I Can’t Stop Investing in Facebook:
Almost a year ago to the day, I published my first book How to Leverage Your Real Estate Business With Facebook. Before I started researching for my book, I was already an avid user of Facebook. I considered myself a late adopter of Facebook, as late as someone could be who was in college during the college-only years of Facebook.
Half-way through writing my book I made my first investment into Facebook. The more I read, and the more I wrote, the more I invested.
Today it is by far my largest holding. No, it does not pay a dividend. But for someone like myself (early 30’s) who is investing for the next 10-50 years, Facebook has a LOT of benefits. Imagine being able to invest in Google 10 years ago. That is where I see Facebook today. Much like Google, who began as a search engine, Facebook is much more than just a place to stalk your highschool exes.
The Biggest Misconceptions Regarding Facebook:
Facebook is just for teenage girls looking to share photos:
This is the hurdle Facebook faced during its first 3-5 years of INSANE growth. In addition to its incredible user acquisitions, its ability to monetize these users has been even more impressive.
Teenage girls are no longer using Facebook:
What once was considered its biggest problem, critics now maintain the opposite to be true. But hey, critics gonna criticize.
All the young people are using Snapchat now:
Snapchat Snapchat Snapchat. AKA: Tha Facebook Killa. Except that its not. The biggest threat Snapchat poses to Facebook is that its attracting all the young people. When I tell people I am investing in Facebook over the next 10-50 years, their biggest concern is always Snapchat.
Tell me honestly, do you really think Snapchat is going to destroy Facebook and make them obsolete? Myspace is the common reference here, but remember who won that battle. I have mentioned previously why I think Instagram Stories is not a Snapchat killer, but still poses a threat to its growth, so I won’t touch on that here. (Don’t forget who owns Instagram)
What it all comes down to is this: The world is big enough for Facebook AND Snapchat. Much like the world needs Coke, Pepsi AND RC Cola. If you could go back in time to the invention of Soda, which one would you bet on?
If it isn’t clear by now, I feel that Facebook is Coke. Or using the television analysis, I think Facebook is CBS. Snapchat is currently MTV, but they are trying to become NBC. Will they? Maybe. Will it affect CBS value? I don’t think so.
If your argument against Facebook continuing to become a successful company is the existence of Snapchat, then I suppose you shouldn’t invest in any company ever, for fear of a competitor putting them out of business.
Facebook isn’t cool anymore.
So what? Neither is Microsoft. Neither is Apple. What companies are cool anymore? What companies can stay cool from one generation to another? Is Snapchat going to be cool in 5 years after it monetizes its users, seeks rapid growth, and creates unique partnerships like its recent deal with NBC to stream episodes of The Voice?
The hardest thing for any company to do is monetize its customers without alienating them. Even the people who claim to hate Facebook still check their accounts 3x an hour.
What I love about Facebook:
REAL ESTATE– As someone who cut their investing teeth in the real estate business, I will always have a soft spot for this industry. Today, I believe the most valuable real estate in the world is the home screen on your smartphone.
How many apps do you have on your phone? How many do you actually use? How many do you use daily? How many are there on your home screen?
This is like being one of the first 3 channels on your TV. Can you put a value on this? Ask CBS, NBC and ABC.
Right now, Facebook owns 3 of these channels- err, apps on your home screen. Maybe not yours, but globally, Facebook occupies three of the most used apps: Facebook, WhatsApp, Instagram. Facebook messenger is also growing rapidly and soon they will allow money transfers through your account.
Thats like owning three huge blocks of prime real estate in the world’s fastest growing and most valuable city.
GENIUS– Is it safe to call Mark Zuckerberg a genius yet? Yes, yes it is. In fact, one of the smartest things I think he has done is surround himself with any and all of the other geniuses he can find. Either by hiring them, or acquiring them.
When Facebook buys a company like Instagram or Occulus Rift, he isn’t just buying the company. He is buying the people. These are some of the smartest people in the world.
Then, he gives them unlimited resources and more smart people to interact with. This may not always lead to optimal results, but over time will lead to more positive returns than negative. I am literally willing to bet on this.
SMART GROWTH- Zuckerberg, and Facebook, understand the growth model better than anyone. They wrote the book on it.
Step one– Acquire users through exclusivity (college kids only)
Step two– Age up (grow with that demographic and then acquire older users)
Step three– create so much value for users that when you monetize they are too addicted to change.
Step four– grow grow grow.
Facebook and Instagram are both in step four. Most competitors don’t make it past step one. Some make it to step two and start to get offers from Facebook (as part of their step four). Snapchat is a unicorn currently struggling with step three (after turning down offers from Facebook).
I personally think Snapchat will succeed. I think they will find unique ways to monetize and will occupy a space on your home screen for many years.
But I don’t believe this is a zero sum game affecting Facebook. I would be more worried if I owned a television studio like NBC, ABC, CBS. Sure, they held a monopoly on your attention for several decades. But so did Radio and Newspapers.
In the battle for customers, clients and audiences, the fight between Snapchat and Facebook is all for show.
The real fight is for space on your smart phone home screen. Facebook and Snapchat are already there. While other media conglomerates are slow to realize this shift in your attention, companies like Twitter, Instagram, Snapchat, YouTube (google) and Facebook are solidifying their positions and investing in the next ones: Augmented and Virtual Reality.
Oh, and did I mention that Facebook owns Oculus Rift? Currently the biggest name in this space?