I have shares of Facebook. It’s been growing at 50%+ for the last 4 years and is reasonably valued.
However, with the recent changes with how they are composing their news feed, showing more family and friends info in the feed and less company info, I’m considering selling the stock.
I am posting these questions here, and not on the Facebook board, because I think most people who follow the Facebook board own the stock, and I don’t want confirmation bias. And I think there is a smart group of investors here, and I value your opinions.
What are your thoughts on Facebook with the news feed change?
Jimbo,
I own FB from the 70s where is bought 2 tranches. As a FB user I find the change refreshing. I am on FB to see what my friends and acquaintances are doing. I find the changes refreshing and because of that will continue to participate in it, maybe even more so than had they not instituted the changes. We will know in the fullness of time whether this will affect their ad loads negatively with lower earnings or not. I also believe they have not fully monetized Whatsapp and Instagram, so those are still on the come IMO. Data is today’s gold and their cost to acquire intensive data is second to none.
What are your thoughts on Facebook with the news feed change?
I am impressed and I think Zuck is really trying to do the right thing. I don’t know exactly how it will affect their top or bottom line, but I would expect growth to slow down a bit. Still, Facebook stock is so cheap, that unless the financial effect is just drastic, I don’t think the stock will be too shaken. The upside may be limited in the near term, but I agree with Monyman3 that long term FB just has too much data and too many users – that’s a persistent advantage that will last close to forever.
I think it’s a positive for FB long term. They acted on strength not weakness. They are willing to sacrifice short term gain to maximize their long term potential. It also prove that they have the “capacity to suffer”. This is the kind of business that I want to hold for long term.
Young people still check FB religiously to see what their friends are up to. I cannot see any real change in their behavior in the forseeable future. For that reason alone I will continue to hold. Glance at the 5 year steady growth rate in the price of FB stock. Sometimes slow and steady works just fine for me.
I hold a medium size position in FB. I have been seriously considering selling it in the face of these changes to the news feed which is the life blood of FB.
Some folks think this will boost user engagement over time. Apparently Zuck thinks this way. While that notion may be correct, I’m not so sure I want to hang on to the stock waiting for the hoped for results to show up on the bottom line.
In fact, it’s a gamble and the results may never materialize. In the near term (I don’t know how long that is, a year? Two years?) I don’t see anything positive coming from it. As far as I can see the most immediate effect will be lost revenue.
As I usually do, I’ll probably sell my position in dribs and drabs when I am convinced I have a better place to invest the funds. But, my intention is to exit. If am wrong over the next few months, I’ll see it and may reverse my actions and buy back in, but for now this move strikes me as a net negative in the near term and a gamble longer term.
Gambles sometimes pay off. Zuck is a pretty smart guy and he knows FB probably better than anyone. Is this a prescient move or a mistake? I don’t know, but over the next year or so, I can’t see how this is going to help the company grow, and therefore I can’t see how it will make the stock price rise. I’m too old to wait around two years or whatever for this to become a net positive.
What are your thoughts on Facebook with the news feed change?
I believe this would be a good thing if they change to a quality over quantity model. FB knows everything about a person and in most cases even has images. With all this data, FB should be able to deliver high quality ads and achieve incredible clickthrough-rates (CTR).
ktcfool – who is tired of seeing ads in his feed for items purchased days before.
Long FB
I think at some point soon the law of big numbers comes in to play, right? FB is already over $500 Billion market cap. I’m sure they will get to a Trillion cap, but $1.5 trillion? Pretty staggering isnt it? I’ve had shares since the IPO, and doubled up when in fell to that $18 range.
I’m still holding my shares, but Ive already decided that I will start selling shares as I need cash for newer purchases or in the event of some sort of market panic.
Well, look, I’m long FB – it is constantly jockeying for top spot in my portfolio – and have been long for about three years. Here are my thoughts:
I trust Zuck. Not blindly, obviously, but I gotta give credit where it’s due. He has done a heckuva job with FB. If he thinks this is the right move, he at least deserves benefit of the doubt IMHO.
It sounds pretty unanimous that most think this is the right long term move. I happen to agree with that assessment and want my companies being run with that exact long term mindset.
According to at least one analyst, this could raise the ad prices on the social media site.
Schackart spoke with a large digital ad buyer and a third-party direct response buyer to see how the the recent changes to Facebook’s news feed algorithm — which will prioritize friend content over public content from businesses and brands — could affect ad revenue.
While the recently announced changes to news feed algorithms caused uncertainty in the market, especially regarding the change’s effects on ad revenue, a large digital ad buyer with whom Schackart spoke believes ad pricing could possibly go up as much as 25 percent, the analyst said.
“Less time spent on Facebook (driven by the feed being less cluttered with posts from businesses/brands/media) leads to decreased supply, and thus higher pricing,” Schackart said, recapping the ad buyer’s comments. The third-party direct response buyer told Schackart that the algorithm change could become favorable for advertisers in two to three quarters, and said the amount of “clutter” will decrease while the amount of relevant ads stays the same, according to William Blair.
I added more FB last week. It’s about 10% now and I’m happy with that allocation. I have no plans to sell and would probably only add again if it got silly cheap.
I agree with several of the writers above. Its too large to have significant upward movement. I look for small companies that are “Rule Breakers”, and can grow 10X in the next 10 years.
Of course, I have been saying that for the last 3 years about Facebook, Apple, and Google, and we all know how badly they have tanked.
Young people still check FB religiously to see what their friends are up to. I cannot see any real change in their behavior in the forseeable future. For that reason alone I will continue to hold. Glance at the 5 year steady growth rate in the price of FB stock. Sometimes slow and steady works just fine for me.
I am not sure what you mean by “young people”; but my experience is that anyone 20 and under does not use FB to nearly the same level as those 30 and older. As a point none of my teenage kids use facebook; neither do any of their friends. They use Snapchat like crazy; and occationaly use Instagram.
I am more of a bear on Facebook. Let’s assume they can earn $8 per share this year. At $175 that is a PE of just over 20 which doesn’t look very expensive in today’s market. However - where is the future earnings power going to come from? I view this latest change as an acknowledgment that they have saturated their current user base; and as indicated above new users are harder to find.
If you are basing your decision on looking back 5 years and projecting that business trend forward I think you will be disapointed.
I have A 15yr old. He has never been on Facebook and has said he most likely never will be on it.
He does use snapchat a lot, plus utube. Most of his friends use instagram.
This is just a FYI from my part of the world.
What are your thoughts on Facebook with the news feed change?
Short-term, slight dip.
Long-term, higher retention rate than without the change. Too many ads reminds me of what the cable
industry did to cable tv–destroyed it with too many ads.
I don’t use Facebook, in fact I erased everything in my account last year for security reasons. But
I do think Z’berg is doing what he feels will be best for the company’s growth for the long haul, and I
can’t disagree with this move.
My concerns with Facebook is the growth rate: It’s too high to ignore, but it’s too low to rock a port
of fast-growers. So about once per quarter, I have to waffle a bit whether to sell and add to one or
more fast growers, or keep on accepting a return of 35-40% that is … well, almost a sure thing. So far
I’ve convinced myself to hang in there with Facebook for the last 3 years. I consider Fbook and Google as
kind of anchors for a group of otherwise high-risk portfolios. So far, it has only amounted to a slight
drag on overall returns. But when/if tech hits the skids, I don’t expect either to fall as much as most
stocks in my ports, and I also expect them to regain their momentum considerably quicker.
Saul would probably say that a drag on returns is a drag on returns, period. And he’d be right but even
risk takers would rather not die of self-inflicted wounds. (Or something like that.)
I guess Holding FBook and Google have become my modern-day substitute for the old days where it was
common for many investors to hold “utility stocks.”
A majority of people do not know that microphone permission is enabled for many mobile apps, obviously including ones you use to record video or conduct a video chat. There are cases where some of the apps are accused of listening in on conversations for keywords, then serving up relevant ads. This supposedly occurs when the app is running in the background. My coworkers and I have seen instances of this ourselves on Facebook and Instagram, and we believe these cases are true even though Facebook denies them.
So, I cannot support a company who operates like that.
Let me start by saying I do not like FB the platform. I have an account and log on maybe once every 8 months or so to clear out the friend requests and that’s about it. That being said FB the stock is about 10% of my individual stocks port. Can’t argue with the numbers they have been putting up. I think this is where we start to find out what kind of pricing power they can command and I’m betting (by adding on the dip the change created) that they have the ability to command more. They along with Google control a huge amount (like 80% huge, I forget the actual number right now) of online advertising dollars and they are both still taking market share. Now there may not be much left to take but I would not be surprised to hear an announcement about progress on monetizing Instagram or what’s app soon. If the stock does take a hit in the next couple of quarters I will reassess but for now staying the course. I am however starting to think a little more about the Amazon announcement to try and suck some dollars out of this space… we shall see.
My impression is subscriber growth among younger age demographics peaked several years ago.
Zuck’s decision suggests that current subscribers are fatiguing. Furthermore, today’s youth treat social media apps like Las Vegas Clubs - they’re regularly distracted by what’s new. The moat in social media is subject to frequent drought.
Decentralization is becoming the theme of interaction worldwide; there will no longer be a market for central control. The world will move on. Easily. Remember AOL? Me neither.
Thanks to all for the thoughts on Facebook, it has helped me clarify my thinking.
This board is an idea meritocracy, now I just have to decide who has more believability, ha ha.
Negatives
-getting harder to grow with the law of large numbers
-younger population doesn’t use Facebook much (I also have 2 teenagers who don’t use it)
-“fake news” increases regulation risk and cost
can only show so many ads
Positives
Zuckerberg
whats app, Instagram, and Occulus
network effect
online advertising duopoly with Google
data they have collected
I plan on keeping my Facebook shares at this time, but will have it on a shorter leash. I think Facebook is at an inflection point, almost peak Facebook. It kind of feels like the NFL, peaked, but might be so strong it doesn’t matter. Growth of its main business most likely slowing down soon, and the growth potential being the monetization of Instagram and whats app. Also, they could find new ways to exploit all of the data they have collected.
