I’ve discussed Facebook quite a bit in recent months. I remain very bullish and have been a shareholder for a few weeks now. I continue to think that the way many investors value Facebook is completely wrong. To look at Facebook as a company that depends only on advertising is wrong. It’s the case right now, but I don’t expect it to be the case 4-5 years from now. In the same way, those saying that having users connecting to Facebook increasingly from their mobile devices is bad are insane. Is Facebook making more money from desktop users right now? Absolutely. But having users so engaged that they want to connect over and over from their work, transit, on vacations, etc is NOT a bad thing.
Facebook’s main strengths are the enormous data that the company has and its status as the default social network that most of us use to connect, share, discuss, etc. More and more businesses are building their online strategies around their Facebook pages or Facebook apps which can only be good in the long term.
One Worrying Trend
There are some things that shareholders such as myself should look out for. These days, one trend that I’m getting worried about is the fragmentation of the social web. It used to be about Friendster, then MySpace. A few years later the scene was all about Facebook with Twitter and LinkedIn gaining some traction.
These days though, social networks are exploding. Facebook, Twitter and LinkedIn remain the strongest players but it’s also fascinating to see players such as Pinterest, Instagram, Reddit, Quora, Google+, Klout, Tumblr, Youtube, etc. Facebook’s value stems in large part from its dominant position. Obviously, having 1 billion users is amazing but if the trend becomes for users to have profiles on 3-4 or more social networks, that will greatly diminish Facebook’s position. Facebook did end up paying up to buy Instagram but it will not be able to buy up all of its competitors.
That Being Said
I remain a strong believer in Facebook and do think the company will gradually increase the sources of its revenues. As long as Facebook remains the one social network that virtually everyone in the Western world uses, i will continue to believe that corporations, websites and individuals will continue to spend more time and money on the #1 social network.
Do you still believe in Facebook? Or LinkedIn? Does the growth of players such as Twitter, Pinterest and Quora make you pause?
Disclosure: Long position on Facebook (FB)