Share price: $152.05 P/E: 46.6
Aside from its social media platform, Facebook also owns WhatsApp and Instagram. It reported a 57% rise in revenue to $27bn and a 177% rise in net income to $12.4bn in 2016. Daily active users increased 18% to 1.23bn people. (Its first-quarter results were due after finweek went to press.)
“Facebook’s entire business model is attention focused. The more attention, the more time users spend on the platform, the more ads they can see and the more revenue Facebook generates,” Talpert says.
Despite its already massive user base, it still has so many more potential users.
Founder Mark Zuckerberg has always maintained that the platform has evolved in line with the evolution of the internet: “Now video is the biggest thing, next could be virtual reality, or augmented reality, and each time Facebook becomes more engaging.”
Facebook’s pricing for ads is on an auction basis, and while advertiser demand continues to go up, supply is not increasing at the same pace, so advertising prices should increase.
“Facebook is not going to continue growing revenue at 50% a year,” Talpert says. “At some point it becomes harder to grow, but I don’t think this means it is going to grow slowly anytime soon – Facebook only accounts for about 5% of total global advertising spend, and digital accounts for just under 40% of the global advertising market.”
Talpert explains that in order for any platform to have longevity, it can’t just be somewhere you go to just have fun. “What it has done well is to embed lots of utility into the platform. Humans have an inherent desire to communicate, with Facebook providing numerous tools to tap into this desire.
Talpert adds that there are a huge number of people who rely on some of its other platforms like WhatsApp, with some even running their businesses on it. This is yet to be monetised.
Daily active users increased 18% to 1.23bn people.
Mark Zuckerberg CEO and founder of Facebook