Despite some critics glee at the latest earnings report, the planets most powerful business remains unstoppable
Imagine running a business that generated $13.2bn in revenue in one quarter – a 42% increase over the same quarter a year before. And imagine that it reported a 31% jump in profits over the same quarter last year.
Now watch as many allegedly smart people dump your stock because they think the future of your company looks bleak. We live in stupid times. Only dupes pay attention to one-day moves in any stock, or even whole sectors. I can guarantee you no one inside Facebook is panicking. No one on its board of directors is worried or is demanding a shift in course or Mark Zuckerberg’s resignation. If anything, institutional investors are getting ready to buy Facebook at a bargain.
The story of Facebook’s second-quarter earnings report and subsequent shave of 19% of its market capitalization (that’s a more than $100bn off the books) on Thursday tells us more about financial markets than it does about Facebook.
I would caution everyone who is giggling with glee (if one is a critic like me) or shuddering in horror (if one is an investor) at the Facebook stock plunge. Look at the long curves of usage, revenue, profit, and market capitalization. Ask yourself if Facebook advertisers are fleeing. Look at global growth, not just growth in North America and Europe. Consider Instagram usage and revenue. Consider that Facebook seems poised to sell advertisements on WhatsApp. And consider the scale of Facebook – the scale. It’s all about the scale.
Facebook usage growth has stalled this year in North America and western Europe. But those markets are fairly saturated and have been for several years. In addition, as younger people join Instagram and use WhatsApp instead of Facebook (which they would find more useful later in life) they still grant Facebook Inc records of user data and the valuable attention that Facebook uses to sell and target advertisements.
The bigger story of scale is that, as of February, 2.2 billion people regularly use Facebook around the world. That number could reach 2.4 billion by the end of the year. That number is so large it’s hard to ponder. Is there anything besides the atmosphere and the oceans that influences 2.2 billion lives? Nothing human-made comes close.
While revenue and user growth in the wealthier parts of the world are unlikely to grow as they have for the past decade, Facebook will enjoy more than it needs from places that are growing themselves: Brazil, India, Indonesia, the Philippines, Pakistan, Nigeria, Mexico, South Africa, and other countries that are rapidly deploying mobile data services – often with Facebook’s help. They have room to grow both as markets and pools of users.
Read more: www.theguardian.com