Internet.org and Other Steps Facebook Is Taking to Fuel Growth

After reporting yet another stellar quarter, the social media giant isn't resting on its laurels.

Aug 5, 2014 at 8:00PM

Following what can only be described as a tumultuous week for investors, Facebook (NASDAQ:FB) managed to hold on to much of the gains it enjoyed after announcing yet another blowout quarter last week. The question going forward is: How does the king of social media continue its run of stellar revenue, earnings, and user growth?

The challenges for Facebook include finding the means to grow its already impressive 1.32 billion monthly average user (MAU) base, and further monetizing its growing suite of services, without alienating all those users. To those ends, CEO Mark Zuckerberg and team just may have found the answers Facebook fans were hoping for.

On a roll
Like its wannabe brethren Twitter (NYSE:TWTR), Facebook's recent 2014 Q2 was strong across the board. Facebook's revenues jumped 61% to $2.91 billion, in large part because it was able to grow its mobile MAUs, and even more importantly, generate significantly more revenue from the over 1 billion "friends" on the go.

As upstart Twitter demonstrated after announcing its own Q2 earnings last week, it's a very good time to be a social network in this age of digital advertising. As more and more marketing departments look online for generating new business, Facebook and Twitter, among others, look to continue reaping the rewards.

With just over $312 million in revenues last quarter, Twitter is far removed from the world Facebook occupies. But there's no denying 124% revenue growth is certainly a step in the right direction for Twitter, and its much-maligned lack of user growth even got a shot in the arm. With 271 million MAUs, Twitter still has a long way to go to catch Facebook, or even one of its many assets like WhatsApp, but at this point, even baby steps are seemingly enough as Twitter's valuation continues to climb.

Though Facebook is further along in its business cycle, it also enjoyed stellar growth in virtually all areas of its business. Not only has top-line revenue climbed, but earnings, margins, and operating income were all much improved compared to last year. Which begs the question: How does Facebook continue its impressive run of financial and user growth?

Internet.org is getting the world online
Nearly 82% of Facebook's daily average users (DAUs) are outside of North America for a very simple reason: Domestically, most everyone that's going to utilize the service already is. That means Facebook needs to look elsewhere to continue growing its user base, and it's taking steps to make that happen.

When the Internet.org initiative was first announced, it sounded like a great concept, connecting the rest of the world to the Internet. Now, the partnership that includes some of the world's most influential companies is taking action, and Facebook and others, including Twitter, may reap the long-term rewards. Mobile phone owners in Zambia are able to download an app that provides users with a set of free Internet services including, not surprisingly, Facebook.

Zambia may not top the list of emerging growth markets, but this is just the first of many steps for Facebook and its Internet.org partners to get the world online. As many users as Facebook has, it's just a drop in the bucket relative to the world's population, and that's what Internet.org hopes to remedy.

Maximum monetization
In what may be the first of many steps to generate additional revenue growth, Facebook will soon require its mobile users to download its Messenger app if they want to chat. Though Facebook said it's separating its Messenger app to "avoid confusion," it may turn out to be the first step in differentiating the many pieces of FB -- Instagram, Oculus, WhatsApp, and Messenger for example -- to better monetize each asset as a separate entity.

Facebook hopes that separating services like Messenger will make it easier for prospective advertisers to determine what its particular value is, compared to Instagram or other Facebook properties. Perhaps Facebook's future will see clients buying ads -- video or traditional -- on one, two, or even three disparate Facebook assets.

Final Foolish thoughts
Facebook's recent string of outstanding financial results has both analysts and shareholders applauding. But in a world of "what have you done for me lately," Zuckerberg needs to continually look for new growth opportunities. Getting the rest of the world online, and generating the most bang for his buck from Facebook's disparate businesses, are two ways Facebook can keep growing into the future.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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