Facebook (NASDAQ:FB) is the largest social networking website in the world. It has more than one billion active users and attracts more than one hundred and thirty million unique visitors each month.
It is also the second most visited website in the world coming a close second to internet giant, Google. As you can tell, Facebook is definitely a force to reckon with. It is hard to believe that it started in 2003 when Mack Zuckerberg wrote the first Facebook program, then known as Facemash, in his dorm room at Harvard. This program gave birth to a multi-billion dollar corporation that grosses in more than five billion dollars in revenue each year.
Facebook’s journey to success was hard and at times, messy. Many people filed lawsuits against this internet giant some of which are still pending in court. The hardest part in its growth was how to finance the start-up. Mack Zuckerberg always faced an uphill battle whenever it came to financing. Some people wanted to take his company in a different direction while others wanted a higher stake in Facebook than he was willing to give. Fortunately, he stumbled upon Accel Partners and Jim Breyer who invested close to thirteen million dollars and one million dollars respectively. These were very smart investments back then. For example, Facebook has a total equity of eleven and a half billion dollars and Accel Partners owns ten percent of that equity.
Facebook has always been trying to introduce new features and products to help it capture a greater market share, improve the Facebook experience for its users in addition to generating more revenue or the company. This is why Facebook issued an IPO in early 2012. The IPO raised over sixteen billion dollars as reported by the Wall Street Journal. However, Is Facebook a good stock to invest in? Will you get the same value for your money as Accel Partners got? Here are some of the pros and cons of investing in this stock.
The Pros of Investing In Facebook
Facebook Has No Real Competition
Apple is facing a tough time in the market because of the enormous strides its competitors such as Samsung and Sony are making in the Smartphone market. Likewise, Google’s Android Mobile OS is increasing coming under threat from Microsoft’s Windows Phone and the yet to be released, Tizen OS. In contrast, Facebook is way ahead of its competitors. For example, Google Plus and Twitter only have half a billion users while LinkedIn and Myspace only have two hundred million users and thirty million users respectively. This means that Facebook will remain a dominant force in this advertising market for many years to come. You should own a piece of this dominant force.
Facebook Is Focusing On the Right Market
The world is turning into a virtual field of constant communication and Facebook is at the heart of it. People are now communicating more than ever over the internet than through traditional forms of communication. It is important to note that more than half of the world’s two billion internet users are on Facebook. This growing market is only integrating more and more into social media. This means that advertisers and marketers will have to use Facebook to reach their intended audience.
The Cons of Investing In Facebook
Facebook’s Growth Is Dwindling in High Value Markets
Facebook’s Growth Is Dwindling in High Value Markets
Growth is only good if that growth leads to increased revenue. This is currently not the case for Facebook. The United States and Europe generate the largest chunk of Facebook’s revenue. This is because these markets have highly integrated financial systems and similarly, high levels of internet penetration.
Unfortunately, Facebook is experiencing dwindling numbers in terms of new users in these markets. For example, the overall growth of Facebook users in the world stood at one hundred and eighteen percent last year but in the United States, Facebook’s growth in users was at a meager thirty-two percent. According to Forbes Magazine, this dwindling growth in new users when it comes to high value markets could be a pointer to future constrains on Facebook’s income.
What Do Analysts Say?
Well, the question remains. Is Facebook a good stock to invest in? Market analysts are quite optimistic about the company’s growth. This is because the firm is experiencing a high level of growth now and this growth is unlikely to stop in the near future. For instance, China recently agreed to lift the ban on Facebook that has been in force in China since 2009. This means that Facebook will now have access to over one billion people on the Chinese mainland. Moreover, emerging markets are now the engines of economic growth in the world. This means that Facebook’s penetration into these new markets will secure it income for a long time to come.
What The Future Holds For The Company?
In conclusion, Facebook is set to enjoy continuous growth for the next couple of years. Facebook stocks are still one of the most lucrative stocks in the market. For example, Mail.Ru sold Facebook shares it had bought at two hundred dollars for more than five hundred and twenty five dollars. Standard & Poor’s has also placed Facebook as part of its S&P 500 index. These are all pointers to continued and sustainable growth when it comes to Facebook stocks. You should get on this gravy train as soon as possible.