Peter Thiel sells most of remaining Facebook stake
reuters.com
reuters.com
https://www.hollywoodreporter.com/news/peter-thiel-facebook-...
Notice that at the time the article was written he had sold about 37 million shares and had only 5.6 million left. The prices he got were absolute peanuts compared to the current price -- he sold 17 mln shares for $38, and another 20 million for about $20. The current price is $180.
I am not writing this to criticize Peter Thiel, obviously the stock market is very difficult to predict. And, unfortunately, I did not buy FB at $20, so I cannot say I had a better mastery of the market than him. The point I want to make is that is downright silly to make any conclusions about FBs valuation based on this sale.
We just tried to use it to advertise and had exactly this experience:
https://www.youtube.com/watch?v=oVfHeWTKjag
Pulled the plug. Nothing but worthless traffic, no engagement.
First step: only target users in countries that you care about and (sadly) do not target Indonesia, India, Pakistan or anywhere in Africa as these are mostly where the fake profiles are.
My guess is that social marketing works ok for brands that have a strong competitive position AND healthy margins.
Teesprings product offering is far too broad to benefit specific targeting which really just leads to low user intent, which leads to huge acquisition costs. No one gets excited for tshirts.
Products outside of these hugely saturated markets do amazingly well if you know what you're doing.
YMMV of course but we did not find Facebook ads effective at anything but reaching click farms.
(Feel free to correct me)
When you're Thiel, having the money liquid is more valuable than waiting. One way to look at is that he could have 5x'd the money had he not touched it. But I'd bet whatever he did with the money since the 2012 IPO (starting companies, investing in companies, etc) had a much better return than 5x.
The extreme of this would be the Silicon Valley right and its full and explicit embrace of feudalism and monarchy.
... and no, I'm not criticizing Thiel. The vicarious sycophancy of the HN community is a lot weirder and at times more troubling than the behavior of the actual SV rich.
The top post in this chain says that he sold 17 mln shares for $38 and another 20 million for about $20. The stock is currently trading at $180/share. If he had held on to those shares they would have been worth $6.66B today. According to Forbes his total current net worth is $2.6B.
I certainly won't criticize someone for making a diversification play after having already made such a huge gain (his initial investment was $500k) but in retrospect it very much looks like a mistake.
Judging decisions based on future knowledge is utterly worthless. "In retrospect, picking the losing lottery numbers was a mistake. In retrospect, picking the winning lottery numbers was brilliant."
It was only a mistake if it was a wrong choice given the information knowable at the time.
Just going up isn't enough if something less risky goes up faster.
Going down a little can even be a relatively good bet if everything else is absolutely tanking. Losing 1% of your principle is a pretty good deal if the stock market (and the dollar) go down a lot.
Relevant Market Caps:
Facebook: 525.34B, PE Ratio: 33.61
Alphabet: 727.00B, PE Ratio: 35.12
Amazon: 558.65B, PE Ratio: 292.63
Apple: 895.91B, PE Ratio: 18.99
Tesla: 52.64B
Ford: 48.08B, PE Ratio: 10.98
IBM: 140.35B, PE Ratio: 12.65
Microsoft: 641.20B, P/E Ratio: 28.12
The business model itself is so solid, it's scary. It's on better footing than Amazon in my opinion.
For the downvotes - are you implying that stock price is directly correlated with business performance and that the market is completely rational?
If anything, it's implying the stock price is not always correlated with business performance, otherwise the statement would be redundant.
My opinion of their business model and their performance is independent of my opinion of the product.
When you look at the numbers you'll see that they're actually similar companies who've monopolized segments of the digital advertising space. If you're going to complain about Facebook's market cap then you should also complain about Google.
Facebook's even got "other bets" -- Oculus, Workplace, WhatsApp, etc.
But I will not entertain low-quality, emotional comments like this and this community shouldn't either.
Facebook the user experience has - objectively and measurably (even almost by definition) - taken a severe nose dive since attempting to capitalize on the page views. They’ve spent their time evolving into an advertising behemoth that has upended the advertising market, but very poorly despite all the access they have to metrics and use identifiable data because the user’s best interests and the advertiser’s best interest are almost at polar cross purposes such that it isn’t possible to optimize for one except at the cost of the other.
Facebook ads simply do not convert except to Facebook properties (with the obvious “exceptions that prove the rule” aside); they are measurably worse investments than CPC advertising, probably worse than traditional CPM adverts (fake clicks), and probably better than old-school mass media advertising (billboards, bus stations, tv ads). They make their buck on people that either invest xxx thousand dollars until it becomes measurably obvious to the them or that don’t be know enough to measure.
Facebooks only “social” innovations that are actually forward-looking past the heyday of feeds and in-feed apps (FarmVille and co) for consumers are Instagram and WhatsApp, both of which were bought out when facebook’s own in-house attempts failed to compete.
Facebook Ads work. They work when you put effort into them and know what exactly what you're doing. Ask any marketing firm. It's a complicated mechanism that has to be learned and experimented with but now Facebook Ads are among the lions share of the advertising market along with Google. They work for many businesses. Just ask Dollar Shave Club. Ask Stitch Fix. Ask Warby Parker. Ask King.
Facebook Ads also don't work if all you're doing is throwing $10k into them with a bunch of random targeting. In fact, no advertising works if you don't know what you're doing and if you're not tracking everything to a T. That's not Facebook's fault - their engine is completely self-serve. As are AdWords from Google. You can blow $100k on AdWords and get no results just as easily as you can blow it on Facebook and get no results.
I made no value judgement on their innovations. I've learned better than to do that on HN where people become so hostile if you even suggest that Facebook might be useful in some ways. I only made a value judgement on their business which is sound and growing rapidly.
Furthermore, in many third world countries, the only internet they know and will ever see is facebook properties via internet.org.
I see the facebook logo on almost all retailers in my patch of the world. Retailers no longer advertise their websites or phone numbers. See us on facebook, they all say. This doesnt just happen without a lot of people brilliantly working hard and smart.
What does Amazon do? Sell stuff and logistics in a handful of countries. Facebook meanwhile has a very sizeable user base giveing them a lot of attention in a lot of countries, so much so they (allegedly) influenced multiple elections.
Private: If we can't co-opt it then it's not useful to us
FB angered the US government by allowing foreign agents to use its tools. So that's only an example of Russians using it on Americans. Now imagine how the US government is using it. You are not going to see it in this "Transparency" report that's for sure.
If FB is an industry on the level of TV or radio, then it's almost certainly not overvalued.
The implications and consequences of the consolidation of this power and influence into one company is a different discussion entirely (and an important one).
1. Much more precise user targeting
2. Direct feedback on effectiveness (did the user click-through or even just linger looking at the content?)
TV and radio seem like very crude tools in comparison.
Facebook "only" took in around $26Bn in advertising revenue last year. But their ads are considered more reliable and higher quality than Google's products, so admit some speculation about growth potential. With a global advertising market (across all mediums) of half a trillion dollars that is quickly moving into digital, is it any surprise that these top dogs have high P/E ratios? Those P/E's are based on anticipated future revenues, shares of a pie that is rapidly expanding in size. Comparing P/E using earnings of this year doesn't give the full picture.
That said, they're certainly not undervalued either, and this analysis does nothing to explain Amazon (WTF is going on there? Surely they don't have $200bn of inventory and warehouse property. Do they?). But 35 P/E is only 3.5x more than the 10x rule of thumb, and the entire market could reasonably grow by that amount. That appears to be what investors are betting on too.
(If I had to turn this into stock picking advice, I'd note that if the market is predicting the future accurately here, then one can also say that traditional non-digital advertisers aren't going to do well in the years to come [no surprise], and also that general tech will likely see a huge influx of revenue and capital investment as the top dogs trickle down their market share gains. Baring some black swan catastrophe things will likely be good in Silicon Valley for some time to come, even outside of the FANG companies. But you should not take this as investment advice, which I would not be qualified to give, etc. etc.)
ETA: For the record there's a third prominent SV category I forgot to include in the list, which is peer-to-peer services. AKA the sharing economy. AirBnB, Uber/Lyft, Instacart. Part of why these were so exciting in the last two years or so is because it was a gold rush on new markets that hadn't been colonized by tech companies yet. Doesn't really affect this comment in any way though, other than technical accuracy of that sentence.
FB has 2.07 billion monthly active users, about 1/3 of the world population, with significant user engagement. Their userbase is on par with major world religions and continents.
Google is the same, though their engagement is a lot more fleeting.
Amazon is hoovering up almost all of the retail growth in e-commerce, and is now extending beyond e-commerce. They to an absurd extent, try to match their R&D and capital investment to their revenue and almost operate as a non-profit, so their P/E ratio always looks absurd, but their book value has increased tremendously over the years.
This isn't 1999 where like Tesla, there was no P/E ratio because there were no earnings (profits), and in the life of the company there had never been a single dollar of profit made, and companies were often rated at 50x their revenue numbers!
These are companies that have shown sustained revenue and profit growth. You can call them overvalued, but this is not in my opinion a bubble, and I think its important you understand the difference between now, 1999, and 2007 or you won't recognize the next one when it comes. In 1999 there was an absolute mania over .com stocks. In 2007 we had a credit bubble that was clear in many statistics and being shouted from the rooftops by some that was impossible to sustain and accompanied by speculators flipping houses, phrases like "buy now or be priced out forever," and other nonsense.
Today, while there are some high P/E ratios, they are at least backed up by long periods of sustained growth rates. Of course it can't last forever, and one can only hope that they will gently reduce their growth rates and have a soft landing rather than a hard crash.
In past 4 years Facebook have grown their user base by 80%, mostly in lower-income countries. But over the same period revenue has grown 400% and pretax profit 600%.
So Facebook will likely have significant growth long after their user base levels off.
I like the rate of bookvalue compouding over time instead of PE.
However, stock options can fuel this by turning a cost (wages) into cash and dilution.
Bob liked Soylent a year ago and has had no recent interaction with it that would merit showing up in the newsfeed. That particular one is funny because Bob swore off Soylent after a few months and just didn't bother to unlike their page.
Of course, not everyone will actually ask Bob for his opinion, but if I really cared about the fact that Bob liked something, and that was a factor in my purchasing decision, I would probably ask him about it, myself.
As a whole, it really dilutes the news feed because half of it is actual "news" from friends (when they recently posted, liked, or shared something) and half is advertisements disguised as posts with my friends' endorsements written at the top because they liked NYT or KFC's page five years ago.
"John Smith likes Wall Street Journal" with the headline and picture from a recent article.
It appears in your news feed like John Smith recently liked Wall Street Journal, or that article.
In reality they probably clicked the like button years ago, and Facebook just continuously recycles that in your news feed, in a way that appears recent.
I also noticed majority of my friends (even some PhD etc) are pretty embarrassed about their postings from few years ago how they pretty much throw up on their facebook wall daily about even silliest stuff. They cyber-grew-up and now would not do that kind of stuff again.
As of Thiel's sell, even FB on their recent call warned stockholders that recent successes will be hard to duplicate. As more move into mobile use and there is less space for ads than on your desktop, the only option FB has is to stuck more ads between your feed, lowering the quality of experience altogether.
Facebook is big enough that when they start bleeding users somewhere else they'll just buy them.
Which says pretty much nothing about Facebook's continuing health.
for him.
Even if he were confident that Facebook has a good chance of growing, say, 10% YoY for the next 20 years, with those smarts and his access he can put the money to work on the next facebook, or even less successful companies that will likely beat that 10% in aggregate.
Haven't used it to buy and sell things, though.
"Wait, you don't have time to come to my kid's birthday party, but you're out skiing so much that you had to upgrade your skiing gloves?"
I'm not saying it's right or makes sense, but there are a lot of contextual layers and subtle subtext inherent in other people's relationships that may not affect your own.
Detroit communities building wireless networks from scratch. Hackerlabs style.
I'm not against home made networks (see: your Detroit youtube video), but you need more formality (ownership entities, local gov partnership/sponsorship) to ensure a high level of service, community buy in, and financing.
https://www.theregister.co.uk/2017/08/27/google_routing_blun...
[0] https://www.engadget.com/2017/11/19/y-combinator-severs-ties...
Of course if you were YC trying to save face for everyone involved that's also exactly what you would do.. but I think it is ill-advised to jump to conclusions before the facts are in. It might be just what it is claimed to be: a choice by Pieter Thiel not to participate further for whatever reasons he might have. Certainly YC of today is not the same as the YC he originally involved himself with.
I don't know enough, but I am curious if someone who has spent the time and effort researching this...Is Facebook's future limited? Is there a new challenger?
Thiel continues to swim against the current and win. Is the writing on the wall?
1. Number of Facebook users * average user income grows 50% (keep in mind that new Facebook users are mostly in developing countries)
2. Amount of time on internet spent by average user grows 100%
3. Number of ads served to an average user per hour of internet time grows 30%
4. Effectiveness of an average Facebook ad grows 160% (ie. 10% per year)
Now 1.5 * 2 * 1.3 * 2.6 = 10.14, so I'm guessing Facebook's revenue will grow tenfold in a decade. Their profit will likely grow even faster because expenses will grow more slowly than revenue.
For example, consider how much "Number of Facebook users * average user income" will grow over the next 10 years. Over the past 40 years world GDP per capita has risen about 4.5% per year [1]. A portion of this growth was due to China's economic boom so outside of China we might expect GDP per capita to grow a little less over the next decade - let's say 3.5% per year ie. 41% in total. But world population is growing and Facebook's penetration is growing on top of that (albeit mostly into poorer countries) so it's reasonable to push that estimate from 41% to 50% or 60%.
Regarding "Effectiveness of an average Facebook ad" here's my experience: In April 2017, Apple released a new Macbook Pro. It looked great - fast, sleek, beautiful. So I visited the Apple website, clicked 'Buy Now' and chose my configuration options. But when I got to the credit card payment screen I had second thoughts - it's very expensive and my old computer was still working fine. Plus I wasn't really sure if I wanted the one with the Touch Bar or regular keys. So I decided to think about it a bit more. And for the next 6 months I was undecided - occasionally going back to Apple's website to drool over the specs - until I finally bought it a few weeks ago. Within those 6 months I didn't see a single Facebook ad for a Macbook. So there is still some low hanging fruit for Facebook to pluck.
https://www.emarketer.com/content/snapchat-snags-second-plac...
The significant drop in engagement may also be why Facebook is dumping the media sites from the news (ha!) feed like a hot potato. Although that was a very Facebook thing to do, it still seemed a little desperate and like it was happening sooner than expected.
edit: forgot reverbnation
However I wish there was more to fill the spectrum between Nextdoor, which is really just a communication tool for people that live within shouting distance of each other (there's a standup routine in there somewhere..) and Facebook, which trends too far towards the national and global.
I wish I could close my facebook account, but it's essential for asynchronously keeping in contact with friends living around the globe now (I grew up in Silicon Valley, so my friend set in particular is rather global since everyone not in tech or other high paying professional jobs have been forced out of the housing market and moved elsewhere). What about at the level of my city, county, state & region? I really wish there were more local options.
I also wish there were better tools for building social networks around specific hobbies, industries, or interests. Where are the clubs of social networks? This requires more than just a "page" with a wall and like button. The anonymous and cancerous Reddit certainly isn't the answer either.
They have a very wide and deep listing of events from small local events (think your local pub) to large nationwide events (such as gigs, festivals). The website is good but the app offers a much more comprehensive experience.
Disclaimer: I am affiliated with REVL.
The chart you link to shows Facebook declining from ~30 mins of usage to ~20 mins. Snapchat increased from 3 to 4. So it's getting closer but it seems unlikely to catch-up.
If anything, all this seems more less engagement in social media. Maybe people somehow are doing more "in real life" or maybe people are just generally less engaged with each other.
The only way the comparison works is if 2009's Blackberry or Nokia owned Apple and the Android OS platform.
Not only does facebook own the facebook social media platform, they own Instagram and WhatsApp, two of the world's largest and fastest growing tech platforms.
Not to mention if Blackberry had Facebook's ungodly 50% operating margin making it arguably the most profitable large company in the world.
In 2009, blackberry was losing money and losing marketshare. 2017 Facebook is growing in all their platforms - facebook, instagram and whatsapp.
But I'm pretty sure FB still supports NN anyway, since a lot of the value to users of Facebook are the articles their friends link to, and that gets hurt if some links are more expensive for some people to click on.