New Project Could Be Big for FB Stock
If I were to pick the most well-managed company in the S&P 500 in the present day, it would, hands down, be Facebook, Inc. (NASDAQ:FB). Owing to Mark Zuckerberg’s one ingenious move after the other, FB stock has found a favorable course. The future is looking even better with all of its projects (big and small) that are underway. Here’s another reason to be bullish on Facebook stock.
Facebook had become a phenomenon long before its stock market debut. Many had started seeing value in the company and were ready to pay huge sums to get their hands on it. Zuckerberg, however, had something big in mind and turned down every buyout offer. Even after the company went public, the bears were certain that the social media company wouldn’t stick around for long.
Fast forward to today: Facebook has not only survived, but it has actually turned out to be one of the best performing investments out there. In fact, it is one of the four biggest growth plays of this year—the other three being Amazon, Netflix and Google, jointly dubbed the FANGs.
Now, what’s interesting to note here is that all three of these were primarily service companies that later moved to products. On the same lines, Facebook, too, has redefined itself from a social media company to an Internet services company. Lately, the company has been opening up its platform to online shopping, crowdfunding, and even payment processing.
But the latest offering is even bigger and better. Facebook is calling it “Professional Services.” The new feature allows Facebook users to search for local businesses based on the best ratings and reviews. Sound familiar? (Source: “Facebook Takes On Angie’s List And Yelp With New Site For Finding Top-Rated Local Businesses,” TechCrunch, December 15, 2015.)
Yelp Inc. (NYSE:YELP) is a similarly modeled rating and reviews web site that connects its users with businesses. People can rate and review businesses and places, or search for businesses and places based on top reviews and ratings. As expected, YELP stock is tanking on the news.
So, what exactly will give Facebook an edge over the well-established Yelp? It is the extensive data that Facebook has been gathering and storing from each of its users.
Since you maintain a profile on its platform and have provided it with information on your likes and searches, Facebook will be able to curate more appropriate results for local businesses based on your location and connections. Plus, you will be able to see which of your connections have rated or reviewed those businesses. Yelp, obviously, does not offer the same level of accuracy and reliability.
Based on what the users are searching for, Facebook will be able to direct targeted ads from its advertisers. Let’s say you’re searching for pet services. Facebook’s algorithm will identify your demand and, in turn, likely supply you with curated ads for pet vets, pet supplies, pet food, pet caretakers and everything else that is, in any way, related to pets. Basically, this will become another source of user data for the company and its advertisers.
Now, Facebook may not have monetized the feature yet, but it certainly stands to make money off of it as the feature starts drawing in interest from businesses. Don’t be surprised if you start seeing sponsored ads from businesses at the top of the search results. Likewise, related products and services might be advertised on the side. For now, however, the service will be used to gain advertising insights.
Case in point: this spells trouble for Yelp and its competitor, Angie’s List, which has the same business model.
The Bottom Line on Facebook Stock
Facebook is firing on all cylinders as the company introduces one new feature after another. The company has been acquiring the best in business (WhatsApp, Instagram) and taking on competitors with more and better features on its platform (search FYI, video ads). The company has literally become the undisputed leader in the social media space and is now going after the heavyweights like Amazon and Alphabet with new service and product offerings (“Buy Button,” “Oculus VR”). The coming year certainly looks bright for FB stock.