More Upside in Facebook Stock?
Facebook Inc (NASDAQ:FB) stock is already one of the hottest commodities on the market. The company is winning big time in the social media business and also made its foray into the multi-billion-dollar virtual reality (VR) industry. But going forward, there is something else that could be massive for Facebook stock.
Let me explain…
Right now, Facebook makes most of its money from advertising. Indeed, with 1.65 billion monthly active users (MAUs), there are plenty of monetizing opportunities. In the first quarter of 2016, Facebook’s advertising revenue surged 57% year-over-year to $5.2 billion. (Source: “Facebook Reports First Quarter 2016 Results and Announces Proposal for New Class of Stock,” Facebook Inc, April 27, 2016.)
The fact is that since its userbase is already huge—1.65 billion is about half of the population on Earth with Internet access—how can the company find further sources of growth? Well, Facebook can always improve monetization on its existing userbase and it also has other apps, such as “Instagram” and “WhatsApp” besides its main “Facebook” app. In addition, there’s the potential of its “Oculus Rift” VR headset, one of the hottest gadgets today.
But the catalysts don’t just end there. There is another industry that could be the next big thing for Facebook—customer relationship management (CRM).
CRM companies help businesses manage and analyze customer interactions and data, with the goal of improving their relationships with customers, assisting in customer retention, and driving sales growth. Online social networks have millions and millions of user profiles—and they know about the connections and interests of each of those users. There are some serious benefits to joining CRM with an online network.
In fact, the biggest CRM software vendor, salesforce.com, inc. (NYSE:CRM), was one of the bidders for LinkedIn Corp (NYSE: LNKD). While Salesforce lost the bid to Microsoft Corporation (NASDAQ:MSFT), the company’s chief executive officer, Marc Benioff, said that “we gave it a solid look.” (Source: “Salesforce Also Made a Bid for LinkedIn, CEO Benioff Confirms,” Recode, June 16, 2016.)
LinkedIn is a great fit for a CRM company because it is not just any social network; it’s the professional network that is indispensable to many human resources professionals and job seekers. It’s no surprise, then, that CRM companies wanted it. As a matter of fact, Microsoft—the successful acquirer—also has a CRM division.
But guess who else was interested in buying LinkedIn? Yep, Facebook. A filing to the Securities and Exchange Commission (SEC) showed that LinkedIn drew interest from five potential buyers. A source told Recode that one of them was Facebook. (Source: “Google and Facebook Also Looked at Buying LinkedIn,” Recode, July 1, 2016.)
Facebook has a userbase a few times bigger than LinkedIn, but if it were to enter the CRM business, a professional network would be a great asset to have.
Still, even on its own, Facebook could have a bright future in the CRM industry.
Because of the information Facebook has about its users, the company is able to offer highly targeted ad campaigns to marketers. But note that this kind of information would also be invaluable to salespeople. It could help businesses generate high-quality leads.
In fact, Facebook already has a great relationship with businesses. Fifty million small businesses in the world have Facebook pages. (Source: “Facebook Hits 100M Hours of Video Watched a Day, 1B Users on Groups, 80M on FB Lite,” Tech Crunch, January 27, 2016.)
Businesses use Facebook pages to market themselves and to learn about their fans, many of which are existing customers or potential ones. If Facebook launches CRM software, the information of its giant userbase would be a strong selling point.
The Bottom Line on Facebook Stock
Customer relationship management is already a huge industry and it’s expected to continue growing. Gartner predicted that by 2017, CRM will become a $36.5-billion industry worldwide. (Source: “Gartner Predicts CRM Will Be a $36 B Market by 2017,” Forbes, June 18, 2016.)
Facebook has the resources to pursue many things. If it manages to crack even a small percentage of the multi-billion-dollar CRM industry, it could see material revenue growth and Facebook stock could soar.