How Facebook Is Like Apple

The following video is part of our "Motley Fool Conversations" series, in which we talk about topics around the investing world. This time, Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova talks about the one number that stands out when evaluating the prospects for a recovery in Facebook's (NYSE: FB  ) share price.

In the hubbub over the social network's valuation and competition from the likes of Google (Nasdaq: GOOG  ) , we've forgotten just how much Facebook is like Apple (Nasdaq: AAPL  ) . Both companies prize vertical integration as a means to control and ultimately refine the user experience.

"In 2011, we began serving our products from data centers owned by Facebook using servers specifically designed for us," Facebook says in its most recent S-1 filing. "We plan to continue to significantly expand the size of our infrastructure, primarily through data centers that we design and own."

"Expanding infrastructure" could mean a lot of things other than data center construction, including advanced hardware and chip design. Why would Facebook touch either area? Data processing. The more information the social network processes, the greater its opportunity to profit from a worldwide base of 900 million active users. Yet cashing in won't come easy. Watch the following video for more.

While much of the tech world is obsessing over Facebook's IPO, there's another newly public social-media company that looks even more promising. Forget Facebook -- Here's the Tech IPO You Should Be Buying, because this social butterfly has a much more reliable monetization model and isn't as vulnerable to the fickle budgets of advertisers. Do yourself a favor and grab a free copy of this report while it's still available.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple and Google at the time of publication. Check out Tim's Web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Google and Apple and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 23, 2012, at 11:10 PM, applefan1 wrote:

    They are both listed on the Nasdaq. Well, that's about it.

    Next useless article....

  • Report this Comment On May 24, 2012, at 1:49 AM, Secs27 wrote:

    One cannot compare Facebook to apple. Apple's iPhone and new iPad are two of the most extraordinary products currently available. Apple produces tangible things that most people are simply in awe of. Apple generates billions in revenue and keeps billions in profits. The two products mentioned above have no equal.

    Facebook is a glorified high scroll reunion site. It is a complete waste of ones time to it there and chat unproductively. They do not make any groundbreaking products and they do not, nor will they generate billions in profit. Their share price is already grossly over valued while apple trades at a severe discount to its peers. I am quite sure apple will be around in ten years, but I would not want to place that bet on facebook. Zuckerberg stole his idea from Harvard, let's see what new technologically superior product he introduces to the market place. Your article is simply absurd to say the least. Maybe you should stick with writing your usual fluff pieces on another overvalued company ....Amazon. Earning little profit and many other vendors offering the same products for much less and selling subpar junk like the kindle fire, amazon's future does not look encouraging. Far better pricing can be found at. Newegg.com Onecall.com Thefind.com Underbid.com If you bought on amazon, you have overpaid and a better deal could have been found elsewhere.

  • Report this Comment On May 24, 2012, at 2:40 AM, gslusher wrote:

    @Secs27:

    Could you explain why you wrote, "Zuckerberg stole his idea from Harvard..."? He was a student at Harvard when he started Facebook, but how did he "steal" the idea from Harvard?

  • Report this Comment On May 24, 2012, at 2:43 AM, gslusher wrote:

    There is one HUGE difference between Apple and Facebook: who their customers are and what product they sell. Apple sells hardware, software, content, and services to consumers and businesses, who are its customers. Facebook's customers, like Google's, are their advertisers. Facebook's product is the attention of their "members." As I have read, when you get something free, it's very likely that you're being sold as the product.

  • Report this Comment On May 24, 2012, at 2:43 AM, Mstinterestinman wrote:

    He stole it from an Existing site made by students from Harvard not from Harvard itself.

  • Report this Comment On May 24, 2012, at 8:44 AM, deemery wrote:

    There are two questions to ask with respect to these kinds of companies:

    1. What is their value-added/value proposition?

    2. How do they make their money?

    With respect to FB, I don't see much value-added. Google Search is clearly a value-added proposition, but all Facebook provides is a place to post stuff and a platform for others. And I'm not convinced at all by FB's arguments about how they'll actually make money harvesting user data. Users are getting smarter about locking data down, and if it is that lucrative others will jump into the fray. I wouldn't bet on FB (vs Google) for data mining

    Apple, as others have pointed out, has a clear set of products and services it sells. The value-added proposition for Apple is very clear.

  • Report this Comment On May 24, 2012, at 9:46 AM, PedalHard41 wrote:

    applefan1 might be a bit biased... but, he's 1000% correct, the only similarity, both are NASDAQ. FB is a cult and has zero value, Apple has tons of value.

  • Report this Comment On May 24, 2012, at 9:58 AM, PedalHard41 wrote:

    Dear deemery, sorry to burst your bubble, but having an internet search engine, maps/directions, browser and decent web-based email with zippy ads on the right-side navagation panel is not enough to make a $600 tech stock... Google's riding a wave, at some point there will be a reality check, and they'll be a $35 stock... There's always a better mouse trap. Apple, IBM, Verizon, etc. with actual products and services have definite value.

  • Report this Comment On May 24, 2012, at 10:38 AM, TMFMileHigh wrote:

    Thanks for the comments everyone.

    We all know that Apple and Facebook are different businesses. The comparison refers to vertical integration. FB needs its integration efforts to work as well as Apple's have in order to produce value for both users and advertisers.

    Separately, while I'm not surprised that there isn't much love for FB here or elsewhere, the size of the brush-off is getting me more interested in the stock by the day.

    Between the increasing number of apps dependent on Facebook Connect and the large advertisers shifting dollars to its platform -- yes, I know the GM story; Ford is happy, so is P&G -- there's plenty of evidence that Facebook will multiply its revenue base in the years ahead.

    FWIW and Foolish best,

    Tim

    --

    Tim Beyers

    TMFMileHigh, Motley Fool Rule Breakers Analyst, Supernova Odyssey I Portfolio Contributor

    Web: http://timbeyers.me

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