Becoming Facebook

I have read various research reports on Facebook, but really none of them is as comprehensive as this 244 page book written by Mike Hoefflinger who is ex-Head of Global Business Marketing at Facebook.

After reading the book, my confidence in Facebook increases.


Below are the things that I have learned from the book:

• People (Mark Zuckerburg, Steve Jobs, Jeff Bezos, Larry Page) who create things that we cannot live without, invent future, touch billions of lives have the 3 characteristics:
- They have the will to keep acting on an "achieveable-unachievable" mission. They are doubted, mocked and eventually competed with.
- They are "clever-foolish" visionaries. They see things others cannot. They have the confidence to move forward without hestitation amid great uncertainty, build it before anyone else can.
- They foster product-centric Medici Academies that attract the best builders. Their success depends on the quality of people building those products. They make the time to recruit the best.

• In June 2006, Yahoo had made $1 billion offer to acquire Facebook. But the 22 years old Mark had rejected the offer. His reasoning was Yahoo had no definite idea about the future. They did not properly value things that did not yet exist. They are therefore undervaluing the business.
- Judging by 2016 levels, Yahoo had undervalued Facebook by more than 300 times.
- Grove from Intel asked "Where does that willpower come from? ". Mark replied "Jewish mother".

• Len on internet depends most is Facebook.
- Facebook's News Feed accounted for 41% of traffic referrals to hundred of news sites. Google accounted from 39% and Yahoo is 4%.
- Even other giants depend on Facebook. It generates more traffic to Youtube, which has 1 billion monthly users.

• By 2008, Facebook has 16 translation (German, French) and eventually grow to 20. The translations were a major contributor to a growth phenomenon.

• Facebook and Google are competitors but they also need each other. (They both account for 73% of all additional digital ad spending.)
- Facebook depends on Google for access to Andriod based smart phones for their apps including Facebook, Whatsapp and Instagram.
- Google in turn depends on Facebook for referral traffic, especially to Youtube.

• 4 countries with internet infrastructures had eluded Facebook's concerted winning pursuits:
- China: Facebook is currently blocked by the government.
- Russia: Local social network VKontakte - illegally offers premium tv, movie and music, keeping Facebook from picking up more than 15 million of the country's 105 million internet users.
- Japan: Local messenger Line has roughly double Facebook's 30 million users. Facebook has invested in consumer promotion of Facebook including TV ads and counting on Instagram to be a powerful boost.
- South Korea: Local messenger KaKaoTalk has 15% higher peneration.

• While there are 3.4 billion global internet users, there are only 1.59 billion monthly Facebook users. *Where are the areas to improve peneration?*
- Biggest opportunity would be for Facebook to reach an agreement in connectivity product to 675 million people on the internet in China. Zuckerberg is prepared for this by learning mandarin and becoming a lecturer at Tsinghua University.
- India has only 136 million of 376 million internet users as monthly active users. And with 1.25 billion inhabitants but only 30% internet peneration. Facebook will benefit when internet peneration in India rises.
- The 3 big sub-Saharan countries of Keyan, Nigeria and South Africa, where Facebook counts only 33 million activate monthly users out of 150 million internet users.
- Facebook has been hard to grow beyond a small 11% share of internet users. Instagram is actually more popular in Russia.

• Only 46% of world's 7.3 billion people are on the internet today. If internet connectivity could be improved (some countries at sub-Saharan Africa, Indian subcontinent and Southeast Asia have low internet peneration) , this will add roughly 150 million to 300 million people connected via Facebook.

• Facebook's advertising business provide win-win solution.
- Its good for people and advertisers. Facebook manages to aesthetically and techically match the best ad to the best person.
- Its good for creating awareness and transaction.
- Its good for large scale and specific targeting. Until Facebook, most advertisers had to make choice between reaching people at large scale in media like television or web portals like Yahoo. With Facebook, advertisers no longer have to chooss as they enjoy access to extremely targeting across a giant audience of 1 billion people a day.
- Its good for large advertisers and small. Constant growth of Facebook users around the world have convinced even the largest and highest quality advertisers in the world.
- Its good for traditional digital and mobile.

• The author mentioned that Facebook's journey is only 1% done.
- If they serve China's internet population.
- If they connect the unconnected, especially in India and Africa, with drones and satellites.
- If they make video - all our phones will have 3D 360 degree video by 2025.
-> Facebook will grow bigger.

• By 2025, world population is estimated to be 8.1 million people. Internet population could grow to 5 billion people by that time. If Facebook's has 60% peneration, the company would be serving 3 billion people and well over 100 million businesses a month.


Conclusion:
If you are looking for an investment that will benefit from world's population growth and improving internet peneration, Facebook is a stock you should look at.

If Facebook manages to penerate China (though possibility looks pretty low now), this stock will receive a significant booster.