a potential $5 billion-plus annual revenue opportunity for Facebook in the long-term. Pending global user growth, we even see upside to our $5 billion opportunity estimate.

This isn't Facebook's first plunge at a marketplace product. In 2007, Facebook launched the first iteration of Marketplace, but that wasn't met with much enthusiasm from the platform's users. A year and a half later, Marketplace was revamped, but users still weren't warming up to the idea. By 2014, Facebook had completely shut down Marketplace and subsequently launched buy-and-sell groups.

Buy-and-sell groups have gained significant traction, though, as Facebook reports that more than 450 million people (or over 25% of its monthly active user base) visit a buy-and-sell page each month. We think this is a signal that e-commerce dynamics have changed dramatically since 2007 and that selling is becoming a more social experience.

When Marketplace first launched in 2007, Facebook had 50 million monthly active users while eBay (NASDAQ:EBAY) had 83 million active users. If a seller wanted to sell an item, it made a lot more sense to do so through eBay because the product was in front of 33 million more potential buyers. Today, Facebook has grown its user base by more than 34x since 2007 to more than 1.7 billion monthly active users, 450 million of which visit a buy-and-sell page each month. Simply, the inherent P2P network is much larger now than it was in 2007. By comparison, eBay has only doubled its user base to

This article was written by

L&F Capital Management profile picture
L&F Capital Management, LLC, is a quantitative investment management group located in San Diego, California. Our multi-strategy investment approach comprises a mix of event-driven trades and long-term value investments, utilized together to maximize profit in both short and long term scenarios. We maintain consistency in portfolio mix through our long-term value holdings, but stress flexibility in portfolio mix from our daily event-driven trades. We believe this mix of flexibility and value generates both short and long term profits while reducing exposure to market volatility. L&F also shares various trade and investment opportunities through Seeking Alpha. For more information, visit www.lfcapitalmanagement.com.

Analyst’s Disclosure: I am/we are long FB, AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (28)

There will be a day when FB is selling at 10 x the earnings per share, but not now !!!!
FB is growing at 40% per year (or more) and should be selling at a 40 times earnings per share (or more).

It's just that simple !!!!!!!!!!
Yes Ebay is at risk here because of FB.
AMZN not so much, at least for now.
In the early days of AMNZ, Bezos feared Ebay the most.
Yes... I understand.... but probrably ten years ago we said the same things about apple or amazon...
From the historical anals, over 100 years ago, Market experts catgorically dismissed the idea of a $1 billion market cap, claiming it was a rather unachievable goal.
- We've since seen companies exceed the 1 billion mkt cap 700 times over.
- So, the lesson here is to never place limitations on the future of human achievement.
**I am confident that several companies in existence today will exceed $1 trillion market cap within the next decade.
advocate devil profile picture
Yes cash but that's like saying republicans ended slavery and then saying let's impute that to the present Republican Party The valuations were based on different metrics and a 1 b dollar company in 1916 is a 2 trillion dollar company in 2016. Maybe it should have been " never place limits on the future of human exuberance"
Could FB a ten bagger investment in 10-15 years?
ChuckXX profile picture
Let me just say that Iam long FB and have a goal of $200 per share that I think is very realistic in the next 3 to 5 years. But as far as a "10 Bagger in the next 10 to 15 years that is "Highly Unlikely". I have been investing now for well over 40+ years and spend a ton of time researching my stocks. But if you look at FB'S current "Market Cap" which is already huge it is very unlikely they could be even a 10 bagger from here. Hopefully you understand what a 10 bagger really is. The best way to explain it to someone is if you have a $130 stock it would have to go to $1,300 to be a 10 bagger. Do you know what that would make the "Market Cap". Well as "The Bern" would say that would make it really "Huuuuuuuge". LOL. I would be well over 3 trillion. Not likely.
Buy FB now!!
Ccoc profile picture
05 Oct. 2016
Nextdoor is squandering a unique marketplace opportunity amoung verified local residents that addresses safety and reliability by being slow to innovate their classifieds and marketplace services. Maybe Facebook will spur them on with much needed innovation and UI/UX improvements
Two concerns with e-commerce on FB: safety & reliability. On eBay & Amazon sellers are protected by relative anonymity through user & business names while establishing trust through the rating systems & buyer protections. Are those two things FB can replicate?
There are many buy and sell e-commerce cites. The only ones well known are e-bay and amazon. FB has no chance. The so estimated $5billion is just a hypothetical number. Majority of FB users are interested in socializing and not shopping. Moreover, the cost of e-commerce items are not usually cheaper than same item that can be obtained locally or at discount stores.
JosephCortes profile picture
And this is only the beginning. There is so much more to come.
Be ready for 2020.
advocate devil profile picture
Man another LF article there are so many problems with this. Seller buyer verifications payment resolution. Basically opening as a flea market 5b$ is such a gross overestimate initially because it's a zero revenue flow. Fb gets nothing from the sales. It's basically a hope that people would use messenger to do payments? So many problems. SA doesn't deserve this
BillBrown profile picture
100% correct.

Facebook has been trying to "break" the "social commerce nut" for years. Every time they try another half-baked strategy (like Google, trying to "go social"), lame articles are written about the "tentacles of revenue streams" and "boundless potential".

Facebook is a cash machine, to be sure, but it's advertising prowess is wildly overstated (everyone missed that P&G news from 6 weeks back, I guess?), as is for that matter, it's video streaming stats (hehehe).

CEOs are finally waking up and demanding to see verifiable ROI and attribution from the rapidly growing cost center that is "Facebook advertising". Zuck doesn't help by coming off as another UNFOCUSED tech kid in a toy store, chasing PROFITLESS money pits like Oculus and flying drones over Africa.

Says growing number of CEOs with marketing dollars to account for: "50% of my online media budget is going to Facebook, and they are spending it on WHAT, while my sales are stagnant and my margins are collapsing? Where's the incremental conversions? Where's the payoff from 'highly targeted media'?"
tinkevchance profile picture
you had me until "profit less money pits like Oculus"
BillB, apparently you are the only person on the planet that doesn't know that Facebook is perhaps, the only ad platform with "superior targeting", and the ability to provide advertisers with measurable feedback on the effectiveness of their ad campaigns.
- Dude, your criticism falls "terribly flat" before a knowledgeable and sophisticated SA Community when you falter on such a basic, distinctive, and unique feature that sets the FB platform apart from the competition.
hafzaal profile picture
Hopefully this time we see 10% gains post earnings.
eBay is going to be in a bind. The size of Facebook is huge.

I have resisted getting a Facebook account. But I might have to. I won't use it for social media as much as I would use it to obtain products that just aren't available in a brick and mortar store.

Facebook still has a lot of potential.
What?!? A whole other potential stream of revenue? Amazing what a "cheap" stock this is still!
FB is beginning to spread its unbounded multiple revenue stream tentacles.
*It's a thing of beauty!
Too bad it has a SnapChat herpe..
Garrrrrlic profile picture
Great artists steal.
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