Facebook: Progress Report

What are the big changes Facebook wants to make in the world over the next five or 10 years?

Facebook made some really good progress this Q2 with the growth and engagement of their community, the release of new products like Instagram Video and advertising growth especially on mobile.

Facebook now has more daily actives on mobiles and on desktops, nearly half a billion people use Facebook on their phones every day and soon Facebook will have more revenue on mobiles and on desktop as well.

Now that Facebook has connected a billion people, what are the next big ambitions?

There are three main goals Facebook would like to achieve: connect everyone, understand the world and help build the knowledge economy. Connecting everyone is about growing their community to reach the next five billion people.

Facebook’s mission is to give all people the power to share and make the world more open and connected and that means everyone, not just people in developed countries. Most people in the world don't yet have smartphones or data access but Facebook knows they want to be connected. So Facebook is focused on making this possible, while also strengthening engagement within their existing community.

Understanding the world is that helping people share not just day-to-day updates like text messages and photos but also building up long-term knowledge about the world about what people are interested in; which restaurants are good, which hotels your friends have stayed at and so on. Facebook should be able to build intelligent services that help user network to answer lots of questions for people that no other service can.

And Facebook wants to lead the community to create a graph of all that understanding to power this intelligence. Building the knowledge economy is about helping people create companies and jobs using information.

 

The way Mark Zuckerberg sees advertising products, Facebook isn’t just building a strong monetization engine for itself, but also creating tools to enable new growth, jobs and businesses, door platform and to support a larger economic shift in the world based on knowledge and information.

‘I am proud of the work we are doing here to help developers to create apps to help local businesses find customers, to help great brands tell their stories and this is a core part of our mission’ says Mark.

Now let's talk about the progress Facebook has made in each of these areas, starting with connecting everyone.

The Facebook community has grown steadily this quarter adding 45 million new monthly actives and the number of monthly actives is steadier, increasing across demographics in the countries. Now 61% of monthly actives are daily actives and now the ratio has just continued to increase.

In Facebook’s most penetrated markets like the U.S. more than 70% of monthly actives use their services daily and now more than 700 million people worldwide use daily as of today.

See Also: Facebook: Operations & Financials as of Today.

     

As more social services get created, one question is How that Affects the Sharing and Time that People Spend on Facebook?

You could naively assume that more new services mean people spend less time on Facebook but that isn't happening, in fact people on average are spending more time on Facebook than ever before. It's possible that because the market is expanding due to mobile even the time spent per person increases on Facebook maybe their market share could decrease, but that doesn't seem to be happening either.

According to third-party metrics by comScore and Nielsen, Facebook’s share of time spent in the U.S. is either steady or increasing and we believe it's either steady or increasing everywhere else as well.

Some product like video fit into the flow of what people are doing and they take off quickly. Others like graph searching home are completely new kinds of product and they are just going to take a longer to develop. I think it's the right strategy to have a balance of long-term foundational new products ones that fit immediate demand. Facebook is committed to building all of those in to market leading products.

See Also: Facebook:Building Knowledge Economy & Thoughts about Second Half of 2013

Instagram:

Instagram is growing quickly as well, so if you combine the two services together we believe the engagement and share time spent are likely growing quickly throughout the world.

The newest product that Facebook is most excited about from their last quarter is Instagram Video, adding video fits really naturally with the Instagram mission of capturing and sharing the world's moments. It's off to a great start. People are already uploading hours of video to Instagram every minute.

Instagram has always been about helping people capture moments in the way they're proud of, filters were necessary for photos and when Instagram started most phone cameras weren't good enough to take high quality photos. Separately Instagram continues to grow rapidly with impressive engagement and Facebook announced last month, they had over 130 million actives using the service.

Waiting eagerly, the Troublesome Blackberry

‘We don't have to be all things to all people in our market’, said Thorsten Heins, President and CEO, BlackBerry in Q1, no wonder the company wants to sell itself before November falls.

The recent news of Nokia opens its gates to Microsoft created a lot of buzz in the market which left Blackberry eagerly waiting for a prospective buyer. The present situation of Blackberry was quite anticipated as it had opted to raise over a billion dollar by reducing its headcount to build its own Ecosystem. 

Thorsten Heins led Blackberry into a new direction which seemed promising but nothing could keep the company afloat. The fact that Mr. Heins failed to lift up the company, now all eyes are on him if he can at least do the job of selling the company, and if he does, it would be the most profitable thing he might have ever done in quite some time.

At current prices, Bloomberg estimates Heins' compensation package could be worth approximately $44 million if ousted after sale, plus bonus benefits and retirement savings and equity awards may bring in a couple more million for him, the total figure could go as much as $55.6 million. He would be pretty much desperate to look out for a prospective buyer to take in the troublesome Blackberry.

Fairfax Financial and its Chief Executive, Prem Watsa, which hold approximately 11 per cent of BlackBerry, are considered among possible buyers. Watsa resigned from the BlackBerry Board due to potential conflicts of interest.

Blackberry’s worth:

·  By the time this year ends, BlackBerry's pile of cash could be as much as $2.6 billion, which is quite low.

·  Also, if one considers their patents and intellectual property, it could be between $1 billion apiece, or $4 billion in total.

·  The Enterprise Data Network should be about $1.2 billion worth to its highest bidder; and additional software can be at $1.5 billion but, minus the $800 million which is an estimated figure of shuttering its handset business.

·  In total, the Company could be worth between the range of $5.5 billion, or $10.50 per share, or as much as $8.5 billion if broken up.

Key interesting highlights of Blackberry so far:

·  Three of their four regions returned to sequential revenue growth as BlackBerry 10 continues its roll out; Europe, Middle East and Africa their largest regions, represented 43% of revenue in Q1 and was up 9%, North America represented 25% of revenue and was up 30%, Asia Pacific represented 17% of revenue and grew 35%.

·  Blackberry shipped 6.8 million smartphones in the first quarter compared to 6 million in the fourth quarter which represented a 13% increase. Approximately 40% of these devices were BlackBerry 10 devices.

·  BlackBerry 10 is now available across 147 countries including the United States and has been an effective launch product to showcase the renewed and re-engineered BlackBerry 10 experience to both consumers and enterprises.

·  BlackBerry 10 QWERTY devices started its rollout late in the first quarter and with over 320 carrier acceptances completed today.

·  Q10 is now available in 96 countries including the U.S. with 50 more countries expected to launch within Q2.

·  Secure Work Space offers an idea of BYOD mobile security solution providing organization the flexibility to embrace BYOD on multiple platforms without sacrificing security.

·  60% of BlackBerry Fortune 500 customers have already ordered, downloaded or installed BES 10.

·  Generated cash flow from operations of $630 million in Q1 and ended Q1 with $3.1 billion in cash, highest cash position in the past three years.

·  Revenue for the first quarter fiscal 2014 was 3.1 billion, up 15% from the fourth quarter and up approximately 9% from one year ago.

·  Looking at their revenue mix, hardware revenues grew by 33% when compared to the fourth quarter and was approximately $2.2 billion.

·  Service revenue was approximately $794 million or 26% of revenue and was down $153 million or 16% from the fourth quarter. 

Now everyone's guessing who would be the one to acquire Blackberry, the news can come out in the near or not too distant future.