Is Facebook The Next Friendster?

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Posted: Nov 04, 2019 1:11 PM
Is Facebook The Next Friendster?

Source: AP Photo/Ben Margot

Facebook is often considered a monopoly, one of the “tech-giants” that has cornered the market and established itself as the permanent social media giant. But a new video report by Visual Capitalist (The Rise and Fall of Social Media Platforms, October 9th, 2019) shows in intricate detail just how quickly social media platforms can rise and fall, which should serve as a reminder to investors that tech giants aren’t always as insurmountable as they seem.

If you were an investor in 2006 interested in tech companies, MySpace would’ve absolutely been on your radar. But where is MySpace today? Within 3 years of its peak, it had been eclipsed by Facebook. Even if Facebook is a monopoly, that doesn’t mean it will always be so – at this moment, other platforms such as Instagram and TikTok are outpacing it in user growth.

I index I work on held Facebook at a 0% or negative weighting since before their market crash of July 2018. As of September of 2019, Facebook has shown major issues in their forensic accounting score.

(Source: Bowyer Research)

Their revenue and earnings quality scores are both well below the average for the companies in our data base.

Facebook’s mantra used to be “move fast and break things.” A company that relies on that attitude could very well find itself in a precarious situation, in which it’s replaced by companies that move a lot faster. Growth is good, but companies can't hyper-grow forever, and Facebook, which was historically dependent on rapid growth, is losing market share to other, faster-growing companies.