Facebook Inc (FB) Is the King of Media. Now It’s Acting Like It.

FB stock holders naturally want to see growth initiatives, but it's important that Facebook takes on its political responsibilities

    View All  

Does Facebook Inc (NASDAQ:FB) deserve to be worth as much — or more? — than, say, a gigantic energy company like Exxon Mobil Corporation (NYSE:XOM), which has physical operations across the world?

fbmsn
Source: Shutterstock

Probably.

FB doesn’t carry $29 billion in debt, like Exxon does. It doesn’t carry any debt. Facebook’s profit margin is over 25% against Exxon’s 4%, and its operating cash flow is accelerating, even if it’s still $4 billion per quarter short of Exxon’s. XOM doesn’t have the two most popular mobile apps in the world, either.

The point is that Facebook, and other “tech majors” such as Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL) and Apple Inc. (NASDAQ:AAPL), now dominate the business world in the way oil majors did when 40 years ago, the way manufacturers did 80 years ago, the way infrastructure builders like General Electric Company (NYSE:GE) did over a century ago. They have the power.

But with power comes responsibility. Facebook ignored this through last year, and a flood of fake news hacked the Internet, creating a government opposed to its business interests.

For Facebook, then, 2017 is a year for taking responsibility.

A Content Business Model

This starts with creating a viable business model for credible content.

This week, Facebook will let big publishers put ads in the middle of videos they push to the site, and take over half the resulting revenue. This follows two years of experiments that delivered cash to cutting-edge publishers like Buzzfeed.

Facebook wants videos with “mid-roll” ads to run at least 90 seconds, and Bloomberg speculates this could reduce Facebook’s margins. But the site has little choice. FB has killed older models of media advertising and the company knows it.

For credible publishing to survive, Facebook must deliver a business model that allows them to.

Content Responsibility

Facebook also is spending on what might be called its “news responsibility,” hiring Campbell Brown as an “interface” with publishers.

Brown is married to Republican political operative Dan Senor, and has been working against teacher unions since leaving TV. She knows the intersection between fact, what is seen on TV and propaganda that controls how people vote and how government acts.

She also knows how to make money online. She’s an olive branch both to the media and the new administration; someone who can make introductions among old media, new media,  and political power.

Next Page


Article printed from InvestorPlace Media, http://investorplace.com/2017/01/facebook-inc-fb-stock-king-of-media/.

©2017 InvestorPlace Media, LLC