Well. That was a good clever start to an article if I’ve ever seen one.
Turns out I already made the same joke. I even made the same joke about how witty I was in making the joke. It’s all very meta.
Last week I re-joined Facebook, after being off the site for approximately the last five years. Why? It’s not something I’m going to admit very freely, but it’s because I may be feeling a little homesick. Nobody ever talks about that with their WHOO! TRAVELING IS SO GREAT posts, but apparently it’s a thing.
I can’t get real nachos here either. I can get some half-assed attempt, but not the real thing. I ate nachos like once a month at home. They’re tasty, but they’re not exactly my go-to food, y’know?
So I’m back on the Facebook. (Like Financial Uproar’s page here! If you do, a puppy licks a kitten. It’s very cute.) I couldn’t retrieve my old account, because maybe I deleted it for good. At least, I think. I can’t remember.
I’m hoping it’s stuck in the bottom of some server somewhere, like a particularly sticky turd. It just won’t go down!
I did all the usual stuff you’d do when rejoining. I found about a hundred people I know and added them. I found my ex-girlfriend and made sure her new guy is less attractive than me. But I didn’t add her, because that would be the worst. People would literally die.
As I’ve gone through and added people, I noticed something.
Nobody ever posts anymore. Not only that, but it took a lot of people a day or so to get to my friend request. Not only have people stopped showing up as much, but they don’t put nearly as much stuff on there. Somebody who used to be on several times a day now might only be on once a day.
I noticed something else, as I added all my old high school classmates and people I used to work with. A lot of people weren’t there anymore. Like me, they just up and deleted their profiles.
In the second quarter of 2012, Facebook reported that 130 million people in the U.S. and Canada showed up at least once a day. Two years later it was up to 152 million. That’s about an 8% increase per year. That’s not very exciting.
Of course, the rest of the world is where the exciting growth is. European daily users rose about a third, going from 152 million to 203 million. Asia basically doubled, from 129 million to 228 million. And the rest of the world did well too, going from 139 million to 244 million. Overall, the number of daily users rose from 552 million to 829 million.
That ain’t bad. But what about monthly active users?
Overall they grew from 955 million to 1.32 billion. In North America, they grew from 186 million to 204 million. Even though North America grew, it wasn’t really that impressive. Monthly active users barely rose 5% a year over the last two. This isn’t very exciting for a stock that’s trading at more than 82 times earnings.
Of course, all the growth is coming from Europe, Asia, and the rest of the planet. Who cares about North America?
It’s important for one reason — it’s Facebook’s only mature market.
The company started in 2004, and opened the site up to everyone in 2006. I created my original profile in 2007, when it was very popular. Then a few years later the site hit another milestone as it introduced mobile browsing for the first time.
Now? It’s kinda boring. Nobody is excited to go on Facebook anymore. They show up, scroll through their timeline, like a few things, and then hit the road. North Americans are bored with it. We have Facebook because we perceive a need, not because anybody is excited about it. Asians are excited about Facebook. Canadians are not. It’s become a utility.
Meaning, in about three years growth is going to come to a screeching halt. It’s already starting to happen in North America. The company will have signed up everyone on the planet who wants a profile, and there will be very little growth left. Even if it manages to get unbanned in China, do you really think the Chinese are going to rush and replace existing social networks with Facebook? I doubt it.
Which is why you’d be nuts to even look at the stock at these levels. Besides, you can’t convince me we have anything less than a massive social media bubble going on right now. Just look at the valuations. When Facebook stops adding 50 million users a quarter, that stock has a long way to fall. It’s barely profitable, and that’s after spending the last three years doing nothing but working on making it profitable.
Let’s put it this way. In 2013, Ford’s net profit was $7.1 billion. Facebook made $1.5 billion. Ford has a market cap of $66 billion, while Facebook has a market cap of $196 billion. What would you rather own — THREE Fords earning you north of $21 billion per year, or Facebook, earning you $1.5 billion per year but with lots of growth?
Facebook will peak at some point. Don’t be holding it when it does.