Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Facebook Inc.'s Most Undervalued Asset: Groups?

There are a number of ways to share on Facebook (NASDAQ: FB  ) . While the media typically focuses on the action in the News Feed, another form of sharing on Facebook is booming: Groups. In fact, Groups is arguably Facebook's most undervalued asset.

Facebook. Image source: Facebook's Newsroom.

A growth opportunity
Facebook calls Groups one of its "core products" and says there are now 500 million people using the feature every month. That's about 42% of Facebook's total monthly active users.

What is Groups? There's a good chance you've used it before. But if you haven't, it "it provides a private space for sharing with small groups -- like your family, close friends, or a sports team -- or for larger communities like schools or even companies," Facebook explained in its fourth-quarter earnings call.

Though Groups doesn't get much attention from investors, it's a big opportunity for Facebook. "A lot of the new growth we see is coming from giving people the tools to share with different size groups of people," Facebook explained in the fourth-quarter earnings call. And there's still untapped growth drivers for the feature, especially if Facebook breaks it out as its own identity, like it did with Facebook Messenger. "[G]iving experiences like [Groups] room to breathe and really develop to be their own brand, I think, is a huge and valuable thing," CEO Mark Zuckerberg said.

It appears plans for a new app are now under way. In a recent "hackathon" to kick off Facebook Creative Labs, a project in which Facebook is focusing on creating new apps to support different ways people want to connect and share, Zuckerberg told Bloomberg Businessweek that 40 ideas emerged from the event. One of the ideas, he suggested to Businessweek, is built for Facebook Groups.

A competitive advantage
But Groups is more than a growth opportunity for Facebook. It also plays a key role in the company's greatest competitive advantage: swarms of daily active users. The best indicator of the health of almost any social platform is not monthly active users -- it's daily active users. When it comes to daily active users, no social platform even comes close to Facebook. In Q4, Facebook reported 757 million daily active users, or about 62% of its monthly active users.

Facebook's incredibly active network serves as its greatest competitive advantage, creating a network effect that keeps members coming back. And products like Groups are one of the tools that give members on Facebook a way to connect for other purposes than to just share updates to family and friends. Groups enables Facebook users to create their own environment for sharing. Whether large or small, every group a Facebook user joins is another incentive for him or her to share and communicate more frequently.

Facebook's active Groups feature is a valuable asset, providing growth opportunity for further engagement and also reinforcing its network effect. Groups is another reason Facebook investors can count on the service to endure for years.

3 stocks poised to be multibaggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multibagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

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.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2895396, ~/Articles/ArticleHandler.aspx, 9/3/2015 7:32:23 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Daniel Sparks

Daniel is a senior technology specialist at The Motley Fool. To get the inside scoop on his coverage of technology companies, follow him on Twitter.

Today's Market

updated Moments ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 -16.48 -0.35%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 3:59 PM
FB $88.15 Down -1.74 -1.94%
Facebook CAPS Rating: ***