Facebook Inc (NASDAQ:FB) knocked Twitter Inc (NYSE:TWTR) out of this year’s March Madness tournament with relative ease, and Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) sent Amazon.com, Inc. (NASDAQ:AMZN) packing in a pretty decided manner.
It’s also going to be a tough matchup for fans and investors to handicap.
On the one hand,you’ve got a known quantity with Google. The company essentially owns the Internet — mobile or otherwise — and though its sheer size is making it tough to muster more big growth, a slow-moving bulldozer is still a bulldozer.
On the other hand, Facebook is a much more dynamic and faster-growing company, with legitimate answers to the question “What have you done for me lately?” Facebook also continues to be the go-to social networking destination, keeping users coming back and logged on for a while every day. Even so, if there’s one thing investors were forced to acknowledge with Facebook’s matchup against Twitter, it’s that even Facebook seems to be nearing its maximum capacity to extract revenue from its user base.
This should be an interesting duel between two companies that aren’t exactly different, but aren’t exactly the same either.
And what has Facebook done for investors lately? Quite a bit, actually.
The latest initiative is a good one. The world’s most popular social networking site introduced Messenger Pay this week, which allows users to send money to other users via the simple chat platform. It’s an immediate (albeit minor) threat to peer-to-peer money-transfer platform PayPal. While it’s going to be a while before the Facebook Messenger payment tool is as big as a similar feature available on the WeChat platform, it’s a start.
Perhaps more encouraging is that the Messenger payment feature suggests the company may be willing and able to start monetizing some of the recent acquisitions Facebook has made over the past couple of years.
In the meantime, Facebook is still a force to be reckoned with based on its underlying performance. Revenue was up 49% last quarter, and net income was up 39%. That’s been the recent norm, too, and analysts are calling for more of the same through the foreseeable future. In fact, the future may be even brighter than expected given data published by JPMorgan on Tuesday.
The research arm of the investment bank noted that when counting usage of Instagram and WhatsApp in the equation, Facebook’s user engagement — the length of time users remained online and active on at least one of the company’s platforms — was up in February compared to January’s figures as well compared to February 2014’s metrics.
Facebook isn’t a risk-free bet, though. Internet users are fickle, and any competitor could launch a disruptive technology at any time. And yes, this includes Twitter. Facebook may have won its game against Twitter in the first round of this year’s tournament, but all it would take is some simple recoding to make the masses fall in love with the alternative social-networking/micro-blogging site.
Such is the nature of the web, and the inherent risk of owning FB. Good thing Facebook is a behemoth that can simply squash or buy those threatening competitors.
While Facebook is a giant, it’s not as if Google isn’t. Deep pockets and sheer presence across all facets of the Internet are going to make the company tough to topple.
Critics will note that Google has been a little lackluster on the creativity front lately, with the failure of Google Glass and “back to the drawing board” for Google X’s drones. And although the driverless car is a cool idea, it’s still years away from becoming a reality, and the company has yet to answer the question about how it will monetize such a technology. Most cities may be leery of allowing such vehicles on their streets anyway, and there’s little doubt that Google would need to achieve some serious scale with autonomous vehicles to actually turn the technology into profits.
What stories does Google have to tell in the meantime that will compel investors? Not many.
The growth of its fiber-optic Internet services and test of a Wi-Fi mobile phone technology look so far down the road there’s little point in getting excited about at this time. Even opening up its Fiber TV box to third-party developers seems a little ho-hum in the shadow of this week’s announcement that Apple would finally blur the lines between Internet-delivered television service and broadcast network-TV programming.
Google is still a juggernaut, to be sure. It’s just not a very interesting one anymore.
Facebook Should Squeak Past Google
A year ago this may not have been the case, but right now, Facebook seems to be accelerating into its full stride while Google appears to have lost a step. Facebook should win this one, but it’s going to be a good fight.
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As of this writing, James Brumley did not hold a position in any of the aforementioned securities.