Why Facebook Reigns Supreme At Social

Facebook announced its Q2 results earlier this week and proved its complete and total domination of social media. The platform for connecting with friends and family posted revenues of $9.2 billion, above expectations, and the bump came largely from its expansion of mobile ads.

As well, profits for the quarter soared 71% compared to this time last year, all thanks to aggressively expanding mobile ads and providing advertisers a convenient and intuitive portal for running campaigns.

Given Facebook’s booming growth in revenue, profit and users, it seems safe to say that it has basically won social media, especially in the face of its sputtering competitors.

2 Billion Users

When was the last time 2 billion people did the same thing besides eating and breathing?

On June 27th, Facebook hit the 2 billion mark, doubling its user base over the last five years. That’s quite the accomplishment considering the poor accessibility of that second billion.

Facebook took advantage of its global presence and focused on acquiring fresh users in Asia, picking up 746 million since hitting that first billion mark. Reaching 1 billion was about figuring out its core product, while capturing 2 billion was focused building the user base and, as it climbs to 3 billion, Facebook’s next goal is to build empathy among its many users – a truly connected world.

Beyond its core social platform, the company has also found roaring success with its subsidiary ones too. Messenger has over 1.2 billion daily active users, WhatsApp has around 1 billion, while Instagram recently rocketed past 700 million.

While Messenger itself doesn’t monetize through ads, it serves to keep users invested in the at-large ecosystem, locking them into all things Facebook. As many know, the company has been unflinchingly cloning many features from Snapchat, but it’s also introduced in-app games and has even begun copycatting Houseparty. Oh, and there’s Facebook M.

The running theory is that fulfilling all of these needs for the users will ensure they feel little to no urge to leave. Given the 2 billion users, Facebook has certainly built some powerful network effects.

Swiping Past the Rosy Camera Filter

While everything looks good for Facebook, there was some pause issued in the earnings call. The social giant expects revenue and user growth to slow over the rest of 2017. CFO David Wehner confirmed that the app is at capacity for advertisements – there’s virtually no space left.

Desktop use has steadily declined and the company opted to remove sidebar ads in favor of a better user experience, both of which will curtail revenue. Aside from that, Facebook’s user acquisition costs will only increase as it pushes to connect more of the world.

New regions for expansion will need technical assistance, chiefly around reliable internet access, which does raise the costs significantly.

However, Facebook is cooking up some strategies to cope with these headwinds.

For starters, CEO Mark Zuckerberg recognizes video as the best place for Facebook to extend its advertising, experimenting with original content and mid-roll ads. YouTube hasn’t done a great job of growing its paid user base and Vimeo will always occupy a niche, rather than the mainstream.

Facebook has a real opportunity to leverage video as a new means of generating ad dollars and growing its user base.

As well, the company can look to augmented and virtual reality as means to draw users and boost its revenues. The Camera Effects platform is a great opportunity for companies to invest in branding and advertising with AR pieces users can interact with.

Oculus is also rolling out a wireless VR headset for $200 over the next year. Once that technology becomes more affordable and accessible to the masses, Facebook could possibly offer it for free and turn VR into another engine for ad dollars.

Even though Facebook has issued guidance for a less optimistic latter half of 2017, it’s working at full tilt to create and capture new opportunities, which means 2018 will assuredly be an even bigger year.

A Weak Playing Field

It’s not a good time to be Twitter or Snap, much less own their stock.

In contrast with Facebook’s rise, its competitors are have very rough times. Over the last quarter, Instagram’s Stories feature added 50 million users, while Snapchat’s only netted a paltry 8 million.

Another divide: WhatsApp’s Stories feature has a total of 250 million users, while the entire Snapchat app only has 170 million.

Resultantly, shares of Snap started trading below the IPO price, now at $13.83. Since going public, the company has shed over $10 billion in market cap. A lot of early investors’ shares were unlocked today, so they’re free to sell and ditch a stock that has only failed. It’s interesting to note the Snap is trading lower than its Series F share price.

Also struggling and flailing is Twitter. While the company did best Wall Street expectations, the results still weren’t good. Despite making progress in managing harassment and trolls and working on a data-light version for new markets with poor internet access, the company can’t get any traction for growth.

In its earnings report this week, Twitter’s ad sales fell year-over-year and user growth was flat, essentially stuck at a base of 328 million. Shares fell 10% almost immediately and they still haven’t recovered.

It’s clear that as Facebook rises, its competitors can’t seem to find any room to catch their breath. With its overwhelmingly massive user bases and strong vision for its future, Facebook is the clear winner of social.