Facebook Inc. (NASDAQ:FB) May Be Getting into Hardware
Yesterday, July 5th, we penned an article "Facebook: The Unbelievable New Data on Growth." That article focused on new data surrounding usage for Generation Z on Facebook Inc. (NASDAQ:FB) properties Instagram and Facebook proper. The critical takeaway as that Facebook, not Snapchat, was the number one destination for the youngest generation. That data, together with data surrounding Facebook's popularity with older generations, has made it the dominant force across all age groups.
Having said all of that, Facebook Inc. (NASDAQ:FB) does face that lingering risk of falling relevance. Nobody really knows if a surprise new social media could abruptly turn Facebook into a shrinking business rather than one that has huge growth, and as long as Facebook is "just a collection of apps," that risk will remain.
But, breaking news today has turned that narrative upside down.
FACEBOOK (FB): BREAKING
If we look at Facebook Inc. (NASDAQ:FB) and its revenue growth, we see a staggering result.
Facebook Inc. (NASDAQ:FB) Revenue
The twenty billion dollars in sales in the last year is projected to hit just under thirty five billion dollars by 2017, or fully a 75% rise. But, Facebook revenue comes almost entirely from advertising -- over 95%. That's the only real bearish narrative surrounding the company -- a lack of a diversified revenue stream. But news today may have shaken that narrative loose.
Bloomberg reported a subtle story today where a man named Rich Heley has joined Facebook's famed and super secretive "Building 8."
Mr. Heley's last two positions were vice president of product technology at Tesla Motors (NASDAQ:TSLA), which is a hardware position, and mechanical engineer at Apple Inc. (NASDAQ:AAPL), also a hardware job. Now here's why that matters.
FACEBOOK (FB): HARDWARE
Facebook's founder and CEO, Mark Zuckerberg, set out a long-term plan for the firm stating that Facebook will be committing:
Stop right there. That single word, "hardware" is enormous. Facebook is already focusing on hardware with its virtual reality device Oculus, but the firm appears to be going further.
Facebook has always faced the challenge that access to its family of social media are always enabled on someone else’s hardware. It's either an Apple Inc. (AAPL) desktop, MacBook, iPhone or Pad, or a Microsoft PC or a phone powered by Google's operating system, Android (and perhaps on the Google chrome browser).
With the truly frightening threat of ad blocking proliferation, the market has always had to brace for the potential, albeit a small probability, of some rather catastrophic ad blocking software infiltrating the world of mobile apps driving a stake into Facebook's sole revenue driver in heart. In fact, here is the chart of ad blocking software proliferation.
But, if Facebook enters the fray of hardware, whether that be a mobile device, phone, tablet or a different version of hardware that acts in a similar way, all of a sudden that risk to Facebook's heart and soul could be eliminated. It also gives Facebook a more diversified revenue stream. The news today surrounding the new hire is much more than a quick headline across a terminal screen, it's the beginning of what could be a seismic shift by Facebook Inc. (NASDAQ:FB) to dominate yet further.
WHY THIS MATTERS
Facebook's monstrous revenue growth is going to come from the largest disruption in the advertising world since the advent of the television -- online video. There is one firm that is aiming to be "the Google of online video." At Capital Market Laboratories we see these trends – the ones that will create the "next Google" or the "next Facebook." Our research sits side-by-side with Goldman Sachs, Morgan Stanley and the rest on professional terminals, but we are the anti-institution. Our purpose is to break the information monopoly held by the top .1%.
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