Someone on Twitter asked: Why is Facebook’s stock rising despite no innovation?

Here is my answer. Before we start, a gentle disclaimer: I have been shilling Facebook stock for a while now. I would have put far more money into Facebook if I had money, if it was easy to remit outside, if I trusted these US stock investing apps more, and if there were no estate tax in the US. I regret not being able to put more money on Facebook when it was down.

But here is why I had invested in Facebook: Most people do not understand this simple thing: Any big move, regulatory or platform, probably affects the rest of the market far more than the leaders who already have different moats and capital to navigate the change. If hosting open source models is banned in the US, if there are stricter regulations around AI, the incumbents with their army of lawyers, their ability to lobby and help shape the regulation, their army of developers who can figure out alternatives, and their existing data, would actually help them and crush new competition/the ones who can’t afford the same. Even with GDPR, big tech players ended up strengthening their position while smaller players struggled. When Apple made it far harder to use identifiers to track users citing privacy (but actually to increase their own non-hardware revenue due to slowing sales), Facebook simply used their vast data on users, not just internal, but across the web, to identify without the identifiers most advertisers rely on.

Did ad performance degrade a bit? Maybe. But if earlier you were using Snapchat and other platforms to run ads, spreading your marketing dollars, you would see even worse performance in these other platforms, and you would just invest all your ad dollars in Facebook: the platform that can still give you high return on ad spend. Facebook is the best growth machine ever invented. A D2C founder if they get $2 out of $1 spent will just keep investing until they squeeze the last dollars out.

Facebook across all its products has massive TAM. Most founders can’t be masters at all channels: SEO is hard, Google keeps changing the rules, organic depends on various factors and not every founder is capable of building their brand like Deepinder, so you want a channel where you can keep spending money each month and hit your growth targets. Yes, Google is also decent, but ask most founders and they rely on Facebook ads to grow.

This means Facebook would still win. More ad dollars flowed because other ad platforms were not able to adapt to Apple’s changes. New platforms won’t even bother competing now on ads. They don’t have enough data. They don’t have enough smart developers who can figure out how to track after all these changes. Facebook’s position is stronger than before these privacy changes. Yes usage is a bit stagnant for the core products and TikTok could have come and taken their share of revenue, but with the uncertainty around TikTok now, Meta will continue to print money. Meta has also perfected copying anything that comes out of other players like Snapchat, TikTok etc. No one can copy as well as Zuck.

VR/AR are still cost centers. I think it will take time to see how these play out. AR has not taken off, but Apple AR also was a dud. So no scare about a new platform coming in from Apple or Google that Facebook can’t control and has to pay tax on. Meta’s AR project looks cool. And now that Oculus is finally at the price point of a cheap Android phone, VR might actually take off. Papa Zuck won’t slack this time. He will want to own the next platform. And he is young. Adapts fast. See his persona change over the last 2 years. His relationship with Trump and Elon now. If nothing, he can just lay off people from time to time and make the stock pump. Especially when he needs to send the signal to Wall Street that they are serious. I am bullish on Meta.