How Facebook Could Grow From Here

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Facebook (NASDAQ: FB) reported quarterly earnings last week, and the market sent the company up a whole 5% on fantastic comps.

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In this Industry Focus: Tech segment, host Dylan Lewis is joined by two summer interns to explain how Facebook is looking into monetizing more of their platforms and when investors might start to see that happen.

A full transcript follows the video.

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This video was recorded on July 28, 2017.

Dylan Lewis: You hinted at some of the Messenger stuff. I think if you're looking at this business, that's really where growth could come in the next five years, because of the massive user bases with the WhatsApp and Messenger platforms.

Aneesh Susarla: Exactly, there are over a billion people using Messenger and WhatsApp individually. Currently, the management has said they wanted to grow the user base instead of directly monetizing it, but I think they're coming at the point now where they slowly start wanting to introduce ads to a select few and see how the response is with that. I think investors are a little bit antsy, and depending on when they want to see that monetization, they want to receive the gains now. But I think Facebook is continuing to remain steady with its core mission and building its user base as much as possible, and then slowly starting to roll out ads and monetization.

Lewis: And if you read the call, you see that Mark Zuckerberg is also starting to get a little bit antsy about it, and wants to turn on the monetization engine there. They have a history of being very deliberate in monetizing all of their platforms, and really doing their best not to compromise user experience. I think the massive user-growth numbers that we see speak to that. As an investor, knowing that this is one of the next big runways for them, I'm pretty excited that CEO Mark Zuckerberg is on board and wants to make that happen, because that's really where the next phase of growth for them comes as a business, I think.

Susarla: Yeah. Facebook is really still in that investment phase. They talked about, in their earnings call, how they're continuing to hire more engineers, build more data centers, and really gear up for the future, and having a long-term vision that they want to execute on.

Lewis: So, much [as] with Alphabet, I also own Facebook, and my outlook is pretty rosy for them, too. I think you're definitely going to see some slowdown in the second half of the year. Management wouldn't be signposting it the way that they have unless it was going to be happening. I don't know what that's going to be. They don't offer revenue guidance, so it's a little tough. But even if it's down to the 30s, that's still pretty darn impressive for a business their size that has not turned on the switch for two of their huge platforms.

Susarla: Right. Facebook has a market cap of $500 billion, but it's growing ad revenue twice as fast as Google. So, that'll be really interesting to look out for.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Aneesh Susarla has no position in any stocks mentioned. Dylan Lewis owns shares of Alphabet (A shares) and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy.