Competition – does it really matter?
There are several other relevant social networking companies out there, but my question is whether or not they matter to Facebook’s bottom line.
LinkedIn Corp (NYSE:LNKD) is the second-largest publicly-traded social networking company, but I don’t really see it as any threat to Facebook Inc (NASDAQ:FB). While LinkedIn has been incredibly successful in building the world’s largest professional network of over 225 million members, I don’t see it as a viable “substitute” for Facebook, nor is it trying to be.
LinkedIn Corp (NYSE:LNKD) is unique in that there is a “premium” membership option, for which users pay anywhere from $19.95-$74.95 per month for additional access to profiles as well as better search options. Forbes magazine has referred to LinkedIn as “the most advantageous social networking tool available to job seekers and business professionals today.”
As an investment, however, I think LinkedIn Corp (NYSE:LNKD) has gone a little too far, too fast, trading at over 100 times even the most optimistic earnings expectations for the coming year. The company will report its earnings on Aug. 1, so be on the lookout for any surprises. If the company’s current earnings (which are really not that important to the value of LinkedIn) come in below expectations, it could provide a more reasonable entry point.
Google Inc (NASDAQ:GOOG) has been trying to capture social networking market share for some time now through its Google+ network, but in my opinion, it is making one major mistake: it is trying to directly compete with Facebook.
Most of the reviews I read have nothing but good things to say about the site’s beauty and functionality. Google Inc (NASDAQ:GOOG) claims 190 million active members, and virtually all Google+ users are on Facebook more, simply because that’s where there friends are.
While I think Facebook Inc (NASDAQ:FB) is in a class of one, I’d be interested to hear anything the company has to say about Google Inc (NASDAQ:GOOG)’s new version.
Final thoughts
Facebook may be nearing maturity in terms of the number of users (well over 1 billion monthly), so now the focus is shifting away from growing and towards capitalizing on what it has. If I had to name one area that is absolutely crucial, it would be mobile ad revenue. If Facebook Inc (NASDAQ:FB) could get to even half of the mobile revenue of Google Inc (NASDAQ:GOOG) within the next couple of years, that would be a tremendously bullish sign for me, so I’m anxious to hear the company’s latest thoughts.
Regardless of what this quarter’s particular numbers turn out to be, Facebook is looking more like an excellent value play that is starting to get everything right.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google, and LinkedIn. The Motley Fool owns shares of Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOG), and LinkedIn Corp (NYSE:LNKD).
The article 4 Things Crucial to the Success of the Social Network King originally appeared on Fool.com.
Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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