E Facebook: You've Got Competition

There appears to be no competition in the online ad revenue game these days aside from Google (GOOGL) and Facebook (FB) which make up a duopoly. Not only do they create a duopoly but they continue to grow their ad revenues by leaps and bounds each year. So why hasn't anyone else entered the battle arena? The barriers to entry appear to be low from a technological perspective but the stickiness factor is an extremely high barrier. These two companies have loyal followers and it shows as these customers continue to increasingly use the products. With this article I'd like to examine what potential threats are lurking out there considering I own a position in Facebook.

 

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Facebook along with Google dominate the online advertisement space but there isn't a lack of competition. It would definitely be foolish to think that there is not a competitor in sight of these two. In 2016 Google advertising revenues were $79.4B while Facebook's advertising revenue in 2016 was $26.9B. But there seems to be one competitor lurking around the corner in the form of Verizon (VZ) that Facebook should pay attention to. Snap (SNAP) can potentially become a formidable opponent as well.

Verizon in particular recently locked up AOL for $4.4B and Yahoo for $4.8B and with its distribution channels Verizon is hoping to capitalize on the acquisition of these two to develop the ad revenues. With additional assets under its belt Verizon is looking to capitalize on the always changing social online industry. Conventionally Verizon has been a telecommunications leader by owning all the hard assets like the cables, poles, boxes, etc. Seeing how large the online advertising business really is Verizon wanted a piece of this duopoly at the time with the purchase of AOL. Verizon had to find additional revenue channels perhaps leveraging their current customer base because adding new wireless and cable customers wasn't a sustainable business model. There's only a finite number of customers available. Now by acquiring Yahoo, Verizon is capable of collecting the ad revenues from their wireless subscribers in addition to their monthly dues.

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Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I ...

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