Q1 2021
By Manuel Maurício
April 30, 2021
Facebook is one of those companies that is always apparently expensive, but always able to surprise everyone with its massive growth.
Revenue for the first quarter was up 48% from last year…
… and net income was up 94%!!! Truth be told, the first quarter of last year was impaired by the pandemic, but still… impressive growth.
May I remind you that we’re not talking about a start-up here? This is a 953 billion dollar company. Alphabet (the parent company of Google) also reported growth of 34% recently. It’s amazing how these businesses can grow with so little capital employed.
Instead of going through the most important financial metrics, I’m posting some tidbits from the conference call followed by some comments.
There are 3 major pillars for Facebook going forward: Content Creation, eCommerce and the next computing platform – Oculus.
On content creation:
“And our goal is to support the full range of human expression, and to be the best platform for millions of creators to make a living. (…) We’re supporting podcasts for sharing and listening to long-form audio. We’re also partnering with Spotify to launch a music player in the Facebook app.”
So music player, podcasts, and even subsctiption based services such as All in Stocks, all inside the Facebook platform. Nice.
On eCommerce and payments:
“We’re also building out broader infrastructure to support commerce, everything from payments to customer service and support. And WhatsApp payments is now live in India and we’ve gotten approval in Brazil to launch shortly too.”
It’s about time. When will Whatsapp payments come to the US and Europe?
Still on eCommerce:
“The next step is to make it easier for businesses to adopt all these services, and to give them the tools that can handle messages and customer relationships. Our acquisition of Kustomer is going through regulatory approvals and we’re looking forward to offering businesses a native way to manage their customer relationships on our platforms.”
So, no need for other websites, apps or even CRM’s outside the platform.
“we have to improve the consumer experience to help people transact on the platform. So right now, a lot of times, you’ll click on an ad, you’ll see an interesting ad, and it’ll take you to a website, and the website won’t necessarily have full context on who you are, the payment experience will be clunky in doing that. And there’s just an opportunity, I think, to make that all a lot more seamless”
“making it so businesses and creators can have Shops and that the ads can then link into Shops and have a native shopping experience.”
After creating the tools for businesses to sell their products, Facebook is now improving the customer experience. At some point user won’t need to leave the app to buy stuff. Be careful Wix, Shopify, Substack, and what not.
On the next computing platform – Glasses baby:
“is going to be one of the hardest technical challenges of the decade, it’s basically fitting a supercomputer in the frame of glasses”
This one is the hardest and further away from becoming a reality, but if Zuck lands it, he will be called a genius.
CONCLUSION
Facebook is trying to become the go-to place for content consumption (podcasts, newsletters, videos); the go-to place for eCommerce with advertising, shops and payments all built in one single platform; and it’s trying to develop VR and AR glasses that will replace smartphones. Pretty lofty aspirations, but if there’s someone that can do it, Mark Zuckerberg is the one (and Elon Musk…. and Jeff Bezos).
Right now, the company is trading at 31x earnings which doesn’t seem cheap by traditional metrics, but the opportunity here is so large – especially with eCommerce – that I will keep my stake in Facebook as long as Mark Zuckerberg is leading the company.
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