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Facebook - If The Ads Run Out

Oct. 01, 2021 11:40 AM ETMeta Platforms, Inc. (META)97 Comments


  • 2 out of 5 of Facebook's most important competitive advantages show signs of erosion and weakening fundamentals.
  • Facebook faces an increasingly challenging competitive environment, especially in light of its recent announcements in FY Q2 2021.
  • The valuation offers hope in terms of a buffer/margin of safety.
  • Continued insider selling and a weak technical setup may indicate a continued correction in the share price.

BRAND. Trust, Design, Marketing and Identity concept. Chart with keywords. Colored markers

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This article presents contrarian research for any investor considering the dedication of their hard-earned money to the shares of Facebook (FB). The article examines, each in turn:

  1. Facebook's weakening competitive advantages
  2. The increasingly challenging competitive environment for Facebook
  3. Valuation, as

This article was written by

Avid long term oriented investor with an interest in value, growth, and special opportunity (spin-offs, insider trading) investing styles. Strong believer in identifying companies with competitive advantages in order to avoid stock investment losses. Self-educated.My expertise and unique investing style has arisen as a result of nearly a decade of professional experience in three highly regulated industries (aerospace and defense, medical devices, and pharmaceuticals) inclusive of work experience within the telecommunications and customer service industries. An engineer by education, a project director at work, and a writer at home, I am meticulous and apt at both the qualitative and quantitative aspects of investment. Income statements, balance sheets, and cashflow statements are for me a pleasant read.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

As always, investors are dutifully reminded to conduct their own research prior to the investment of hard-earned money into any stock, FB included. I strongly encourage you to challenge my thesis, ask questions, and to share information with all readers - this benefits all of us. If you appreciated and found this article of value, you can pay me no greater compliment than to click the "Follow" button. Thank you for reading and for engaging in the discussion, and best of luck with your investments, wherever they may be!

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 (97)

PlayerOfGames profile picture
how many would take that offer?
Lol less than 0.1%. It's all virtue signaling and horde mentality.
Investing For The Future profile picture
@PlayerOfGames I agree, so it would depend on if the offering / platform gains momentum. If so, I see no reason for it to not displace FB or other social media platforms - do you? People like brand new, shiny things.
AssetMonk profile picture
Facebook Outage is intentional, to steal media spotlight away from event whistleblower taking centerstage. Drowning news feed with - share price tanking due to outage, or poking fun on outage.... etc. are all shifting public focus to outage instead of whistleblower. This looks disconnected event but done intentionally.

When you have multiple events from same entity you tend to focus on bigger sensational one and don't bother clicking other events. PR game book then takes over painting this as wider internet rules issue.

It's not America, goal is to prevent discussion in international markets. Facebook is fully aware they can't avoid discussion in America, Outage event is successfully masking whistleblower impact filling international headlines, tv shows.

If you carefully observe the outage nature - going down 3 sites at once, which IT team is stupid enough to commit this type elementary mistake, even after with layers redundancies built in to the system?

Frances Haugen taking centerstage timing is known publicly, outage timed to soften the media blow. Discrediting and badly painting Frances Haugen is also part of another game plan.
Investing For The Future profile picture
@AssetMonk That might make sense based on my assessment too. FB is growing primarily internationally, stagnating in NA and EMEA, so preserving the international image is important. However, don’t you think that by doing this it will backfire? Most news articles I saw focus both on whistleblower concerns and the outage.
I’m hoping FB stock price crashes back to 180$ again…will back up the truck. Addiction is the product and FB is just a platform..each of us is addicted to something or the other…we just need someone to blame for it 😃

FB is not going away anytime soon…these political dramas, whistleblowing, threat of breakup or AOC/Liz Warren running FB will continue till cows come home
Investing For The Future profile picture
I completely forgot to mention Discord at now ~150 million users, which is ironic considering I've actually used the app / service before. $130M in revenues in 2020.
Their failure would be the US success
Investing For The Future profile picture
@better investing Are you suggesting that FB collapsing or not existing as a business would somehow be better for the United States or a desired outcome? If so, why?
@Investing For The Future I would love to see them be punished for knowingly doing all the awful things since 2015 at least, surely you know what the investigations were back then and how the FBI findings were crushed/suppressed. I was ashamed to see such corruption here in America. Enough said, if you feel I’m wrong you’re probably right, most Americans could care less about rule of law or patriotism.
@better investing Despite appearances, I don't think the US government wants to take down FB or the rest of Big Tech for that matter; these companies wield too much strategic advantage against China at this point.

Amongst many other facets of competition with China, the US is currently competing for economic influence in Africa and other emerging markets. Meanwhile, Facebook is laying down an undersea fiber optic cable the circumference of the Earth around the entire continent of Africa to bring highspeed internet to landlocked countries. You really think the US wants to take down an American company and let China in to fill the void?
Very nicely written and I think that the concerns are generally well-founded. Just a few thoughts.
1. I am not sure I agree with the comment on "stealing from Youtube" if the video is not copyrighted or protected somehow. Users in YouTube itself probably steals video content.
2. As I said the arguments regarding the perils of FB are well-founded. But I continue to get amazed at how the positives are completely overlooked. It is due to FB that many people, including me, have been able to reconnect with friends like back from KG. It is FB that allows my 84-year old Mom to stay connected and learn about her relatives around the world. She loves it. Any social interaction, even a physical one, can have negative consequences for people who are perhaps, for lack of a better term, socially challenged. So should we cancel all physical social activities? My neighbor's daughter and also someone in my family, all had issues about their appearance from mingling with their high school friends. Freedom of speech can breed negative comments - should we then stop freedom of speech? Should we stop high school then? The issue I see is that no one is talking about the hundreds of positive sides of FB - focusing only on the relatively fewer negative.
3. Billions of people use Whatapp for free to stay in touch with their loved ones around the world. Even my company is now using WhatsApp to make all international calls. Isn't that something? Should FB not be allowed to make money with advertisers so that they can make this free for us?
4. Lastly, do you think it matters or anyone gives a shit as to what color of socks I like? Do you think big brother doesn't know about pretty much everything we do? There are now cameras everywhere.....isn't it better to have some private company have some data to counter government surveillance? Finally, isn't target advertisements generally better than random advertisements thrown at the public????
Investing For The Future profile picture
@achow1919 Thank you for reading and for the commentary!

For #1 - it's certainly possible. Thus why I did clarify "purported," e.g. alleged theft. Certainly other social media platforms that use video have also been accused of similar theft. I know of several examples of TikTok videos that went viral being "re-posted" on YouTube.

For #2 - there are many alternative methods to communicate with friends and family and to re-connect, which is why perhaps FB's merits are not lauded as much, and certainly not as much as they might have been initially at the inception of FB. Smartphones, Zoom, TEAMS, video call / chat functionality, email, you name it...

For #3 - there are plenty of free alternatives offerings as well. I am not sure what the exact benefit of appeal of FB's WhatsApp functionality is for your organization and you? Technically speaking, it's not free. Facebook collects user and potentially business data, perhaps even without your permission, and then uses it to improve their algorithms or to market you with targeted advertisements, etc. I never claimed FB should not be allowed to make money by using advertisements - my concern is their reliance on advertisements for ~97% of revenues. As FB scandals continue, any loss of business / consumers / network users / etc. will weaken Competitive Advantage #2 - the Network Effect - and continue weakening future growth prospects. In many ways it is a self-inflicted wound.

I would contend, however, that Facebook should not be allowed to use private user data without explicit permission. This is certainly the high bar I have to face in the pharma / medical device / CRO industry - whereby anonymization of data and strict privacy laws and regulations exist - and I certainly do not see why social media or Facebook should be exempt, especially in light of their poor governance of users' data and continued questionable business practices.

For #4 - I absolutely do not think surveillance is so advanced as to have "big brother" know about most of our private activities unless concerted efforts are made by numerous intelligence analysts / companies / departments to uncover the actions or data of a certain individual or groups of individuals. If "big brother" knew everything that we're up to, far more Chinese citizens - by my assessment - would be imprisoned. As I believe China's and/or Russia's "big brother" espionage to rival if not to surpass that of Western nations like the USA, UK, or Australia, I certainly do not believe "big brother" readily or easily knows everything there is to know about each and every single one of us. Anonymization still works and exists.

Regarding government versus private surveillance - it depends on the government and on the company, no? I'd choose the US government over Facebook and Apple over the US government and Facebook over the Chinese government. It is all relative.

Agreed that targeted advertisements are better, if we need advertisements at all.
2underpar Wyatt Oil Anthem profile picture
I am guessing we are going to see a nice dip in FB after this trash piece on 60 Minutes with the "whistleblower" Frances Haugen.

FB is a horrible platform. But Twitter is worse. And LI is faring no better. It's all garbage.

But the scapegoating here is ridiculous. Our deficit isn't a crummy social media platform. Our deficit is effective and engaged parenting. We're raising a generation of victims. It's really sad to see this happening in America.

And I hope Ms. Haugen is held responsible for abrogating her employee agreement. Her actions were shameful.
@2underpar Couldn't agree more.....
@2underpar Facebook should sue Ms. Haugen for stealing the internal documents.

People cannot steal from their company just because they don’t agree with the company’s strategy and priority.
Excellent, in-depth, compelling & persuasive arguments…though markets can stay irrational longer than you can stay liquid 😆
Long FB
Investing For The Future profile picture
@Sleepless@FED Thank you very much for reading and for the compliment! I am glad investors long FB are finding the content and research valuable.

Note as per my disclosure I am not short FB nor do I recommend anyone to short the stock. In fact, I think that's a sure-way to lose money (e.g. shorting companies like FB, MSFT, AAPL, AMZN, etc.) and I'd only ever recommend shorting companies with VERY weak fundamentals and clearly identifiable risks that will cause further drops in the share price, and only during identified bear markets (e.g. to minimize any loss of money due to the position running against you). Ideally, the short company candidate should also lack any catalysts for price share appreciation and have a very weak balance sheet.
@Investing For The Future
This market is very irrational right now...take a look at companies like Vegas based SGMS which is drowning in debt, it is technically bankrupt but the low interest rates are keeping many Zombies alive...market needs a thorough shakeout...
Moats and Income profile picture
Well said on metaverse:

“it is difficult to envisage an overwhelming majority of people acceding to using sleek augmented reality glasses (once developed and released) while being overwhelmed with advertisements at inopportune moments and influenced to spend money on virtual/digital goods that cannot readily aid you in reality“

When I first read their metaverse announcement, I thought ecosystem….but, no, FB envisions a significant part of their users to detach from reality and move into a gaming environment. Sorry, not happening for the masses…
Investing For The Future profile picture
@jmerlo Thank you for reading and for the comment! I completely agree. I am very unclear on why so many are optimistic on FB's Metaverse commitments and promises. As far as I can assess, this is still at least a decade if not two from realization and it is still very unclear if FB will be the major beneficiary of a creation of such environment (if it is fully created at all), as the CEO clearly states they will need collaboration and many partnerships to realize such a vision.

Thus, the revenue profiles associated with FB's move into this area are very uncertain at best, and I fully agree that it's difficult to see mass user adoption beyond gaming and specialized niches (airplane pilot training, manufacturing training, racecar training, safety / industrial work, etc.) Not until far better products and clear use cases are developed that will sway the masses - even then the "glasses" might pair with smartphones / digital watches.
NV_1790 profile picture
Disclosure: Long FB.

There are so many things I disagree with this article but ill take the conclusion to highlight some of the main points

1. The reliance on Advertising revenues, which can absolutely be disrupted by competitors (as evidenced by Amazon's rapid rise in digital advertising). Europe, US & Canada - the highest average revenue areas per user - are stagnating in growth. This point fails to take into consideration the fundamental differences between Amazon advertising and FB advertising. Also, while the number of users is close to saturation in developed markets the ARPU will continue to growth as it is not restricted by demographics. Finally, while the company relies heavily on advertising new initiatives will change this over the next 10 years.

2.The hype perpetuated by the company itself in relation to Augmented Reality, Virtual Reality, and the Metaverse, especially in light of such products only representing ~3% of revenues to date. The problem here is the author fails to see who the target audience is. The audience is not the general public or even investors, the audience are prospective employees who will be working with those prototypes. This is an ad company. (See Michael abash's presentation for example)

3. The deterioration of Competitive Advantages #2 and #5 - Network Effect and Brand and Vision. The damage to the latter is of particular significance and concern, as the CEO and the company continue to demonstrate the same principles in their business model vision for the Metaverse. While there have been some surveys that mention a number of users who may be dissatisfied with the company the umber remains immaterial compared to the nearly 2 DAUs. This also applies for advertisers.

4. The ambitious and late entry into additional industries, such as the "creator" economy, "e-commerce," and "computing" despite a plethora of well-imbedded leaders and competitors in each. The author here decides to trow a number of categories and companies to see what it sticks. For example, IBM and Snowflake. While in the eyes of the author the company is late in these categories the vast majority of markets are quite early and present substantial opportunities for the company. For example, India and the Jio partnership. Finally,The company has a nearly 2 DAUs and a war chest of first party data that is unique to it and can't be matched by companies like adobe.
Investing For The Future profile picture
@NV_1790 Thank you for reading and for your comment! Would you be able to kindly expand on a few points for us (keeping in mind you benefit any investors considering the stock)?

1. Can you explain a few of the fundamental differences you see in FB versus AMZN advertising? Any links to articles are appreciated (if available).

Yes, ARPU can continue to grow in emerging markets, though I am unsure about developed markets. Why do you believe ARPU will grow there as well? The question still remains if the growth in ARPU both in emerging and/or developed markets will offset any decreases in the # of NA / EMEA users if the stagnation turns into a loss of users in those geographies for FB's platforms due to the Brand & Vision issues discussed.

Yes - the new initiatives will help to diversify the revenues, however I am concerned about FB's ability to execute on all of these initiatives in tandem, and as I mentioned, their entry into the new markets/industries brings them into direct competition with many established incumbents / leaders.

2. I fail to see why prospective employees would be swayed by videos of products that are not real? Prospective VR/AR/Metaverse engineers and employees are intelligent and savvy enough to have plenty of insight and ideas of their own. There are hundreds of VR/AR companies / start-ups as per my link that such employees could choose from instead of FB. FB has amazing benefits and salaries in comparison to many such companies, and a fantastic internal culture, and this would certainly be far more effective at capturing these potential employees over hyped videos.

3. The users surveyed as dissatisfied with FB's products and thus contributing to a negative NPS would most likely classify under the DAUs or MAUs, thus I am unclear on what you're implying here? Are you suggesting the number of FB detractors is much, much lower than the number of promoters / users of the products? If so, how do you explain the negative NPS surveys - too small a sample size?

4. I do not need to present anything to see if it sticks. I have no position in the stock, short or otherwise. I present existing competitors in the "compute" industry, which as of the FY Q2 2021 earnings call FB announced it will be entering in the future.

"The company has a nearly 2 DAUs and a war chest of first party data that is unique to it and can't be matched by companies like adobe."

For creators, it is the inherent brand trust and non-theft of IP by a company that is more important than a treasure trove of massive amounts of user data. While advertising and marketing to a prospective audience does play a significant role in creators' considerations, so does the implication of partnering with a company that may be seen as applying loose morals to grow and thus vilified by the society and by governments. Newer businesses in particular need to be careful about avoid bad press or publicity, even if they believe FB's products to be superior or to offer a better target / captive audience than the ecosystems / products offered by Adobe, Apple, Google, or Amazon.
Longbow Archer profile picture
Yes FB is reliant on Ad revenue, however, the source of ad revenue is very diversified and mostly riding the long-term trend towards eCommerce.
Investing For The Future profile picture
@Longbow Archer Thank you for reading and for the comment! You are not concerned by the rapid example of growth of Amazon in advertising (and this is just one competitor)?
Longbow Archer profile picture
@Investing For The Future Frankly no. The Ad pie is growing and there is more than enough room for an oligopoly.

AMZN is great if you sell on Amazon marketplace. If you don't sell on AMZN you are going to drive business from FB+IG, GOOGL and perhaps ROKU for your eCommerce operation.

Will allbirds advertise on AMZN? Nope. They will on GOOGL and FB however.

Also, AMZN Ad revenue has a limiting factor since the entire AMZN marketplace is geared towards products not brands so a merchant on AMZN will do product not brand building ad spend there to the extent they sell on AMZN.

The brand builders such as Casper, Warby Parker and Dollar Shave Club are looking to not just sell product (AMZN ad spend) but build a brand (FB Ad spend).

Recall for reference that FB is still increasing both revenues and market share. AMZN has grown Ad revenue at the expense of GOOGL not FB.

Lastly, GOOGL tried to take out FB with Google+ and discovered that FB has a strong, wide, deep and durable moat.
Investing For The Future profile picture
@Longbow Archer Yes - I am aware of Google+ failures. I am aware of numerous Google failures over the last decade because often they seem to diversify R&D spend greatly into fast growth markets / industries in an attempt to establish dominance there, and it fails, so be it... incubator / start-up styled strategy, almost, if you think about it. Invest aggressively into many high-risk high-profit areas and even if 9/10 fail, the 10th that succeeds will give such a high RoI that the other 9 failures and monetary losses are negligible.

It appears you're suggesting the key difference between Amazon and FB is due to a) product focused advertising versus b) brand focused advertising. However, my impression was that while FB certainly does a lot of brand-focused building for businesses there is also plenty for specific products as per the ads? Similarly, depending on the company / product it's not impossible to associate your company's brand with your products on AMZN. Many companies do so, and fairly successfully.

If one looks at brand focused advertising as a way of FB retaining a competitive advantage due to their approach to advertising, well there are many other e-commerce companies that specialize in this, such as Adobe, for example (e.g. they help businesses build their brands).

Also, don't you think eventually some companies / businesses will shy away from using FB for brand building types of advertisement unless FB begins actively addressing the business practice / brand issues and concerns?
Tiktok and YouTube are more like content platform rather than social network. The only competitor that could treat Facebook/Instagram is Snapchat.

Facebook is very hard to beat. Just remember Google Plus. And now Facebook is way bigger than 2010. Your idea about another better (perfect) social network is pretty naive.

The competitors of WhatsApp/messenger is iMessage, Wechat, Line, etc. But they are limited in some local markets.

Traffic is the king. There are many business opportunities may grow from 3B users times 40 minutes of time spent. Facebook has been focus on Ads because it is a good business with high margin but it doesn’t mean they will stop there.
Investing For The Future profile picture
@luckyrichcat Thank you for reading and for your comment!

Yes, FB has some of the most dominant social platforms, however there are many social network platforms as well. For example, LinkedIn certainly qualifies.

My idea about another social network is not to imply perfection or a utopian product, but rather to stress an alternate business model (charging users for use of the social network as opposed to relying on advertising) and showcasing that it wouldn't be overly difficult for a concerted and dedicated competitor to try to capitalize on FB's shortcomings and consumer/business/regulatory gripe with FB to try to launch a similar competing product with similar features and/or improvements and to thus to begin stealing market-share and users, if not at least limiting future growth prospects.

Thus, I do not see why it is naïve. Rather it is focused on the cutthroat nature of business - competitors can try to use FB's misadventures for their own benefits.
Heisenberg View profile picture
We saw with the old guard of technology stocks (Oracle, Cisco, IBM, DELL, Intel, Microsoft etc) that when the original industry growth prospects they were in started to stall (saturation of demand on one hand, and disruption from mobile phones and cloud computing on the other), the old horizontal market structure morphed to a more vertical market structure in many cases (often the opposite happens in industrial companies when growth stalls, they shift their focus on profitability, migrating from a vertical structure to being more focused on particular parts of the value chain). I guess the tech stocks were addicted to growth and were already hugely profitable.

These players started moving into other parts of the value chain where there was already ample competition to fight for a few more percentage points of growth, or into new fields. I was concerned by these changes, but must say when we look back a large number of those players didn't do to bad. Seems the strike rate of successful change amongst the old big tech stocks at first glance is better than for industrial companies when they try to execute a business model change. Obviously, we cannot pass full judgement yet.

Regarding Facebook, I must say I have never been a shareholder because a lot of the concerns regarding how to manage content (and responsibility for it), ability to manipulate data to affect users decision making and the social consequence of this when identified/scrutinised in public, government regulation to allow interoperability between different platforms (as we are seeing in China) were all concerns I have had for many years.

Nevertheless, I have never seen a company take as much criticism as Facebook and see such little damage to its financials (tobacco companies spring to mind, they were not bad investments over time!). Clearly it has a strong business, and the company has positioned itself well to changing trends and technology. I wouldn't sleep well shorting it.
Investing For The Future profile picture
@Heisenberg View Thank you for reading and for your comment! It indeed remains to be seen how aptly FB is able to execute on its commitment to creators, e-commerce, and computing. I suspect they may be taking on too much all at once and that executional challenges will emerge. We will see.

I agree that FB - like Apple - takes an inordinate amount of criticism globally and publicly. Unlike Apple, FB has a negative NPR, while Apple has a positive NPR and sports Consumer Loyalty as one of its competitive advantages. I am not so sure the same can be said of Facebook.

Not sure regarding your "shorting" comment - whether it's in relation to my article or simply to anyone reading. As my disclosure clearly states, I have no position in the stock, short or otherwise, and I do not intend to initiate one. As per my response to another commentator, shorting is very risky and a sure-fire way to lose money in most situations and should only be performed in a bear-market ideally with specified very weak companies identified as the targets. Certainly - at least for me - FB would not qualify.
I don't think a social media site that costs money would work out very well. Most people are on Facebook to see what family and friends are up to. They are not going to switch to another platform unless their family and friends have switched. With a paid platform you are going to get less people joining and as a result less people will want to join.
Investing For The Future profile picture
@SmartReturns Thank you for reading and for the comment! Perhaps - then again, this business model has become a standard for SaaS / IaaS / etc. and thus many consumers are now familiarized with it.

If consumers are willing to pay monthly subscriptions for streaming services (Netflix, for example), telephone / data services (AT&T), internet (Verizon), gym memberships, food delivery services, and so forth, I am unclear on why they would be unwilling to pay for services to a well-designed site with all the necessary features for their desired social media use cases. It's all a matter of initial R&D and investment. Once designed, and if offering slightly better or equivalent features to FB and other social media websites, they users may very well try it out.

It would be a matter of publicity / advertising / free initial offerings (like SA memberships) before enough momentum is gained to fully monetize the network. This strategy has been effectively used in dozens of industries and sectors with success, inclusive of in healthcare.

$10 / month is easy to sell people on for a flashy product once 1-2 friends are trying it out and loving the features.
Thank you for this article. I'm a bullish Facebook shareholder but I always appreciate a fair-minded bearish article that doesn't rely on sensational hyperbole and FUD.

It's always a good idea to be aware of and keep an eye on potential weaknesses that may result in deterioration or erosion in any company that one is holding.

That being said I think Facebook has a long way to go towards any real material decline, and that any such decline would reveal itself gradually.
Investing For The Future profile picture
@Stonesfan03 Thank you for reading and for the comment! Yes, I agree. Any real declines will be visible well in advance, and hopefully this article will help any who read it to be mindful and aware of such changes in FB's business fundamentals or the macro-environment (for example, the continued rise of Amazon in advertising or new FB legal misadventures) to identify such changes via early-warnings well in advance of any decreases in the share price.
Facebook presents a great investment opportunity at a reasonable price. Its core advertising business is extremely dominate, captive and profitable but as a platform business there are a great number of developing adjacents which partly due to the negative sentiment that is always circulating the main business are not priced in. FB would only need to land or gain traction in one of these for a significant re-rating. The adjacents are too numerous to lists but to add some content, monetisation of WhatsApp, payments services, digital currency, business marketplace, other business services, VR, video streaming, gaming, revenue enhancement of Instagram…..Many of which would also be revenue diversifiers.
Investing For The Future profile picture
@Lemon Bull Thank you for reading and for your informative and helpful comment! I am sure both myself and other investors appreciate it.

May I ask just a few questions, if you'd indulge me?

1. Agreed that FB has a dominant advertising business (and very profitable), for now. Yet, does reliance on 98% of revenue on Advertising alone not concern you?

2. The "developing adjacents" to me appear to be a replication of the strategies by many other dominant companies in the e-commerce, compute, and "creator economy" markets. I agree that if FB pulls of the successful release of features for their platforms / networks there is ample opportunity for future growth. What I disagree on is the execution and the competitive headwinds to be faced by Facebook from existing leaders in those industries.

Why would creators choose FB over Adobe or Google? Why would companies in need of analytics / compute choose FB of Palantir, Snowflake, AWS, Google, IBM, Azure, etc.? Why would companies choose Facebook for e-commerce over Adobe's Magento, Amazon, etc.? There's so many incumbent players already... Facebook - to me - appears to be reacting, not leading here... unless I'm missing something! Let me know. I'd welcome your further thoughts.
@Investing For The Future
Being reliant on advertising revenue traditionally made businesses very cyclical but Facebook’s Ad revenue stood up remarkably well even during the height of the pandemic. Advertising is now essential for any business in e-commerce.

It’s reliance on advertising doesn’t concern me, businesses now more than ever will always need to target customers and Facebook has a growing user base of billions of active users on its platform.

The potential for any of the adjacents to take off is an added bonus as they aren’t priced in. I don’t see FB as needing to lead these categories. The potential for FB to successfully compete and even have an advantage over some of the businesses you mention really comes from the fact that they have both the business and their customers already in their very captive eco-system/platform, dare I say it metaverse. Very few businesses are in this position and through this FB to a large degree controls the rules of engagement.
@Investing For The Future I think what you are greatly undervaluing is the large amounts of data Facebook obtains on a huge portion of the global population. I also think you are putting way too much emphasis on people hate and distrust of Facebook. Most people just simply do not care. It is a vocal minority speaking out. If it was such an issue why do billions of people continue to use their site regularity. I would love for Facebook to diversify their revenue stream, but the advertising doesn’t scare me, my biggest fear is just a competing site that takes away a large number of active users, which in turn would turn away advertising. As long as users stays steady or continues to grow company’s are going to want to access those people with advertisements. The mataverse scares and excited me. I have no doubt that they are onto something but there is no guarantee that even with all their R&D that they will be the ones to successfully lead the charge into the future. I will not be adding anymore Facebook at the moment but will continue to hold what I own. Thanks for the article
"TikTok - 689 million monthly users, $35B in revenue", that's the whole revenue of Bytedance which makes it highly misleading, while they are definitely a big part of that and most of the growth. by that logic you could have placed 180B under YouTube
Investing For The Future profile picture
@JB170 Correct, it is misleading and my apologies. I corrected it to $1.9B for TikTok's platform specifically. Missed it in a late night proof. Hope you found the rest of the article helpful and/or informative! Feel free to let us know your thoughts on FB's future prospects. =)
Why don't you just write a book?...FB has more levers to pull...the metaverse will have myriad applications the TAM for gain of function with AI/AR/VR can hardly be imagined, FB is merely a reflection of our pathetic species...I'm not selling!
Investing For The Future profile picture
@coolcatnip Thank you for reading and for the comment! I surmise you have a contrasting opinion to mine and are more optimistic about the company's future prospects. I'd be delighted to learn more regarding your opinion, especially as it pertains to FB's ability to diversify its revenues.

A few questions - if you'll oblige myself and other interested or current investors!

1. When will AI/AR/VR products be "mainstream" enough by your estimates to allow the creation of the Metaverse? Within the next decade or later?

2. When will the Metaverse be established to the point of possible monetization that drives a meaningful result for FB's revenue diversification? Within another decade after #1 or much more quickly?

3. Since FB has announced it will need to partner aggressively with other companies as it builds the Metaverse, how much of those possible revenues from #2 will go to FB as opposed to other companies?

Please note I did not encourage anyone to sell or to buy, merely to examine the risks associated with the company and to comment on this article and to challenge my thesis. As an investor, I always find well-written and well-researched bearish articles on my stock holdings beneficial. I wish we'd see more such articles on Apple.
Poetic title! Thank you for the great article.
Investing For The Future profile picture
@Ckat2Invest Thank you for reading and for the compliment! What do you think about Facebook's future prospects? Worth buying given the undervaluation, or a wait-and-see because of the qualitative concerns discussed as well as the ongoing correction?
youngdividend profile picture
Where did you get Tik Toks revenue of $35 Billion?
@youngdividend thats bytedance(parent company) whole revenue. he shouldve clarified
Investing For The Future profile picture
@youngdividend and @JB170 Thank you so much for reading and my sincere apologies! It has been speedily corrected to the appropriate $1.9B in 2020 revenues for the platform itself, in part thanks to the swift SA Corrections Team! Kudos.

Thank you for catching that and let me know if any additional questions. I did proofread, however the final proof was completed late at night.
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