Facebook Inc (NASDAQ:FB) has a huge opportunity in front of it, and hardly anyone is talking about this catalyst that could shoot FB stock materially higher. Its Marketplace, the tab in the middle bottom of the Facebook app that no one ever really clicks on.
It opens up this Craigslist-like section that feels more like a garage sale for 2 billion people than anything else.
Some products look great, in excellent shape and with great photos. Other products look less great, in questionable condition and with blurry photos.
This hodgepodge listing of goods has somewhat limited the success of Marketplace. Many consumers love the Craigslist like set-up. Others prefer more structured commerce, or more trusted sellers (like actual retailers).
But Facebook is bringing big changes to Marketplace, and those changes could propel this platform into mobile commerce stardom.
Here’s why.
New Changes at Facebook Marketplace
Marketplace was launched as a user-only platform. Facebook users sold stuff to other Facebook users.
But FB is now expanding on that original garage-sale method. Recode reports that Deb Liu, the Facebook VP who oversees Marketplace, said Marketplace is going to start offering “ticket sales and products from retailers’ shopping Pages.”
For context, Facebook has 65 million business pages. Many of those business pages are from retailers who are trying to tap into the 2 billion shopper pool that is Facebook’s monthly active user base. What better way to tap into that huge shopper pool than listing products in Facebook’s commerce section?
In other words, Marketplace is starting leverage Facebook’s massive business ecosystem to buff out the platform’s offerings. This move has huge potential. It connects the world’s largest pool of shoppers with retailers.
But the big question comes up: who would buy goods through Facebook Marketplace?
Trends say that in a few years, the answer to that question will be everyone.
FB: Social and Mobile Commerce Is On the Rise
We are now entering the era of mobile and social commerce.
Mobile commerce is pretty straightforward. It is commerce through the phone. As retail continues to shift towards digital and shoppers continue to rely more and more on their phones, it is only natural that mobile commerce grows as well.
Social commerce is also pretty straightforward. It is commerce through a social platform. As mobile commerce grows and as social media usage grows (it is estimated we spend 50 minutes each day on Facebook’s suite of apps alone), it is also only natural that social commerce grows in popularity too.
Here are the numbers FB stock investors need to know.
According to The Shopping Index published quarterly by Salesforce Commerce Cloud, digital commerce jumped 14% higher in the second quarter of 2017. That’s no surprise. But the big underlying trend is that mobile traffic share jumped to 57%, a 23% year-over-year increase.
And the big mobile growth is driven by an explosion in social commerce. Social traffic surged 42% higher in the second quarter.
These trends are just coming into full swing, and they imply massive, secular growth potential for Facebook Marketplace.
Marketplace finds itself in the perfect overlap of social and mobile commerce. Users and businesses buy-and-sell products using their Facebook page, so its inherently social. And Facebook is clearly pushing the mobile angle by listing Marketplace as one of the five tabs at the bottom of the Facebook app.
Bottom Line on FB Stock
The market is pulling back, so naturally FB stock is pulling back with it. There might be some near-term choppiness here as macro political headwinds and extended valuations weigh on investor sentiment.
But longer-term, Facebook stock will trade at a price far higher than where it currently sits. The valuation remains reasonable (25.7-times fiscal 2018 earnings for nearly 26.6% annualized earnings growth), and the company has many more levers it can pull to accelerate growth.
One such lever is with Marketplace. Given the rapidly growing trends in mobile and social commerce, Marketplace is introducing big changes at the perfect time.
Don’t be surprised if Marketplace usage suddenly soars once retailers start listing products on the platform.
As of this writing, Luke Lango was long FB.
