We use cookies to optimise our site and allow us and 3rd parties to tailor ads you see on sites. By using this site you agree to our cookie policy.

LearnBonds.com

Facebook Inc (FB) Might Want to Consider an Alphabet Swoop

Facebook Inc. Ecommerce

Facebook Inc. is not much different from Google, at least in the core business that they both have. Google Inc makes money from the ads that it sells on its search business and Facebook makes money on ads from its social network site. Google announced a change in its structure and the market thinks it is high time Facebook also became more like Google.

Facebook Inc. Ecommerce

A Wall Street Journal coverage of Facebook’s second quarter (Q2 2015) earnings call provides an insight into why analysts think that Facebook should copy Google. The opening statement of the call brings out fine links between Google and Facebook.

It reads, “Facebook, like Google, is an advertising company that spends aggressively on technology and big ideas. Their opportunities and execution differ, but the themes come earnings time are consistent: are the advertising dollars flowing, and how well are you keeping down costs?”

Facebook is not much different from Google

Facebook  might not have many business interests as Google has, but the firm sure has its hands in many pies. Facebook owns the social network site that bears its name. It owns Instagram, WhatsApp, and Messenger.

Facebook is also breaking out into News as it beats Twitter as news source. In addition, Facebook owns the maker of virtual reality headset, Oculus Rift (a number of products are in the pipeline). Facebook is deep into solar-powered Internet drones, Laser technology and the Internet.org project.

The need to keep a lid on costs

Facebook  has an ownership structure that allows CEO Mark Zuckerberg to do pretty much anything that catches his fancy. The WSJ reports “Zuckerberg has warned that Facebook won’t back down from shelling out dough for the data centers and employees it thinks it will need — not necessarily now, but years from now — or for bets on technologies of the future, like the virtual reality system Oculus.”

Google started becoming a Wall Street darling after it started making strides to cut costs in a response to the clamor for less expense-side items from Wall Street. Google  CFO Ruth Porat played a key role in rebranding the firm with Wall Street when she discussed plans to keep a tight rein on costs at the firm.

The market will reward Facebook

Google and Facebook are okay with ignoring Wall Street and investors and the ownership structure of the firms means that the investors couldn’t do much than complain. However, while investors do not have much say in how a firm is being run, they do have the power to bring its stock down. Google understands this and it has adjusted; perhaps it’s time for Facebook to also changing its stance.

The market is likely to reward Facebook if its copies Google’s new model. For one, Google gained about $20M in market after the news of its name change broke. In addition, Google  has gained 4.27% in share price in the last three sessions while Facebook has a measly 0.04% gain.

All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
Avatar

Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

HTML Snippets Powered By : XYZScripts.com