If You Own Facebook Inc (FB) Stock, Just Put This on Your Radar

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There’s no denying Facebook Inc (NASDAQ:FB) has been one of the biggest success stories of the past few years. In fact, it may be THE biggest of the (mini) modern era. FB stock is up 300% since its May 2012 initial public offering, and the company itself is by far the social-networking market leader. It’s done everything any investor could reasonably hope for.

However, there can come a time when Facebook becomes too big — and, perhaps, a little too arrogant — for its own good. And, that time may be near.

Many of the companies that were once partners with the social media giant are starting to feel like Facebook’s pawns. As a result, a number of the them are starting to form an alliance against the bully on the block.

This is where things get interesting.

Content Providers Growing Weary

Most consumers and investors know that Facebook, along with Google — the search unit of parent company Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) — dominate the internet in Western hemisphere. What those folks may not fully appreciate is just how pervasive the two companies’ dominance is.

Facebook and Google together are poised to win 85% of 2017’s increase in digital advertising spending. FB controls nearly 40% of the U.S. display ad business, while Alphabet owns about 78% of the country’s search-ad revenue.

It’s the sort of reach publishers of digital content and advertisers want to tap into. But, at least in the case of Facebook, the relationship with the social networking venue has become anything but symbiotic.

Case in point: News outlet CNN was more than willing to contribute video and written commentary when Facebook was starting to seriously experiment with such content in 2014. But, as Facebook grew to realize how integral it was as a middlemen connecting news providers and news consumers, it became more controlling about its content needs. Andrew Morse, general manager of CNN’s digital operations, recently put it like this:

“Facebook is about Facebook. For them, these are experiments, but for the media companies looking to partner with significant commitments, it gets to be a bit of whiplash.”

CNN has begun to voice doubts about the usefulness and the payoff of its Facebook partnership, but the news provider is hardly alone.

Other Websites Teaming Up

It’s not just the potential for a content-provider revolt that should worry FB stock holders. It’s that competitors, tired of losing business to Facebook, are finally realizing that collectively they can make a dent in Facebook’s dominance.

Ad-technology outfit Sonobi is the organizer, but it’s the group’s participants that give the movement credibility. Names like The New York Daily News, Penske Media (owner of 22 digital brands), The Weather Company and others are now uniting to create what they hope will collectively become the third-biggest online advertising marketplace.

Next Place 

Forrester senior analyst Susan Bidel summed up the evolution of the alliance by saying:

“Publishers are under tremendous pressure from marketers to deliver scale so they can compete with Google and Facebook. They have historically competed against each other so to try and get them to cooperate with one another is difficult. It requires them to have their backs against the wall.”

It would be naive to think the Sonobi-led group could topple Facebook or Google in the foreseeable future (if ever). It would be equally naive, though, of Facebook or Alphabet shareholders to ignore the fact that their once-partners, now-competitors have finally become frustrated enough team up with one another against common enemies. This is something that’s not been tried in earnest yet; the group’s user-base so far is 150 million strong, a figure that’s expected to double by the end of the year.

Bottom Line for FB Stock

Don’t sell your FB stock just yet simply because Facebook has worn out its welcome and its publishers have figured out a way to fight back. If nothing else, Facebook (and Google) are entrenched, and could hold onto market share just by playing defense.

On the other hand, this is a data point to revisit in near-term considerations of Facebook stock investments.

Nothing lasts forever when you’re the market leader, because everyone’s gunning for you. Just ask Cisco Systems, Inc. (NASDAQ:CSCO), HP Inc (NYSE:HPQ) or Nokia Oyj (ADR) (NYSE:NOK). All three are still big names- — yes, even Nokia at one time — but none of them are the infallible powerhouses they once were.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/facebook-fb-stock-just-keep-mind/.

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