Here’s a simple truth: Facebook Inc (NASDAQ:FB) has a whole bunch of growth levers, including several you have probably never heard of. That means there are several reasons to buy FB stock that you’ve never heard before. One of those unheralded reasons: Facebook Workplace.
Facebook Workplace is the social network’s enterprise edition. It’s essentially a cloud-based communication tool designed for businesses of all sizes. And, it’s exactly like Slack, the hyper-growth start-up which has made a killing selling enterprise communication tools.
Formerly known as Facebook at Work, Workplace debuted in October 2016 to very little fanfare. Most investors have since forgotten about it. But Workplace scored a big win recently by signing on the world’s biggest employer, Wal-Mart Stores Inc (NYSE:WMT).
All the sudden, everyone is interested in Facebook Workplace again.
Should you be, too?
Without a doubt. This is a big and rapidly growing space that Facebook could easily dominate by leveraging its unparalleled size.
Facebook Workplace Is Competing In A Huge Space
The fancy term for this space is enterprise social networking, or ESN. The name says it all: social networking at the enterprise level.
The ESN market is big. And it’s growing quickly. One aspect of the cloud tech boom is the growing demand for enterprise cloud solutions tailored to addressing intra-business communication and workflow needs. That is why market analysis firm IDC expects the ESN market to grow at a 19% clip annually to $3.5 billion by 2019.
But maybe even IDC’s double-digit growth forecast underestimates just how big this space could be. Just look at the growth darling of the ESN market, Slack. Slack is the fastest growing software-as-a-service (SaaS) company ever. The company is adding $1 million in new contracts every 11 days. Since the start of 2015, the platform has gone from from 365,000 daily users to from 365,000 daily users to 6 million today.
No matter how you slice it, the ESN market is a rapid-growth space with huge growth potential.
And while it may look like Facebook is late to the party — and Slack is running away with the market — that couldn’t be farther from the truth. After all, the world’s largest employer doesn’t just sign up for Facebook Workplace unless there is something to the platform.
That something is actually two things: familiarity and price.
Let’s address the first. When a company adopts an ESN tool like Slack, its an entirely new software interface every user in the company has to get used to. The learning curve isn’t steep, but its certainly there.
That isn’t the case with Facebook Workplace. Facebook has 2 billion active users. Pretty much everyone has interacted and is familiar with the Facebook interface. Workplace is just a natural extension of that interface, and employees are already familiar with it. There is no learning curve.
It’s also worth noting that Facebook is already the most-used social media platform for work-related purposes.
All in all, then, Workplace is a very natural adoption for businesses. Facebook dominates the personal social networking market. It only makes sense that a Facebook product would also dominate the enterprise social networking market.
On the second point, Workplace is substantially cheaper than its competitors. Slack charges $6.67 per month per active user for its Standard plan, and $12.50 per month per user for its Plus plan. Workplace only costs $3 a month for each of the first 1,000 users. For the next 9,000, that drops to $2 each per month. After that, it’s only $1 per month.
Bottom Line on FB Stock
Facebook Workplace has huge growth potential.
Alongside Walmart, big companies like Starbucks Corporation (NASDAQ:SBUX), Columbia Sportswear Company (NASDAQ:COLM), and Volkswagen AG (ADR) (OTCMKTS:VLKAY) also count themselves as Workplace customers. This list will only grow more and more robust as the ESN market grows and companies realize the obvious price and familiarity advantages Workplace offers over competitors.
At $1-$3 a month (or $12-$36 per year), Workplace could turn into a material revenue stream for Facebook. It’s also subscription revenue, so it counts as annually recurring revenue and lends itself to predictable profits.
That is all good news for FB stock, which has been beaten up recently alongside the rest of the tech sector.
Long story short: buy the dip in FB stock? I think so.
As of this writing, Luke Lango was long FB.
