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Facebook Experiments with Enterprise and E-Commerce

Posted on Friday, Nov 4th 2016

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Nothing appears to deter Facebook’s (Nasdaq: FB) growth. Earlier this week, it announced its third quarter results which continued to outshine market performance and delivered record revenues. This was the fourth consecutive quarter that Facebook surpassed market expectations.

Facebook’s Financials

Facebook’s Q3 revenues of $7.01 billion were ahead of the market’s estimates of $6.92 billion. EPS of $1.09 was also significantly ahead of the Street’s projections of $0.97 for the quarter. A year ago, Facebook had reported revenues of $4.5 billion and an EPS of $0.57.

By segment, advertising revenues came in at $6.82 billion, compared with the Street’s estimate of $6.71 billion. Mobile ad revenues accounted for 84% of advertising revenues. A year ago, they brought in 78% of advertising revenues and a quarter ago, they accounted for 84% of advertising revenues. Payments and other fees revenues brought in the remaining $0.19 billion.

Among operating metrics, daily active users (DAUs) grew 17% over the year to 1.18 billion with mobile DAUs growing 22% to 1.09 billion. This was the first quarter that more than a billion users were active on their phones on Facebook. Monthly active users (MAUs) grew 16% over the year to 1.79 billion with mobile MAUs growing 20% to 1.66 billion.

Facebook’s New Offerings

Facebook continued to improve its monetization capabilities with the launch of new services. Recently, it enhanced its presence in the enterprise segment with the release of an upgraded Workplace app. The app is targeted at improving user engagement on the Facebook Workplace app. It is a subscription-based enterprise version that will help simplify the process of collaborating and connecting within the workplace. Facebook is hoping that since globally 1.8 billion people are already familiar with the Facebook app, they will find it easier to adapt to the Workplace app.

Facebook had launched the very first version of its enterprise offering at the beginning of 2015. Since its launch, Facebook has more than 1,000 organizations signed up for its app. But while the service offers familiar features such as messaging, open streams, media-sharing, private groups, and inter-company connectivity, it is still viewed by many as a social media offering and not an enterprise-wide collaborative tool that can enhance productivity. Additionally, there are other, more enterprise-oriented collaborative tools already out there such as Salesforce’s Chatter, Microsoft’s Yammer, and Slack. Facebook is trying to beat competition through a price war. It charges as low as $1 per user per month compared with its competitors who end up charging as much as $5 per user per month.

Earlier last month, Facebook also launched its e-commerce service called Marketplace. Facebook was already witnessing the trade of goods among Facebook users through the Facebook Groups. According to a Facebook study, more than 450 million people visited buy and sell groups each month. To facilitate the process, Facebook launched Marketplace, which is a convenient destination to discover, buy, and sell items with people locally. The app shows photos of items that nearby users have listed for sale. Users can also search for something specific, filter by location and category of price.

These experiments are interesting efforts to discover new business models for the company. Their existing advertising business model is absolutely fantastic, with the most advanced targeting capabilities both on mobile and desktop. Whether or not the new experiments succeed, Facebook will continue to grow just on the strength of its ad revenues, just not as fast. That is the key driver behind these experiments – a search for other fast growth monetization models.

Its stock is trading at $119.25 with a market capitalization of $344.4 billion. It had touched a 52-week high of $133.50 last month and has recovered from the 52-week low of $89.37 it had fallen to at the beginning of the year.

Photo Credit: Marco Paköeningrat/Flickr.com

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