Facebook has shown remarkable resilience in the face of a raging pandemic, a consequent economic crisis, and the recent onslaught of anti-trust probes. The Big tech, which is how the highest-earning companies, including Facebook, Amazon, Apple, and Google, are collectively referred to, has grown significantly in stock prices during the pandemic.
Facebook, along with the tech giants Amazon, Apple, Alphabet, and Microsoft, have grown at an unprecedented rate, with raking in billions before the pandemic and then some during. While all other American companies suffered a combined 6% decline during the pandemic, these five tech companies grew a whopping 37% in stocks. They collectively account for 20% of the US stock market, an unparalleled feat by any single industry in several decades.
Welcome to our latest issue of issue of ValueWalk’s hedge fund update. Below subscribers can find an excerpt in text and the full issue in PDF format. Please send us your feedback! Featuring hedge fund assets near $4 trillion, hedge funds slash their exposure to the big five tech companies, and Rokos Capital's worst-ever loss. Read More
Facebook has had an eventful year with several negatives and positives and has successfully remained untouched by the negatives. A pandemic, ad boycott and anti-trust probe later, Facebook stands at an all-time high stock price. Currently, Facebook reports 3.14 billion monthly users from Facebook, Messenger, WhatsApp, and Instagram combined. However, some of these issues are likely to haunt Facebook in the future, particularly the anti-trust probe. What does this mean for the shareholders and to Facebook share trading?
How did Facebook thrive during the pandemic?
Facebook COO Sheryl Sandberg attributes some of the success to early investments made in making Facebook ad returns for businesses transparent and accessible for its users. The pandemic tightened the purse strings of small businesses, which meant that small businesses looked for a limited advertisement platform that promised targeted advertisements. Facebook focused on narrowing down the target groups of specific businesses based on their locations, which helped bring visible results.
The pandemic proved to be a blessing in disguise for social media in general since people turned to them for keeping in touch with their friends and maintaining a social life. Facebook updated its platform to match the needs of the hour by introducing ‘Educational Hub,’ which enables students to find and join Facebook communities that include teachers and students who share similar interests. It also provides resources for mental health and socially relevant issues.
Paid Online events
This Facebook feature allows content creators, performers, teachers, and other skilled workers to earn money through Facebook by hosting paid events. This initiative created opportunities for performance-oriented jobs that were affected during the lockdown. Although Facebook has decided not to impose a transaction fee on this feature for this year, it has definitely added greatly to the user base.
Introducing Facebook Shops
Facebook Shops, in partnership with Shopify, has increased Facebook’s revenue potential. So far, Facebook is involved with commerce and businesses only so far as advertising for them. The actual business transactions took place outside the realm of Facebook. Facebook Shops is an initiative that partners up with e-commerce websites to encourage businesses to put up shop through Facebook and Instagram without any additional charges, with a 5% transaction rate for any sale made.
Why did the Facebook earnings remain untouched during the Ad boycott?
Facebook has stayed away from picking sides on the political front, sometimes to a fault. This because obvious when Facebook refused to take down a particularly sensitive post by President Trump on the Black Lives Matter movement. Many people registered their protest on this, including several employees of Facebook. After Twitter took a stand on the issue, Facebook’s complacency became evident, leading to an ad boycott by some of the most prominent brands such as Coca-Cola, Starbucks, Verizon, and Unilever. However, this did not significantly affect ad revenues on Facebook. CEO Mark Zuckerberg attributed this to the fact that Facebook’s revenue is mostly thanks to small businesses and not industry giants.
The FTC Anti-trust probe and the future of Facebook
When Facebook CEO Mark Zuckerberg was asked to give a deposition to the Federal Trades Commission, it was expected to be a concern for the growing company. Anti-trust probes can become quite exhausting and expensive in terms of shareholders if the probe turns into a case. Fortunately, Facebook was given a partial way out at the end, by making a payment of $5 billion for the privacy breach charges. In an even fortunate and incredible turn of events, Facebook stocks hit a record high right after the deposition.
Whether Facebook is a safe bet for new investors is a tricky subject. Facebook does have a lot to offer in terms of avenues to bring in money, such as the new e-commerce ventures. However, stock experts opine the continuing anti-trust moves can be a determining factor in Facebook share trading.