Why I’m Bullish on FB Stock
Facebook Inc (NASDAQ:FB) is the real deal. Plenty of tech companies aspire to the same level of greatness, but few can duplicate the phenomenal success of FB stock.
There’s a reason for that.
Mark Zuckerberg, the CEO and founder of Facebook, has a strong understanding of how to build networks. I don’t mean the kind of professional network that helps you get ahead in life; I mean it in the sense of a “social network.”
Zuckerberg can think like a software programmer and like a consumer. His social media platform was the first ever to become profitable. Facebook earned $3.7 billion of net income last year, while rivals like Twitter Inc (NYSE:TWTR) and LinkedIn Corp (NYSE:LNKD) were stuck in the red.
Pretty much all of it came from advertising. The platform for that advertising was Facebook’s web site and mobile app, which in turn raised the stock price 198% since its initial public offering (IPO). Now Facebook is aiming for a repeat performance of that growth.
The company has built another platform that could be just as successful as the “Facebook” app. Once the dollars start rolling in on that platform, FB stock could shoot through the roof.
What am I talking about? Messaging platforms, dear readers. Facebook “Messenger” and “WhatsApp” messenger are going to be major profit centers for the company. I see these two services helping FB stock double—or even triple—in the next 24 months.
I know that may sound strange. Right now, you look at the messaging apps as nothing more than a text service, a way of keeping in touch with family and friends. Maybe you even have some group chats on WhatsApp.
From that perspective, I can see why it’s difficult to believe me, but hear me out for a second. There is a world of potential in messaging apps. Pretty soon, we will be ordering pizza from WhatsApp or requesting an Uber car from Messenger.
Don’t believe me? Two months ago, Facebook open-sourced tools for companies to build chatbots for Messenger. These chatbots can provide automated customer service through messaging platforms. They can answer questions and take orders. (Source: “Facebook launches Messenger platform with chatbots,” Tech Crunch, April 12, 2016.)
Facebook also made it possible to transfer money on Messenger. So right now, as you read this, companies are building chatbots to sell users items and services through Messenger.
It’s a whole new way of interacting with customers, just like social media was a brand new way of interacting with customers. Messaging apps are going to be the next major platform for advertisers, meaning that’s where the ad dollars will flow.
The only question is whether or not Facebook can win this market. I personally think the company has it locked up. Then again, I’m a big admirer of the company, so let’s look at facts…
How Facebook Drew in Advertisers
Facebook began as a popular social networking site; that much we all know. It became our “digital address book”—a place for storing the contact information and birthdays of everyone we knew. But that wasn’t enough to draw in advertisers.
There needed to be something more concrete for advertising agencies to write the big checks, so Facebook adapted. It became the ultimate destination for content creators.
Don’t believe me?
According to a 2015 report from Pew Research Center, 63% of users said they used Facebook as a source for news. That number is probably even higher today. (Source: “The Evolving Role of News on Twitter and Facebook,” Pew Research Center, July 14, 2015.)
You see, Facebook created a way for articles to smoothly and quickly open within its app. The feature is called “Instant Articles.” With this feature, news sites were effectively forced to publish using the Instant Articles system, but they had to pay Facebook to promote their articles.
Then there was the video streaming service. The social media giant became the first real threat to YouTube after Facebook launched a video player that made it easy to share clips with friends and family. For content creators, Facebook became the best way for your videos to go viral.
Those were two genius moves that Mark Zuckerberg knew would keep Facebook users engaged on the app. He was right. Advertising dollars poured into Facebook’s coffers as the number of video views stacked up.
By next year, more money will be spent on digital advertising than on TV ads. And within digital ads, more money will be spent on mobile-targeted ads than on desktop advertising.
In other words, Facebook won the battle for advertisers a long time ago. The 198% gain in FB stock is proof enough of that. But the gains to come could be just as—if not more—impressive than that. Messaging apps are opening the floodgates, and while this tide won’t lift all boats, it could certainly carry FB stock to new heights.