Facebook was graced with an eloquent downgrade today. How lovely. One of my favorite aspects about following the tech sector in the bubble 2.0 are the fools we call analysts. Time and time again they fail to grasp the underlying movements in the tech sector. Again and again they make calls that are blatantly wrong. It’s a wild guessing game and they get paid if they guess right or wrong. The sad part is that we, investors, don’t get paid for spewing crap and have to wade through the mess these analysts create for us. Last night (more like the wee hours of the morning), I was enlightening myself with some market reading. The author of the piece I was reading suggested that the best research with the best returns emerges when you break things down yourself. So in light of the research note on Facebook today, let us dissect the mess they call analysis.
The best place to begin would be to look at the logic that the note incorporated today. This idea that those using mobile applications, in particular the Facebook app are overwhelmed and frustrated by the ads on their applications. What the analysis fails to capture are the ever-changing habits and expectations of today’s smart phone users. The expectations about what type and size of ads that you will come across on your phone are themselves changing, we are learning to deal with the iAd 5. If little George knows that every time he logs into Facebook on is phone he will receive an advertisement he learns to deal with that. Will he change social media platforms? No. Why would he change platforms when all social companies have the same approach. As time progresses these ads will only serve to be beneficial to the user experience They aren’t stupid at Facebook. They were smart enough to buy the next big thing, Instagram, so obviously they are going to be smart enough to give their users the best ad experience.
Looking at the next 3 years, BTIG suspects a slowdown in revenue. Uhm what? Look at how the tech landscape has changed substantially over the past year, let alone from 3 years ago. You are welcome to have a pessimistic view. Though over here in reality, we will take the optimistic view, because well, Facebook has shown leaps and bounds since the beginning. I am not talking about the botched IPO. I am speaking in regards to the movement from a platform based off your internet browser to one on your mobile device. I am talking about the complete revolution of advertisement, one not seen since the beginning of the 20th century. The rules to the game are changing and Facebook writes this new rule book everyday.
Today, a bone was picked with a Smucker’s advertisement featured by Walmart The talking heads suggested that this was bad for business. What world do you live in? If I like Walmart on Facebook, I like it because I am cheap, in turn meaning I want to know about all their bargain offers. Being that a large majority of Americans buy jelly, a Walmart advertisement selling jelly only serves to benefit Walmart. It boosts the image Walmart wishes to portray, that they have a great deal on a product you regularly use.Instead of hindering Facebook as these fools suggested, it in fact only serves to benefit Facebook. Facebook wishes for both users and companies to utilize its platform to create and support their own brand image (or personal brand image in my case). That’s why I use my Facebook profile to follow what I like, to share what I do, and to interact with individuals I like. Obviously, that’s why Facebook put an image of a name brand product at a bargain price on their Facebook wall.
Obviously Zynga’s failure has weighed heavily on Facebook and it’s stock. Looking through the clutter one can see that the change in Facebook’s structure has pushed themselves away from Zynga. At the same time they have catapulted themselves in a direction of more profitability In our consumer based society buying and selling things are everything. Just ask Google how they have made a killing for years. They would respond that through capitalizing on search the are making billions off of selling advertisements. Facebook looks to do a similar measure, but through different means. They want to bring you what you want, what you like, and at the same time let you share those items with your friends. As the photo sharing craze takes on the world, individuals will go from taking pictures of the food they eat at dinner to the new shoes they bought or the new shirt they bought. As we see advertising only mature on the Facebook platform, you are no longer going to be just tagging Sally, but tagging Nike and P.F. Chang’s. This revolution, this way in which companies will be able to subconsciously sell products to the masses will change the world of advertisement (even more then it has).
Steve Jobs once said, “A lot of times, people don’t know what you want until you show it to them.” Zuckerberg hasn’t even begun to show us what remains hidden up his sleeve. So before you start reducing estimates and lowering projections, maybe you should realize that those models can become outdated as fast as Facebook can connect those around the world.
If it can be sold then let’s do it, if it could be sold we gon’ move it.
Photo by FindYourSearch