Betting on FB Stock
Of all the tech firms that just reported earnings, Facebook Inc (NASDAQ:FB) was the only one to exceed market expectations. The company showed stellar growth in the last year, giving investors a ton of reasons to load up on FB stock.
It was a sight to see. The company pulled in $5.38 billion in revenue, reflecting a 52% increase from the same quarter last year. And that’s not even the half of it.
Facebook’s margins have gotten juicier than ever before. The company’s profit skyrocketed 115% year-over-year, from $993.0 million to $2.0 billion. It was a dream quarter for CEO Mark Zuckerberg.
A lot of his earlier bets paid off. Zuckerberg poured a lot of resources into building Facebook apps for smartphones. He saw mobile as the ultimate operating platforms, a guess that proved eerily prescient.
Customers are spending more time on mobile devices than desktops and laptops. A report found that more than half of all e-mails were opened on smartphones, which goes to show how integral mobile devices are to consumers. (Source: “US Consumer Device Preference Report,” Movable Ink, last accessed May 5, 2016.)
Facebook took advantage of this trend by spotting it early, then designing apps that would keep users satisfied. The company’s mobile monthly active users were 1.51 billion at the end of March. That’s a sizeable portion of the planet. (Source: “Facebook Reports First Quarter 2016 Results,” Facebook Investor Relations web site, April 27, 2016.)
The company used this success on mobile to attract advertisers. In the previous quarter, mobile advertising revenue made up 82% of the firm’s total ad revenue.
It’s a simple process. Keep users happy, and advertisers will come knocking on your door. One way Facebook did that was by ensuring smooth functionality on all mobile devices. The next thing it did was lock down content.
Facebook Is the New King of Content
If you are a content publisher on the Internet, you have to realize that Facebook holds all the power. It is the new toll highway for content. Google used to hold that title, but sharing content on social media has eclipsed searching for it on Google.
Readers used to open web browsers on their computers and search for whatever they were interested in. Google would bring up the results. That’s how a majority of content used to get distributed.
Google was the toll road, so think of advertisers as shopkeepers. They paid to hawk their wares along the side of Google’s road.
Naturally, Google made a killing with its “Adwords” and “Adsense” programs. But that era is in decline. Google is no longer the only road in town.
Facebook built a bigger toll highway. More than a billion people use its app on a daily basis, giving the advertisers direct access to their audience. And remember, advertisers follow the audience. That’s where their loyalty lies.
It’s no surprise to me that they are packing up their stalls from Google’s road and moving to Facebook’s highway. The shift has been happening for several years, but it just became official with this last earnings report.
Facebook is the new king of content.