Finance

Tech Stocks: Facebook’s Advantages

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No doubt, Facebook is one of the most traded and highly popular tech stocks in the stock market right now. It’s a member of the FAANG group of stocks, and it’s still beating expectations as of press time.

Social media platforms have been making waves in the financial markets in the past decade. And Facebook is at the forefront. It started in a Harvard dormitory where CEO Mark Zuckerberg birthed the idea of this social networking giant.

But apart from its humble beginnings, let’s look at some of the reasons why Facebook remains a very solid stock investment these days and why the business is beating competitions to the ground.

Advertising

With the massive amount of platform users, it would be a mistake to ignore the potential of the platform to grow with digital marketing.

Small businesses compose the vast majority of the advertisers on the Zuckerberg-led platform. For the first quarter of 2018, the company raked in advertising revenue of $11.97 billion. The company also accounts for 20% of the global advertising market.

Facebook has access to a mind-numbing amount of user data and it is also very efficient in the use of target marketing. The broad-based ads that target different sets of people made it possible for the platform to provide a customized user-experience to its users.

However, it’s not all glitz and glam. Facebook has been embroiled in a data privacy scandal after it was revealed in 2017 that political consulting and strategic communication firm Cambridge Analytica collected the personal information from up to 87 million Facebook users.

Cambridge Analytica was the company behind the pro-Brexit campaign in the UK and Donald Trump’s presidential run campaign in the 2016 US elections.

Mobile Trends and Updates

Facebook’s rapid growth can be attributed to mobile application boom after it launched its messenger app in 2013.

Messenger has over 1.2 billion monthly users, as of 2018. Instead of fighting with the mobile market competitor WhatsApp, Facebook simply acquired its rival in 2014 for a whopping $19 billion. This brought another 1 billion users to its already vast user base.

According to data, global users consume four to five hours per day on their phones.  On a typical smartphone, more than 30 mobile applications can be found, and three of those account for 80% average daily usage.

Among the global users, the Facebook app is the most widely used app each day.

Engagement Advantage

According to Facebook, the “engagement rate” is the percentage of people who viewed a post and either shared, liked, reacted or commented on the post.

Put in another way, when a large number of users respond to a post, it means that the post holds some actionable impact on the user or viewer.

From the user’s point of view, this may all come down to how much he or she agrees or disagrees with a certain post. However, for the business, the engagement rate measures the pulse of the potential buyers.

The users can scroll through an endless flow of catalogs and express their opinions on products and services.