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© 2023 by Troy Springer

The Social Network (Advantage)

April 3, 2018




I remember hearing Mark Zuckerberg speak probably when I was in about 10th grade or so which would have been 2012. In 10th grade, Facebook was the dominant social media platform, and Twitter was just starting to become the cool place to be on social media for high schoolers. I remember Mark Zuckerberg talking about his vision for Facebook: he viewed it as a sort of profile for everyone to log onto the internet.


Nowadays that sounds like a scary proposition, given Facebooks recent data scandals and the general trend toward autonomy and cryptocurrencies. But to the degree, that vision has almost become a reality. Virtually any website you long on to, there is an option for you to use Facebook too long on.


Personally, I always click that button. It is easy and has particular advantages. For example, on Spotify, I can find all of my facebooks friends and share and view their playlists. Without Facebook, Spotify is a worse platform... and that is probably the case for hundreds of other platforms. Besides possibly, is THE most important site on the web.


As I am writing this Facebook stock is down about 16% since before the information laundering of Cambridge Analytica.




Several big names have left the platform completely such as Elon Musk and Tesla denouncing Facebook and even comedians such as Will Ferrel taking a stand against our data.

Well Mr. Musk, let's pump the breaks on that. We live in a world where the most valuable resource is no longer oil... its data as The Economist attests too. Tesla wants the data just the same and collects is in every opportunity, like Facebook. Yes, Facebook had a scandal, but the average person doesn't realize how much of their data is actually out there...


I love this graphic from The Economist:




If you feel violated from Facebooks data breach, you might consider to...


-Stop using any cell phone with a GPS in it; they track where you are. And you best believe that is valuable data when it is aggregated. You signed your rights away to privacy the moment you clicked "yes" on your iPhones user agreement.


-Stop using Google, or any other search engine as their whole business is based on tracking everything you do on the web, things you buy, your searches, interests, music you listen to, and personalizing ads in your direction.


-Quit using Twitter, Snapchat, Amazon, your smartphone, smart watches, Alexa, Siri, and all other trackable tech gadgets.


The point is, Facebook is not alone in this. Everyone in the high tech world is doing this. That's the whole concept behind the business of Big Data and all these cloud-based software and analytical companies that are favorite of investors. Facebook is just the subject today.

That's why Elon Musk wants to separate himself from the issue. It is possible we might be on the cusp of a privacy revolution followed by massive regulation... or we will admit that we like these things too much and don't care.


I think we don't really care. We are addicted to this technology, and maybe a few times a year you will remember that these companies know so much about us and feel violated and be upset about it, but it draws the dopamine shots you get from logging on to Instagram a few times a day.

Scott Galloway, the outspoken and brilliant marketing professor at NYU Stern School of Business, had a great quote about this...


"Consumers talk a big game, but at the end of the day they want that little black dress for $9.99 or want to share their fabulous lives with their friends on Instagram."


Some advertisers may walk out briefly in a PR stunt but as Galloway puts it "they have no choice."

Put it simply, facebook is a huge monopoly of information and control over the web. 94% of people with a social media account, also have a Facebook account. Facebook and Google share about 2/3s of online ad spending revenue.




Pat Dorsey, a former researcher on the competitive advantage at Morningstar now runs his own fund, Dorsey Asset Management focused on owning companies with sustainable advantages for the long term. On their latest 13-F filling they held a massive 30% position in Facebook, and he regularly speaks to the strength of their network.


Facebook's network effects are huge. Think about if Facebook owned Twitter, like they own Instagram, or if they owned LinkedIn, engagement and participation on those sites would certainly go up. It's the one profile fits all approach. Instagram has seen massive growth since being acquired by Facebook. Instagram stories are much far-reaching than Snapchat stories due to the network. While that's maybe not a personal use advantage, its a buisness and engagement advantage.


Just a few months ago we were talking about Mark Zuckerberg for president; now he is the villain.

In my mind, the world is not going to suddenly shift away from a big data world, and I would not expect Washington  in it's current state to sweep in with regulation or try to break up Facebook or any other big tech company soon.


I am long $FB, and this may turn out to be a buying opportunity. 




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