Why I Invest in Facebook

Posted: July 19th, 2016 | Author: | Filed under: Uncategorized | No Comments »

I’ve posted a lot on this blog about Facebook and when it comes to their business, I’m fanboy. Other than Apple, Facebook is the second highest (tied with Google) on my investing rubric.

Investment Rubric

Stock My Love Leadership PE Cash Potential Macro view Total
FB 8 10 4 8 8 9 31.3
AAPL 10 9 10 10 7 8 36.1
AMZN 7 9 1 3 8 10 26.4
TWTR 7 9 1 5 9 9 27.2
GOOG 8 8 8 8 7 8 31.3
BRK.B 5 10 8 8 5 7 28
CMG 10 8 5 3 7 7 29.2
UA 8 9 4 2 7 7 27
SIRI 7 6 6 2 5 5 22.6
TEAM 8 9 1 8 8 9 28.4

Cash

Annual Cash

Facebook has nearly $5 billion in cash along with $21 billion of overall assets, a growing position year over year. Facebook has enough cash in the bank to weather a bad year or two and enough cash, along with an attractive stock to own, to make acquisitions such as Instagram and WhatsApp.

PE

As of this writing, Facebook’s PE is 74.33. I give FB a low score of 4 for this high PE. That being said, considering FB’s growth last year (23% earnings growth, 43% revenue growth) they’re growing into that valuation reasonably quickly (although the price has appreciated nearly a quickly as the growth).

Potential

Facebook’s user base and the information about their users puts it into a fascinatingly strong position. There are many categories Facebook could dominate if they chose to, such as events.

The upside within the Big Blue App is enormous but the potential with their other products is an attractive icing to the cake. Instagram, WhatsApp and Oculus are growing and still a ways away from achieving their true potential. We may think of Facebook not as a Social Network, but as a Virtual Reality company someday.

Macro View

More internet users are coming on board every day. 46% of the current population is on the internet, plenty of room to grow. Internet users grow 7.5% yearly.

Online advertising, where Facebook makes its money, continues to grow as well. Online advertising accounted for 28% of all advertising and is growing 13% per year.

Leadership

Mark Zuckerberg has the ability to see a clear vision of the future and execute to get there. It appears Mark still owns voting control. Mark has shown the ability over and over again to delay gratification and think in the long term. As a buy and hold investor, this gives me great confidence that our interests are aligned.

My Love

I use Facebook every day. It’s typically the first app I open when I wake up in the morning. I use WhatsApp to communicate with my cousins around the world and I use Instagram nearly daily. I’m a fan of their products.

My Concerns

Time spent on Facebook per day (~40 minutes / day) is high. Will people fatigue? Will Snapchat, Twitter and yet-to-be-named startups chip away at this time spent? Will another Social Network overtake Facebook someday?

They’re betting a lot of money on messaging – Messenger and WhatsApp. Can they win this war? Can they monetize communication like AT&T and others have in the past?

When I’ll Sell

I’d sell if Zuckerberg left but I thought I’d sell Apple when Steve Jobs died but I haven’t. Zuckerberg leaving would make me think long and hard about their prospects.

I’d sell if they started to stretch themselves too thin. Although I invest in companies who do a lot (Google, Apple, Amazon) I love Facebook’s relatively focused product line.


My Investing Rubric

Posted: May 19th, 2016 | Author: | Filed under: Uncategorized | No Comments »

Dilbert-Future-Returns

WARNING – Shitty investment advice ahead. Proceed at your own risk!

It’s 2016 and all of the practical advice on investing is to sit back and invest in index funds, ETFs like $SPY. Maybe you’re even more savvy/lazy and use a service like Betterment. Yet here I am, still unable to resist the allure of picking a stock.

Maybe it’s the ego, maybe it’s the rush you get when a stock you pick doubles, maybe it’s more extrinsic — the exercise of evaluating these companies will (hopefully) make me a better Product Manager and a better entrepreneur someday. Either way, it’s a hobby of mine and it’s something I enjoy whether I make money or not (but def trying to make that $$$$). Don’t do what I do, stick to the ETFs. But…here is how I go about evaluating a stock.

As Product Managers tend to do I’ve developed a rubric. The criteria of the rubric are heavily influenced by the greats – Warren Buffett, Charlie Munger, Ben Graham and Peter Lynch.

Criteria

I invest on 10 year time frames. I’m not concerned about how well the stock will do tomorrow, or next year, but where will it be 10 years from now. Keeping that in mind, I break down each stock from six different perspectives.

How much Cash does the company have in the bank? If they hit a rough patch do they have the cash to get through it? Do they have cash for R&D, for acquisitions?

What’s the Macro View of the company? What trends in the world will affect this company both positively and negatively?

What’s the company’s Potential? They’re making money doing X but what other opportunities do they have to make money in other ways?

What’s the current Price/Earnings ratio? Is the stock, based on its price, already expected to grow like a weed? Is the price cheap compared to earnings and therefore the growth expectations modest?

How’s Leadership? Particularly the CEO. Have they shown the ability to delay gratification? Are they committed to building a long lasting company? Visionary?

My Love. The most important criteria of them all with my investing. How much do I love the product? And not just any product by the company, but the product that is making the lion share of their revenue and profit. This is where I hope to leverage any information asymmetry I may have. Picking individual stocks that will beat the S&P 500 is tough and a big reason for that is because Wall Street is very good at understanding many of the other criteria I listed above. My taste has to be the differentiator.

The Equation

My Love + (Leadership .8) +( PE.7) + (Cash .3) + (Potential *.7) + (Macro View .5)

My love for the product is the most important to me and therefore I give it the most weight within the rubric.

The Individual Stocks I Own and Their Rubric Score

Stock My Love Leadership PE Cash Potential Macro view Total
FB 8 10 4 8 8 9 31.3
AAPL 10 9 10 10 7 8 36.1
AMZN 7 9 1 3 8 10 26.4
TWTR 7 9 1 5 9 9 27.2
GOOG 8 8 8 8 7 8 31.3
BRK.B 5 10 8 8 5 7 28
CMG 10 8 5 3 7 7 29.2
UA 8 9 4 2 7 7 27
SIRI 7 6 6 2 5 5 22.6
TEAM 8 9 1 8 8 9 28.4

Each criteria is on a 1-10 scale. A perfect score, after the weights, would be a 40. A score of 25 and above is what I consider to invest in.

With $SIRI, the outlier, I only invested $500 and I did it because it was unbelievably cheap at the time and I’m a big Howard Stern fan. It’s my biggest percentage gain investment to date but I consider it to be a lucky investment.

In the next couple of weeks I’m going write a breakdown of how I came to the numbers in the rubric for $FB, $AAPL, $TWTR and $TEAM.


Young Users

Posted: March 31st, 2016 | Author: | Filed under: facebook, Product, snapchat, Uncategorized | Tags: , , | No Comments »

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Old habits die hard. As you get older your mental models of the world become more rigid. You know what you know but ya start becoming closed off to trying new things.

People making products, especially products with a shitload of users, run into this all the time. As processors and cellular networks improve, new features are possible but people are stubborn, they like the way they do X and they’re not trying to change it.

Facebook, with over a billion users, has a tough task on hand. They don’t cater to the lowest common denominator but they don’t cater to their advanced, or power users either. This means Facebook doesn’t release the most advanced product they can, Facebook makes concessions so they can release a product that will be widely used.

Snapchat, on the other hand, is doing an excellent job of capitalizing on bandwidth and smartphone improvements. “Stories” – a mixture of photos and videos that users create using the editing tools Snapchat provide are a perfect example of this. When Facebook came out, sharing videos was a pain in the ass, it was slow and cameras weren’t readily available. People form a mental model around what Facebook is as they use it and when things change it becomes difficult for companies to break out of the box their user base sees them in.

Facebook has done a great job pushing against that tide and have made huge inroads with videos, some say they’re even surpassing youtube, but taking a video of yourself and uploading it to Facebook is not the ubiquitous behavior you see in Snapchat.

Snapchat has a much younger and more open minded user base and this allows them to be more aggressive with their product. When Snapchat Chat 2.0 was released on 3/29 I was curious if they were going to push the envelope in the chat game. Sure enough, they delivered.

The chat game is crowded, as I pontified on before. It’s hard to make inroads but one of the ways to get started is to piggyback on your social network’s user base. Unlike Facebook and Instagram that have public ways of giving props, Snapchat lacks this which encourages users to send a chat if they like a Story or have something to say. It’s funny because, like the name implies, Snapchat started off as an ephemeral chatting app, evolved into a Social Network and is now getting back to its roots and beefing up its chatting abilities.

It’s one thing to release cool features it’s another to have them be used. At 33, most of my friends will be reluctant to embracing the new features. The majority in my age group insist on using feature-poor iMessage or SMS. Luckily I’m on the older side of Snapchat’s user base. Snapchat Chat 2.0 will be immediately embraced by their users. For whatever reason I find the stickers lame (too old?) but I look forward to seeing my (younger) friends live stream, create small gif-like videos, annotate em with Snapchat’s editing tools, audio notes and more.

 


First 90 Days at Social Tables

Posted: February 16th, 2016 | Author: | Filed under: SaaS, social tables | 1 Comment »

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Gut check time. It’s been three months since I left my job as Director of Engineering at Jibe and started working as a Senior Product Manager at Social Tables — did I make the right move? Do I enjoy Product Management? Do I enjoy Social Tables? Do I enjoy the people I work with?

Yup, Yup, Yup and Yup.

For me, Product Management is the shit. I’m enjoying getting in the head of our users — performing customer interviews, making surveys, observing their behavior through tools like Heap and FullStory. I’ve (kinda oddly) really enjoyed making product-tradeoff decisions. As an engineer, I many times felt the features we were working on were half-baked and I questioned the prioritization. I’m now the PM being questioned by bright engineers and it’s been a fun exercise to be able to diligently score each feature, prioritize them in as an objective-way as possible and convey my reasoning to my team to ensure buy in. I think I’m doing pretty good here but I hope to get much better.

I’m not sure what I’m enjoying more, the new role or the new company. Social Tables embraces transparency – weekly updates from Marketing, Sales, Product, Customer Success and Engineering, rich updates filled with no-bullshit metrics. We do a monthly “Global Takeover Meeting” where the founder and CEO, Dan Berger, covers a wide range of topics, including numbers that reflect the positives and negatives (room for improvement?) of the company during the previous month. After each board meeting, the memo to the board is available for all “Tablers” to read. I love that we’re trusted with not-so-encouraging information at times and treated as adults. The transparency has made me trust the Exec team (called “Staff” at Social Tables) more than I have at any other company.

My plan is that Social Tables will be my last job. Not because I want to be like my parents and work at a company for 25+ years, but because I hope I will have the courage to start my own company after this Tour of Duty. Social Tables is training an army of entrepreneurs. All of this transparency has allowed me to see behind the curtain, to understand much more intimately what it takes to run a software company. Dan not only gives us access to numbers that most CEOs keep behind lock and key but he also does a great job training us on the SaaS business and walking us through his decision making and thinking. This, along with the Social Table’s adoption of the Deliberately Developed Organization philosophy, make me feel like I have a job where I’m getting paid to learn, which is a hell of a bargain.

All of that is fine and dandy but if you don’t like who you’re working with it’s hard to get job satisfaction. I’m digging the peeps I work with at Social Tables. You can read about the makeup of the company here (more transparency FTW). The company’s average age is 28, making my 33yo ass the old guy :). The youth brings a certain level of eagerness and passion that I relate to. It’s tough to generalize 100+ people but I can say that I’ve been impressed with how welcoming/friendly everyone has been (I think Dan does a good job setting this tone and hiring with culture at the forefront of his mind) and I’ve been most impressed with how much people want to do well at their job. In the past, I’ve been discouraged by co-workers focused on appearance of doing well and not always having a passion to succeed. It’s been a joy to work with people that can meet, and many times exceed my intensity.

I’m happy and grateful to be a Tabler.

 


Yentas, the Messaging Gold Rush

Posted: January 19th, 2016 | Author: | Filed under: facebook, messaging, Product | Tags: , , | 1 Comment »

yenta2

We’re all a bunch of yentas and inventors from Samuel Morse to Alexander Graham Bell to Brian Acton (WhatsApp) have made a ton of money making it easier for us to chit chat. Communication is a time-tested gold mine that’s changing with the rise of new paradigms (like smartphones). With so much at stake, we’re experiencing an intense battle between all sorts of players vying to solve our messaging needs.

To name a small sampling ya got iMessage, WhatsApp, Facebook Messenger, GroupMe, Line, Viber, Kik, Tango, Skype, Slack, Google Hangouts (Gchat), Tencent QQ, Snapchat etc etc etc. They all have different twists to them but the general use case is the same: help people directly communicate.

These players differentiate in a few key ways:

Communication styles is the first way these messenger services start to differentiate. People like to communicate differently depending on where they’re at and what they want to say. You have short text (SMS-style), longer texts, pictures, videos, gifs, voice, ephemeral messaging, and who knows what will be next…VR videos?

Cross-platform is a big differentiator in the messaging wars. Many of the newcomers are smartphone only (iOS and Android generally). Skype crosses a number of platforms (Windows, OS X, Windows Phone, iOS, Android, Blackberry OS). This cross-platform support ensures the vast majority of computer and smartphone customers can use a messaging service conveniently on the device they have on them.

Interoperability is the next decision all of these messaging services wrestle with. The majority of the popular ones are single-protocol –i.e. ya gotta be on Google Hangouts to talk to others on Google Hangouts. When you go multiprotocol, you allow your users to talk to people outside of your messaging service.

Deciding how to approach each of these areas of differentiation can be a challenge, and implementing too much can slow down your ability to do anything cool. Supporting multiple communication styles adds complexity to both the code base and the UI. More communication styles limits what platforms you’ll be able to support with parity. A cross-platform strategy adds complexity to the development process — instead of building a feature once you build it per platform. Supporting multiple platforms can affect your ability to support these features and can result in a “lowest common denominator” type effect if you want a consistent user experience. Same thing with interoperability, you ultimately hinder your ability to support numerous protocols well (e.g. if you want to use SMS, you’re limited to 160 characters).

In the messaging game, getting better distribution (cross-platform, interoperability) makes it harder to do cool stuff. If you want that premium, cutting edge experience, you go for the 80/20 rule when it comes to cross-platform and not worry about interoperability.

Facebook-logo-png-2

Of all these players, I’m digging Facebook’s approach. They have two massive horses in the race with WhatsApp and Facebook Messenger, which allows them to try out different strategies that will capture different segments of the market. WhatsApp is all-in on the cross-platform strategy and removing the $1/year fee removes the remaining friction there to get on WhatsApp. Sure, the experience won’t be great and definitely won’t be consistent for all users, but WhatsApp will continue to capture the low-end market where people want a cheap way to chat.

Facebook Messenger is going for the premium experience and taking the platform route. It’s single-protocol, it’s got a web presence and is on the major mobile platforms, but it’s focusing on the cool things. More importantly, Facebook is empowering other devs to do cool things within Messenger.

In the messaging space, being the best of breed might not mean squat. The network effect is too important, you go where your friends are. I love Facebook Messenger but I gotta admit, I’m a iMessage, Google Hangouts, email, SMS (non-iOS users) Facebook Messenger, Skype, WhatsApp kind of guy, in that order. I may like Facebook’s strategy the best but I go where my friends are.


The B2B Gold Standard

Posted: December 19th, 2015 | Author: | Filed under: Investing, Product, SaaS | No Comments »

Atlassian Logo

I can’t believe it, I’m excited for an IPO for a B2B company. Maybe the past 10 years working at B2B companies has poisoned my brain but I’m hoping it’s because Atlassian is something special. Companies like SalesForce and Workday have killed it on Wall Street but I never had any interest in throwing money at them. I like to invest in companies in which I’m intimately familiar with their product, companies that are profitable and are led by founders who care. I haven’t found a B2B business that fit those requirements but Atlassian is a different beast.

The money most SaaS companies put towards marketing & sales boggle my mind. The majority of SaaS companies spend 2x on marketing & sales compared to product & engineering. For every buck put into making the product better, these companies are spending two bucks to get the word out and convince customers to fork over the dough.

Bucking the norm for SaaS, Atlassian has been profitable since year one (Note: Atlassian isn’t a true SaaS company since they allow customers to host their software). Thirteen years in, Atlassian continues to make more than they spend. The margins aren’t anything to brag about but at least they exist and Atlassian still has the killer revenue growth people expect from SaaS companies.

I’d imagine part of the reason Atlassian has been able to turn a profit is its small marketing & sales spend. Atlassian spent 21% of its revenue on marketing & sales in the first half of 2015, 16% in 2014 and a mere 12.5% in 2013. In comparison, Box spent 200% of their revenue on marketing & sales in 2013, Salesforce spent 56% and the industry standard is around 50%.

Atlassian’s marketing & sales budget has been growing but I’m hoping they keep the course of letting the product speak for itself. My ideal B2B company does the following — build a badass product that customers enjoy, those customers spend more money with you and they tell others about how great your product is, which does the sales for itself. When you get into that cycle the money goes into making your product better which accelerates it and scales better than a heavy marketing & sales approach. After a decade of using Atlassian products like JIRA, I’m of the opinion they make best of breed products and can pull this strategy off.

I dig not only Atlassian’s product-focused philosophy but all of the other things I look for when I buy a stock. I like that their founders have shown an ability to delay gratification. Scott Farquhar and Mike Cannon-Brookes could have sold out long ago but held out, these guys are in it for the long haul. They’ve been patient in building Atlassian slowly and thoughtfully. They only took funding after they had impressive traction, which gave them the leverage they needed to get a favorable deal. The values the founders run the company on jibe with me —

  1. Open company, no bullshit.
  2. Build everything with heart and balance.
  3. Don’t f*** the customer.
  4. Play as a team.
  5. Be the change you seek.

I’m going into this stock knowing the Price to Earnings ratio is ridiculous, and that is fine. The bottom line is I think this company will be around in 10 years and will be making a lot more money than they are now. I have faith that Atlassian will continue to seek profit and their low marketing & sales spend will allow them to do so with ease. The founders will keep the culture strong and ensure a long-term outlook is maintained. The product line will continue to get better, the current Atlassian customers will continue to spend more money, the Atlassian products will continue to make their way into the browsers of employees at companies all over the world and the money will add up nicely.


Sky is the Limit

Posted: November 19th, 2015 | Author: | Filed under: Uncategorized | No Comments »

Growth Ahead

Despite predictions that we’ve hit the peak of Facebook’s Social Network it has continued to defy critics and grow in every objective measure you could think of.

To determine the health of the Social Network itself I keep an eye on Daily Users and time spent on the site. In terms of the business, Revenue Per User is another metric to keep an eye on. Facebook’s Q3 showed growth in all three.

 

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Compared to a year ago, Daily Average Users has grown a total of 4%. 5.2% in the Asia-Pacific, 2.2% in Europe, 1.8% in US and Canada and 5.5% in the rest of the world. I’m most impressed by the smallest number, 1.8% in the US and Canada. If users were feeling Facebook Fatigue in large numbers the saturated market of US and Canada would start trending down, we’re not seeing that (yet).

The 5.5% growth in the rest of the world, although the largest, is the least impressive. Internet usage is growing around 7% this year with the expected growth much larger in the “rest of the world” as defined by Facebook. Facebook’s strategy, including Internet.org is solid and Facebook is most likely capturing a large chunk of new Internet entrants but have some room to improve.

Facebook continues to increase Average Revenue Per User worldwide and in every region.

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Ad revenue in the US & Canada grew 41% from a year ago. Facebook is moving in the right direction and there is still tremendous upside here. It’d be interesting to compare ad revenue per minute spent watching TV versus the ad revenue per minute spent on Facebook. It’s a bit of an apples to oranges comparison — TV advertisements consist primarily of long, informative, high-quality commercials whereas Facebook ads come in a variety of types including photos, videos, and links. While TV ads are often richer and more informative, Facebook ads allow for precise audience targeting and provide useful engagement metrics to advertisers.

My hunch is that the broader market’s ad spend is not being allocated effectively and many advertisers are clinging to older, less measurable, less effective ways of advertising (newspapers, magazines, billboards, TV). Slowly but surely these ad dollars are moving to Facebook and expect the ARPU number to double in the next 2-3 years.

Some believe the Law of Large Numbers will soon be Facebook’s biggest problem but Facebook has plenty of potential users to gobble up —  over a billion people that have internet access already and more than 4 billion people who are not on the internet yet. Expect user growth and revenue growth per user to continue for over a decade.

We’re not at peak Facebook. The Sky is the Limit

Disclaimer – I own $FB

 


Stocks as Gift Cards – Stockpile

Posted: October 19th, 2015 | Author: | Filed under: Uncategorized | 1 Comment »

As a child, like clockwork, every birthday my grandfather would give me a Savings Bond along with whatever toy or video game was popular at the time. Those Savings Bonds came in handy when paying down college debt. Owning them and using them was all I needed to become hooked on investing and the power of compound interest.

The days of buying a Savings Bond or a Stock Certificate at a bank and signing it over to your grandchildren are long gone. These financial instruments have become electronic and the friction of gifting them has ironically increased since being modernized.

Stockpile is the first promising attempt at cutting down on the friction of gifting financial instruments.

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Stockpile takes a clever and familiar gift card approach to stock gifting. They allow a user to use a credit card to purchase any amount of shares in stock, including partial shares, in gift card form for a gifting fee of $2.99 + 3%.

While using Stockpile I was pleasantly surprised how they handled gift card redemption.Unlike other gift cards that lock you down to narrow uses and attempt to charge fees, Stockpile provides many different options during redemption. You may redeem the gift card for the stock the gifter choose, regift the gift card, redeem for a stock of the redeemer’s choosing or you may purchase another gift card, such as a gift card to use at Macy’s.

Stockpile’s options of investments are impressive — hundreds of companies along with many ETF options. The website and iOS app are carefully designed with a modern look and seamless user experience.

OneShare.com, GiveAShare.com and FrameAStock.com provide a similar but limited stock gifting product. These products allow users to purchase one share (and only one share) at a time for a much higher fee than Stockpile (a share of SIRI trades for $4 and cost $44.00 on GiveAShare). These websites are in much need of a facelift and all three lack a mobile strategy.

Companies like GiveAShare focus on Adults who want to teach investing basics to children. They focus on getting young investors excited about investing by giving users a physical certificate (many times unofficial) and providing add-ons such as child investment books. Stockpile is not pursuing this educational or novelty route and do not provide physical certificates, Stockpile is more focused on providing a practical way of gifting a stock.

Stockpile is a well-designed, easy-to-use, innovative product that has made gifting stock more than a novelty. Stockpile has successfully removed the friction of gifting stock at a reasonable price. Through Stockpile, people can give the gift of wealth beyond the impersonal wad of cash. Proud grandparents, aunts and uncles can buy stocks that will teach the value of investing and set their loved ones up for the future. I like the fact that a small gift I give today could potentially grow much larger and make someone happier now and when they cash it in someday many years from now.


Apple Music and Howard Stern

Posted: June 16th, 2015 | Author: | Filed under: Uncategorized | No Comments »

Howard Stern

With the upcoming 6/30 launch of Apple Music and Howard Stern’s contract with SiriusXM coming to an end, the stars are aligning. Howard Stern and Apple may seem like an unlikely pairing but they would be a powerful couple.

As iTunes music sales continue to lose business to the rise of streaming music and the subscription model, Apple is mixing it up. Apple is entering the streaming music space and needed a way to differentiate themselves from the established players like Pandora and Spotify. Apple Music’s differentiator is a blast from the past – human-driven radio stations (as opposed to playlists or algorithms). At launch, they’ll have one station, Beats 1, which will support 3 different DJs around the world.

For Apple to be successful in the Internet Radio space they should take a peek at SiriusXM. Unlike Spotify and Pandora, which has concentrated on content delivery, SiriusXM has concentrated on having the best audio content in town. SiriusXM has struck deals with the majors sports (NFL, MLB, NBA, etc) and many personalities, the most important being Howard Stern.

SiriusXM had merely 600,000 subscribers prior to Howard joining the company in January 2006. They now have over 28 million subscribers. Howard’s fans are loyal, will follow him and pay to listen to him. Howard joining Apple Music would provide an immediate boost in Apple Music subscribers.

SiriusXM has done a great job of curating content but the user experience of their web and mobile app is lacking. The iOS mobile app doesn’t allow podcast-esque subscribing. If you are listening on the web there is no handoff to mobile, the iOS app does not know where you left off. Even simple tasks such as fast forwarding and rewinding are clumsy and unreliable.

Howard can bring Apple Music paying customers and Apple can give Howard’s fans a much improved user experience – a win-win situation. As a fan of both Apple and Howard, I’m keeping my fingers crossed. I’m hoping Apple isn’t too prude to team up with Howard.

Bababooey to you all!

 

 


Has Facebook’s Social Network Peaked?

Posted: April 1st, 2015 | Author: | Filed under: Uncategorized | No Comments »

The big question mark in my mind is if Facebook can monetize the new Facebook Federation fast enough to counter the eventual decline of Facebook, the social network.

To be clear, as the network approaches 1.5 billion active users, it’s not going away any time soon. But I’d bet on a slow decline of the main product starting sooner rather than later. (Who knows if they’ll ever admit this though since Messenger users are technically Facebook users and many people I know have Facebook open on their desktops just to use Messenger.)

The Facebook Federation

MG did a good job avoiding the tiresome claim that Facebook the company would die, but did decide to vaguely predict the peak of Facebook, the social network.

Is Facebook diversifying and splitting up the Social Network a bit? Yes. Has Facebook, the Social Network, peaked? Not based on anything objective that I can think of – total users, daily active users and money per user.

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Facebook Daily Active Users

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Facebook Average Revenue per User

The numbers tell a much different story than MG’s gut feeling. Daily Average Users continues to grow, dollars per user also continues to grow and at an impressive rate. Although there are 1.5 billion people on the network already there are nearly 3 billion people with access to internet. There are also 4.2 billion people without access to the internet, which Internet.org is attempting to address. There are plenty of people that Facebook can go after to grow the network. Law of Large numbers be damned.

Perhaps MG has experienced Facebook fatigue, his usage of the Social Network may have peaked but the numbers do not indicate it’s peaked for the rest of the world.

Based on the post, it appears MG feels Facebook’s diversification is what signals to him the Social Network has peaked. Google and Amazon have also similarly diversified but I believe their cash cows – Google.com and Amazon.com are far from their peak.

The Social Network will evolve but I believe it’s far from it’s peak.

Disclaimer – I own $FB, $GOOG and $AMZN