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.
best,
Matt
Here’s some analysis from a guy way smarter than me, Ben Thompson over at Stratechery: https://stratechery.com/2018/facebooks-motivations/
I’ve owned FB a couple times and do currently. I’m staying the course.
Here’s some analysis from a guy way smarter than me, Ben Thompson over at Stratechery: https://stratechery.com/2018/facebooks-motivations/
Ben’s podcast “Exponent” is quite good.
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.
From https://www.benzinga.com/analyst-ratings/analyst-color/18/01…
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.
Matt
Long FB
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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.
Sarcasm off.
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.
tecmo
…
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.
Paul
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.” 
Dan
If you don’t own the stock, why?
https://www.independent.co.uk/life-style/gadgets-and-tech/ne…
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.
-ElonFeeNix
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.
TTD could win big, as a thought. But WTHDIK.
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
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.
Happy investing
Jimbo
I think the brother sister team here manages at a a very high level. I suspect they were unpleasantly surprised by the amount of fallout for them from the sub rosa political hijackings of the site in 2016, fallout which has not completely abated. This seems like a way to sanitize the common experience and make it more friendly/less controversial.
I think they are seeking world domination and this won’t slow them down much. For as long as the growth doesn’t markedly slow, I let the trend be my friend here, long and staying that way.
– Also a Jimbo
If you don’t own the stock, why?
1.- I don’t like Facebook, the website
2.- I invest in high tech and internet via ETFs
Denny Schlesinger
Negatives
-getting harder to grow with the law of large numbers
It’s not the law of large numbers but market penetration.
law of large numbers
The law of large numbers is a principle of probability according to which the frequencies of events with the same likelihood of occurrence even out, given enough trials or instances. As the number of experiments increases, the actual ratio of outcomes will converge on the theoretical, or expected, ratio of outcomes.
http://whatis.techtarget.com/definition/law-of-large-numbers…
The law of large numbers has application, for example, in insurance. You don’t know when a person will die but if you look at a population as a whole you know what the mortality rate is and what insurance premiums to apply. The larger the population the more accurate the mortality rate.
Market penetration is what governs growth rates which is best illustrated by the “S” curve. Typically growth starts slowly until around 15% market penetration is achieved. At this point more people pile in and the growth rate accelerates creating the “curve in the hockey stick,” the bottom curve of the “S.” Fast growth continues until around 85% market penetration when you start running out of new buyers. At this time the tip of the “S” is put in place. Once you have all the market the most you can grow is as fast as the market itself grows – this is known as “vegetative growth.”
4.2.2 Population growth
Latin America will have a projected population of somewhere between 554 million (481) and 637 million (37) by the year 2000. Most of this increase will be absorbed by the big cities, for nearly half the product of the vegetative growth in rural areas emigrates to the cities (37, 46, 227, 373).
http://www.fao.org/docrep/t0750e/t0750e0s.htm#4.2.2%20popula…
The “S” curve
https://www.google.com/search?q=the+%22S%22+curve&num=50…
What you should look for is market penetration of the industry as a whole first and then FB’s share of it.
Denny Schlesinger
Some comments from this thread…
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 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.
I also concur with these assessments, that those 20-25 and under do not use FB much, but, I also think that will change as they get older, especially when they have a family. That is why people like FB, to keep track of what’s going on with family/friends. I wasn’t on FB for a long time, but when I started missing out on some events because I didn’t check my unused FB account, I started becoming more active on it, and I do enjoy seeing what family and friends are up to that I didn’t know before.
I think as the younger set ages, they will start using FB more…whether you consider that a reason to invest is beyond my point, my point is that we don’t need to worry about the fact that the younger age groups aren’t currently FB users…they will be.
Up 53% and still climbing.
I’m up 141.3% so far.
– This…is the MaineReason
Long FB
I will tell you my thoughts-which are largely shaped by my own usage of facebook. Over the last few months I stopped using it, first as an experiment and then after realizing when i came back that most of my feed was ads and that posts from friends were few and far between. It is my impression that many of my friends have also abandoned it too but maybe that it just the way the feed is structured. In any case, has it affected my experience? Yes, no doubt about that. So, as a long term stock holder, I think it’s great that they are doing something about it. In the short term my fear is that the issue is already affecting facebook usage. If earnings reveal this, we could see another hit at earnings time. It’s great if they are so far ahead of the game that the company is taking action pro-actively based on user experience surveys, and that’s possible too of course. Most people I’ve read seem to think this will just be a blip in a long term trend upwards, and I don’t disagree with that. Am still long options but reduced my position by about a third until I see what happens at earnings time.
As for size being a determinant of potential- people told me that about Apple when it was less than a third of the market cap it is now, so I’m not buying that.
what Are your thoughts on Facebook with the news feed change?
Short term, irrelevant. Long term, almost irrelevant. Really long term, maybe not.
Removing news from the newsfeed and putting more “friends” posts in only makes the silos more vertical. Liberals complaining to liberals, conservatives complaining to conservatives. Nobody fact checking anything anymore, more intrusion from bad actors, less real world.
Yes, it may lengthen “engagement” time slightly, so for their advertising that’s good. For society maybe not so much. Others may laugh, but unless the get in front of their fake news problem and election problem I can forsee regulation in their future. What form that might take I have no idea, but I wouldn’t dismiss it out of hand. Zuck “hiring people” to monitor? Seriously? A billion posts a day? How can that work?
Facebook is anathema with the younger set, they like instagram or snapchat or whatever (Facebook owns some of this so while it doesn’t monetize as well, at least they have a toe in the future, so to speak.) But I have to agree with others that the law of large numbers will weigh them down some; they’re already huge, as big as the three 3-letter networks combined by ad revenue. That doesn’t mean they’re through, though. They will figure out how to get into live sports or other things that are still ahead, I’m sure, so there’s some future there, too. Will they take on Netflix? I have my doubts, but that could happen, too. They have a eBay challenge, but that’s a bust so far, too.
The moat is huge, I wouldn’t worry about a direct competitor, and frankly I don’t see minnows nipping at the whale either, at least now (except the already mentioned kids’ sites). But as for changing the newsfeed? Yawn, a pretty big non-event I think.
I’ve had it since the post IPO drop, since 17 and will continue to hold it, and I could be talked into adding with a good argument, but I probably won’t because I haven’t heard it yet. Change in news feed? That’s not it, at least enough not to move the needle significantly. Growth from here? Sure. Rocket ship? I think not, not without some other spellbinding initiative.
Regulation. That’s the threat. I expect it in foreign lands first, and that might presage movement here, although it’s a lot harder. Google is facing headwinds in Europe because of it, don’t think it can’t happen.