Facebook (FB) had an inauspicious start, to say the least. It didn’t get back to its IPO price for more than year.
Its biggest initial problem was it didn’t look like it knew how to monetize all the people that were joining the free social media site.
There were also questions about founder and CEO Mark Zuckerberg’s ability to live up to market’s expectations for the company. And those expectations were very high.
But Zuckerberg stuck to his plan. He continued to add new acquisitions, beef up FB’s reliability and security and expand its user base. But initially, big advertisers were not impressed with the response they were getting and many started to pull their accounts.
The FB Stock of Today
However, this past year has seen Facebook transition into the company of everyone’s expectations. FB changed its privacy settings to be more advertiser-friendly in default mode — users cans still opt out, but they’re opted in for more advertising than they were historically.
And Zuckerberg’s vision is now a reality. More than 1 billion people now use Facebook daily, and the addition of video has been a huge boon. People are viewing videos about 8 billion times a day now. Video viewing has doubled just since April.
This is the kind of audience that advertisers swoon over. FB stock not only has the people, but it’s doing more with them, and the longer they stay on Facebook, the better chances that advertisers can catch their eye.
The Interactive Advertising Bureau working with PricewaterhouseCoopers reports a 51% growth in advertising on social media in the past year. And FB is hauling down a lion’s share of that growth in advertising — and revenue.
And in the first nine months of 2015, FB stock has reported advertising revenue gains of 40% over last year.
What’s more, the web-based video advertising space is growing now as well. And FB is well positioned there.
But at some point, FB stock can only grow so big, and as its market (and audience) matures, FB will need new growth engines. That’s where FB’s acquisitions come in.
The Many Faces of Facebook
Instagram, a photo and video sharing app that FB bought for a tidy sum (much to the chagrin of critics), hit 400 million users in September. According to research firm eMarketer, Instagram’s ad revenue will reach $600 million in 2015 and rise a tidy 146% to $1.48 billion in 2016. At that pace Instagram will account for about 14% of FB’s ad revenue by 2017.
And 75% of Instagram’s users are outside the U.S. Talk about a growth opportunity. This is a market that no other social media brand can touch on that scale.
Want more growth? How about its messaging acquisitions Whatsapp and Messenger? Whatsapp has 900 million members, Messenger a mere 700 million.
Whatsapp has grown 50% since April.
Then there’s FB’s purchase of the virtual reality (VR) headset firm Oculus Rift, which is set to launch to great anticipation in the first quarter of 2016. VR is expected to be a $30 billion industry by 2020.
The point is, beyond the Facebook nameplate there are some real growth opportunities that will keep FB racing along for years to come.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
