Facebook Stock Analysis: Meh-ta verse

In the internet age, the years of durability could be eroded in just a few days
Images source: freepik.com

Mark Zuckerberg is possibly the most hated entrepreneur on this planet (After Bezos). Thanks for the privacy violation (debatable). But, not this kind of perception that kills Facebook. Once again, we bring you another “business model” episode. This time through Facebook Stock Analysis.

The Virtual Hit The Reality:
The Facebook stock analysis begins with the fact that it is hated

We have a unique precursor of competitive advantage durability, that is when people hate it but can’t lose it. Take SAP as an example. This may be the ugliest software made, poor UI, sometimes unreliable, but engineers keep using it till the end of the day. Or look at EA. People hate how it exploits every aspect to make money. But People keep playing, especially for the sports universe.

Facebook fulfills this precursor. People hate it but can’t lose it. This customer retention is reflected in its finances. Under fire throw from all directions, The Largest social media still record 22% revenue upside in 2020 with an envious profit margin of 38%

It spread political heat, works as surveillance for your personal life, gives your data, location, preference, your shopping list. People’s perception of Facebook is it is a toxic social media platform – but, Facebook’s economic moat is too strong, the fortress is impenetrable, thanks to its network effect advantage.

Till one day.

Tree of Knowledge: Apple
Facebook stock analysis realize its dependency on another platform

When Zuckerberg was grilled by the senate (Thanks Cambridge Analytica), people love it and treat it as a satisfying show. Because People already know that Facebook steals their data. So it is not Apple who tells the people.

The iOS 14.5 just ask you, would you like to allow Facebook to draw your data? This question sparked anger. Lol. And people touch “NO”. When the user does this, Facebook money flow is interrupted.

Business Model

The problem for Facebook is not the customer perception, there is something that is more fundamental than it. That is Facebook’s business model itself. 

Shortly speaking, Facebook offers a free social media platform for billions of people. By using Facebook, people’s data is collected and learned. Then Facebook offers a service to create personalized ads for other business entities, mostly small businesses, based on that collected data. The personalized ads are presented to Facebook users and businesses pay Facebook for these services.

So to make money, the requirement is there is a rope of data from users to Facebook.

Apple cut that rope1.

Key Point: Battle of Titans
Facebook stock analysis recognizes the social media position in the customer layer of touch.

Facebook’s issue is mainly due to its need for another platform to embed. Facebook requires iOS to exist in iPhone, it requires Android and Windows OS to live in Android smartphones and computers. This makes Facebook looks left behind another tech.

Imagine this.

Apple has privilege since customers could touch and hold the devices. This is layer 1.

Then we have Google with Android, Microsoft and Windows, and once again Apple. This is layer 2.

Facebook requires layer 1 and layer 2 to exist.

By the way, Amazon itself has its own ecosystem. Retailer with its own delivery system, also supported by the cloud. Differ from Facebook, even Amazon requires Android and iOS to exist, it doesn’t collect the data. Even when the worst comes, Apple and android ban Amazon Bezos still has Amazon Echo and Kindle Fire to launch a counter-attack. Simply said Amazon could survive alone.

Ironically, iOS also could not touch Google business since iOS 14.5 only treat the second layer. This means that when you type Mila Kunis sexy dress or best bodyweight exercise, Google keeps tracking you. Apple begins to act when a user enters the app’s ecosystem.

Facebook stock analysis from a big tech relationship point of view
The Relationship of The Big tech
This brings us to the conclusion that ecosystem control is one of most ultimate competitive advantages.

Recent Development
Flexing Muscle on Ecosystem

Let us leave Facebook for a while and discuss the bigger picture and recent development. If you are Alphabet (Google parent), Apple, Amazon, or Microsoft shareholder, you need to keep checking about their ecosystem development. You don’t want them to become the next Facebook.

Here are some developments.

  1. We have already known that Google expands its ecosystem with Chrome OS, but Chrome Flex is another story. This OS allows an old PC or computer to run Chrome OS. It sounds like the Resurrection mantra to raise the dead. And like Chrome OS, it is updated regularly, secure, and light. For Google, Chrome Flex gives them a more user base and more exposure for its Google Apps like Sheets, Docs, Slides, Calendar, and the gang. One miss from Google is its presence in the physical world, its Pixel smartphone is not good enough, and it lacks a computing device like laptops. One notable effort is its acquisition of Fitbit, but, as smartwatch become more popular today, the Fitbit has less popularity
  2. Microsoft acquires Activision to strengthen its grip on gaming. Now Microsoft has its own console, Elder Scroll maker Bethesda, and Call of Duty creator Activision. This complete Microsoft ecosystem that already held by the Surface series – Windows – Office.
  3. Begin its history as a bookseller, Amazon almost disrupts everything online. It transforms a cloud provider and has its own facilities. In 2022, Amazon try to become more “physical”. The largest e-commerce plan to open clothing stores in Calif.

Investor Note

Investors need to keep paying attention to company progress whether it reinforces current strength or the opposite, making it vulnerable

The Final Note

  1. Once again we see that basic understanding is vital to building our portfolio. In this case, the business model. Our post exposes Facebook’s business model and its dependency on another platform – whether it is iOS, Android, or Windows. This leaves a vulnerable hole that can be exploited.
  2. And once again, customer perception is inferior to competitive advantage or business model. Customer retention deals with marketing doesn’t mean that it is not important. But Business models and competitive analyses are key components of investing. Thus, when composing facebook stock analysis, we can’t leave those two from the equation.
  1. actually, any entity with the same business model is also affected by Apple’s move. For example, Snapchat, so it is not only Facebook versus Apple []