Like it or not, Facebook is crushing it

You might not 'like' Facebook, the social media phenomenon. But it's very hard not to be impressed by Facebook, the business. 

Big year ahead: Facebook CEO and co-founder Mark Zuckerberg.
Big year ahead: Facebook CEO and co-founder Mark Zuckerberg. Photo: Jeff Chiu

More than a billion people use its core service every day, 934 million of them on a mobile device. 

Those staggering numbers were contained in the gigantic social network's quarterly earnings report, released to investors in the US on Thursday morning. 

The social media site keeps growing and growing.
The social media site keeps growing and growing. Photo: Facebook

Not only is Facebook - which is apparently about to change one of its key features, the 'like" button - huge in terms of its user base. It's also growing like crazy, and (unlike other notable internet growth stocks) making real money.  

Facebook made a profit of $US3.7 billion ($5.2 billion) in 2015, up 25 per cent from a year earlier. Revenue grew by 43 per cent to $US17.9 billion. Its shares soared in after-hours trading in the US. Maybe the so-called FANG trade, which saw investors pile into fast-growing internet stocks (Facebook, Netflix, Amazon and Google/Alphabet) last year, still has some legs after all. 

Advertisement

Analysts surveyed by Bloomberg expect Facebook to generate a profit of $US5.3 billion next year (which would be another increase of 43 per cent). Those estimates might get revised upwards in the next few days as Wall Street digests the result. 

In any case, Facebook is growing into its once ridiculous-looking valuation (valued at upwards of 30 times next year's estimated earnings, its not exactly cheap, but not as expensive as others) and cementing its status as one of the great internet success stories.

As Twitter continues to struggle, it increasingly looks like social is a winner-takes-all market, and Facebook is the winner. Also, it is a dominant player in an industry whether many others have struggled: mobile ads. 80 per cent of its revenue came from mobile devices during the quarter.

The company and its CEO Mark Zuckerberg have a big year ahead of them: Facebook has started taking orders on its Occulus Rift virtual reality headsets and expects to start shipping them by March.

It  has changed its strategy to make money with WhatsApp, the messaging service used by an estimated 900 million people that it acquired for $US17 billion in 2014, and there is speculation it could increase the number of ads on Instagram, its photo-sharing app. 

There are plenty of risks, and things change quickly in tech. But Facebook is on a roll at the moment, and its recent track record suggests it should be able to deal with them

1 comment