Facebook (FB +2.48%) is good at a lot of things -- hence the stock's 59% rise during the past two years. But the social network is especially good at one thing: growing its social platforms rapidly.
Ever wondered how the company does it? Or even better, have you ever wondered whether or not there's a formula the company follows to replicate this growth across multiple platforms. As it turns out, there is. And the company detailed this formula in its most-recent earnings call.
Facebook CEO Mark Zuckerberg (right). Image source: Facebook.
It's time to spill the beans. But before we look at Facebook's formula for growing social platforms, let's take a look at the company's track record so far at attracting users to its networks.
Facebook: The company's original social platform -- the Facebook we all know -- now has an impressive 1.59 billion monthly active users. And the platform is still growing at rapid rates, up 14% year over year. Here's another way to put it: Facebook added about 200 million monthly active users in 2015 alone.
And now, Facebook CEO Mark Zuckerberg has set his sights on boosting the platform's user base to 5 billion.
WhatsApp: Facebook's messaging service, WhatsApp, ended 2015 with nearly 1 billion monthly active users, up from about 700 million users a year ago.
Messenger: More than 800 million people now use Facebook's once-native messaging app, Messenger, which was separated into its own product in 2014. This is up from about 500 million a year ago.
Infographic source: Facebook.
Groups: One billion people are using Facebook's Groups every month now, up from about 700 million about three quarters ago.
Instagram: The photo and video social platform reached 400 million monthly active users in September, up from about 300 million a year ago.
This is some serious street cred.
The formula
So, what's Facebook's strategy to building mass-market social networks? During Facebook's fourth-quarter earnings call, Zuckerberg clearly laid out his "formula for how we build these businesses."
1. Delight. First, focus solely on a "great consumer experience," Zuckerberg said. This "helps people share in a new way that's really important."
2. Organic business interactions. Next, "you can start to introduce organic ways that people can interact with businesses," Zuckerberg continued. He noted that the way Facebook first introduced organic interactions with businesses on Facebook was with Pages.
Zuckerberg explained what these organic interactions could look like:
The businesses that people want to interact with, the public figures, the politicians. Not necessarily ads, but organic interactions around not necessarily just your friends and families, but more public figures and businesses.
3. Scale. Before Facebook introduces ads on its platform, the company ensures that the ecosystems of organic interactions have scaled.
4. Monetize. Finally, after Facebook builds out its social platform's organic interactions with businesses to scale, it will "build businesses around them," Zuckerberg said.
And then only once you have that ramped up to a good, to a good scale can you really start dialing up advertising, having that feel good and be a good part of the experience with good content because all of those public figures and businesses are already participating in the platform at scale.
Zuckerberg noted during the Q4 call that Instagram is in the early stages of turning into a business, WhatsApp is well into organic business interactions, and Messenger is catching up to WhatsApp.
Instagram. Image source: Facebook.
The young CEO remains as confident as ever in the formula, noting during Facebook's Q4 call that the company will continue to use this approach "in all of our products and the different things that we do going forward."
Of course, the details are in the execution. And with Facebook proving it can execute on this formula so well, it's easy to see why the market is rewarding the stock with such a forward-looking valuation. Facebook shareholders wait in anticipation for Zuckerberg and his team to repeat its formula... again, and again, and again.
