The social network giant is maturing under the watchful eye of Wall Street
Facebook’s earnings will be released today after the stock market closes and Mark Zuckerberg’s company is once again in the spotlight. After the IPO in 2012 the company had a rocky path but is now among the favourites of traders and investors alike.
Since the closely followed public offering two years ago it has managed to beat estimates seven out of eight times, each time causing volatility and big price movements, as well as widespread media coverage, being one of the darlings of Silicon Valley.
The price then went as low as $18, but has since made a large upswing and currently sits at $81.05. Reaching 1.2 billion users currently, revenue has had jumps of 82%, 118% and 92% in the last three quarters and recent turmoil in the markets hasn’t affected the appeal of the company – they’ve gained over 45% since January, profiting from the turnaround in ad revenue.
Their persistence in believing that mobile adverts would bring them profits definitely paid off. The model with replacing banners and text ads with more sponsored posts coming in the regular news feed. Facebook managed to hit the nail with the design and precision targeting, leading to (estimates of) click-throughs of 2% to 6%.
With Amazon and Google establishing footholds in e-commerce, most recently with food and product delivery, this is also a target for Facebook. However, the latter has the advantage of being able to gather that bit more information – not only about single users, but their connections and network. This is touted as a being a serious advantage and could prove the missing link to getting the best fit between relevant merchants and buyers.
So, the name of the game right now is user data. Facebook, Google, Amazon, Apple, Alibaba and anyone else is trying to get more information on consumer habits, where, when and what they’re purchasing. All of the above have spent massive amounts on companies that will not only bring in profits in new and existing markets. The decisions behind buying many of the companies (like Whatsapp and Instagram) have been in the context of how much user information they can add.
Companies like Snapchat also seem to be taking a serious share of younger users which is also seen as a threat, as millennials are one of the main target groups for the social network, because they are seen as forming their long-term shopping habits. So, as is the norm, traders won’t only be looking to see what the last quarter has been about, but rather if a slowing down is imminent (as they did with Twitter yesterday).