Market Value

Amazon vs. Facebook

2016.05

Amazon vs. Facebook: Which Tech stock is best?
Market Value
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FANG is an acronym for “Facebook, Amazon, Netflix, Google”, the four companies that have been dominating the tech market in the past year.

  • FANG's 2015 market cap from January to November: Facebook ($217B → $300B), Amazon ($143B → $310B), Netflix ($21B → $51B), Google ($360B → $552B)

Recently, Twitter asked users to pick the most attractive stock option of the FANG companies, and results found Facebook in 1st and Amazon in 2nd.

  • Results: Facebook 43%, Amazon 29%, Google 20%, Netflix 8%
  • Immediately after Amazon and Facebook released their earning reports for the first quarter of 2016, their stock prices rose significantly (Amazon by 12% and Facebook by 9%)

Because of its enormous advertisement revenues and AI/VR-related growth potential, Facebook has been rated favorably and continues to dominate the messaging/social network market.

  • Facebook exceeds the expected market outcome for the first quarter of 2016: 1 quarter sales were approximately $6B and the net profit, $2B. These figures showed that Facebook had earned three times the profit made in the first quarter of 2015.
  • Messaging/social media dominance: Facebook continues to grow its user base (1.6 billion users) and with the growing popularity of WhatsApp and Instagram, Facebook has been experiencing a boom in ad revenues through mobile devices and online videos (currently, roughly three million companies actively advertise through Facebook).
  • Early release of VR/AI and other technologically advanced products and services: With the purchase of Oculus and by collaborating with Samsung Electronics, Facebook is taking a near-monopoly over markets that produce VR-related devices, software, and platforms.
  • Fortification of management structure: by issuing the new Class C shares, Zuckerberg maintains 50% of the voting power while raising Facebook’s capital by selling more shares.

Amazon has 1) secured its sales and dominated the retail and cloud market, and 2) is rated highly in the IoT field and predicted to experience great growth in the coming years.

  • Amazon breaks records in the first quarter of 2016: 1st quarter sales were approximately $35B and the net profit, $0.6B. These figures showed that Amazon had grown 28% in sales and earned ten times the profit made in the first quarter of 2015.
  • Maintaining retail growth acceleration and profitability: The number of customers using Amazon Prime has been growing rapidly. Prime benefits the company by boosting both growth and profitability, essentially allowing them to catch two birds with one stone.
  • Dominating and maximizing profitability in the Cloud industry: Amazon has had booming success in the Cloud industry and has secured high profits (2016 1st quarter sales of $2.6B, business profit of $700M, and Amazon Web Services (the cloud) sales have grown by 26%).
  • Dominant player in the IoT market: 1) Customers can order products with Amazon’s Dash Button and receive orders with drone technology 2) By collaborating with network companies, Amazon has increased its big data/machine-running capabilities, allowing them to take hold of the IoT Ecosystem.

What are the key differences between Facebook and Amazon’s industries? How does each company imagine its future? In you opinion, which of the two companies is likely to be more valuable to consumers in the future?

  • If you are associated with or involved in the development of a start-up, it may be useful to think about the value of Facebook as a channel for customer acquisition and Amazon as a back-end services and big data provider.

Please take a moment to discuss this topic (in English) with your Ringle tutor, who is likely to have grown up with Facebook and Amazon and been influenced by these two companies.

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