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What's going on?
As it approaches 2 billion monthly active users, Facebook continues to impress investors (tweet this) with its growth following the release of its first quarter financials.
What does this mean?
Facebooks growth metrics are exceptional: it increased monthly active users by 17% versus a year ago to almost 2 billion users (that is about a quarter of the worlds population). Over the same timeframe, it increased its revenue by 49% which shows that its not only growing its user base but that its making more revenue per user (in technical terms: its average revenue per user was up almost 30%).
Why should I care?
For markets: The stock has had a humongous run.
Although it sold off a bit after reporting its results, Facebooks stock is up 30% so far this year and almost doubled over the past two years (its tough to read too much into a minor selloff after such a huge run-up). It would be difficult for the stock price to keep rising at the same pace it has over the past year, partly because its revenue growth will almost certainly slow if only due to Facebooks enormous size. At some point, investors will have to focus on Facebooks potential new revenue streams (like its prioritization of video) in order to derive the stocks value.
The bigger picture: One day, large tech companies may have to worry about becoming too big.
Google and Facebook dominate the digital advertising market. Amazon dominates ecommerce. European authorities have already taken steps to try to limit the power of big tech firms, but US competition authorities have yet to signal any major problems. If the influence of big tech firms on our lives continues to increase (think: Amazon Echo or payments integrated into Facebooks Messenger), actions by governments to curb their dominance could become more serious risk factors for their stock prices.
Originally posted as part of the Finimize daily email.
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