We've heard a lot recently about technology replacing jobs in America. Well, Facebook Inc (NASDAQ: FB ) COO Sheryl Sandberg believes her company has a responsibility to boost employment in America. Her solution ? Mobile advertising. And, while that might sound self-serving, it's possible that both small business owners and those holding Facebook stock could benefit from such a business-driven proposition.
"Technology is certainly replacing jobs," Sandberg said in an interview with Bloomberg Television. "And technology can also be used to grow jobs. It's our responsibility to help small businesses and large businesses all around the world use technology to grow their businesses so that they can grow jobs."
Someone has a solution for fighting the job reductions expected as a result of automation. Good for Sandberg and Facebook for understanding Economics 101 - You can't create jobs if your business isn't growing.
Small Businesses a Key Growth Driver
Seventy million small businesses, says Sandberg, are using Facebook (via Pages) on a monthly basis, five million of which are advertising on its platform. Also, it has eight million Instagram business profiles with two million advertisers.
While mot a new observation, Sandberg reminds investors that small businesses are the ones that create most of the jobs around the world and they do so, in large part, by successfully using mobile marketing to spread the word.
According to the World Bank, there are close to 500 million small businesses around the world - defined as 300 employees or less - 80% of which are located in emerging markets. The success of small businesses in emerging markets, in turn, results in greater exports for small businesses here in America, spurring a trickle-down effect.
Facebook hopes to generate as much mobile advertising as possible from these 500 million small businesses. Right now, according to Sandberg's figure, 1% of small businesses around the world are using Facebook for advertising. Imagine Facebook's revenues if 10% of small businesses were using its advertising platforms.
"Now, more than 1.4 billion people are connected with a small business on the social network, and more than 1 billion messages are sent between users and businesses every month," according to a June 13 Forbes article.
Forget Large Businesses
I'm being somewhat facetious, but small businesses could be the edge Facebook needs in its fight with Alphabet Inc (NASDAQ: GOOGL , NASDAQ: GOOG ) which generates the lion's share of its ad revenue from search while Facebook gets most its ad revenue from digital.
In 2017, it's expected to generate $16.3 billion in digital ad revenue, 32.1% more than in 2016, three times as much as Google, and giving it a commanding 39.1% of the U.S. display market.
Add Instagram, which is expected to contribute up to 20% of Facebook's mobile revenue in 2017, and you get the importance of small business to Facebook's business model.
Bottom Line on Facebook Stock
Currently trading around $152, if Facebook were to get 10% of the world's small businesses advertising through its various platforms, I see no reason why Facebook stock couldn't hit $500 in the next three to five years.
Thank goodness for small business.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
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