Personal Finance

What Facebook's Ad Prices Tell You About the Direction of the Company

In this segment of the Motley Fool Money podcast, host Chris Hill, Million Dollar Portfolio 's Jason Moser and Matt Argersinger, and Hidden Gems Canada 's David Kretzmann consider all the things Facebook (NASDAQ: FB) is doing right to monetize its hundreds of millions of users, as well as the uncertainties around some of its secondary platforms. They also discuss CEO Mark Zuckerberg's philosophy and how it guides the social media giant.

A full transcript follows the video.

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This video was recorded on Feb. 2 2018.

Chris Hill: When Facebook reports earnings, there are a lot of metrics that Wall Street likes to look at. Here's one that seems relevant: the price that Facebook charged for ads in the fourth quarter increased by 43%. Jason, that seems pretty good, especially when you're an advertising business.

Jason Moser: It's not bad at all. I think Facebook, ultimately, seems like it's bulletproof. We were going into this quarter thinking they were going to be some concerns in regard to the fact that they were starting to push advertisements and content for publishers down on the timeline to help bubble up more of the personal connections and whatnot, get back to the core purpose of Facebook's existence. I don't know that that's necessarily going to be as big of a problem as some may think. I think this is a testament, really, to the size of a network being such a great competitive advantage. That's really where Facebook is executing so well. There's so many people participating on those platforms, whether it's Facebook or Instagram or WhatsApp or Messenger.

A couple of big question marks there, I think, still, with WhatsApp and Messenger, how they're going to really monetize those. But to me, this all goes back to Mark Zuckerberg saying that helping people connect ultimately is more important for him than maximizing the time they spend on Facebook. I think he's genuine when he says that, and I think he has kind of a nice balance there with Sheryl Sandberg helping run the business side, to marry the business along with his visions of what Facebook can do for the future.

Hill: Last fall, we had David Kirkpatrick on the show. He's the author of the best-selling book, The Facebook Effect . He got a lot of access to Facebook years ago. And part of what you said, Jason, some of the media coverage this week about Zuckerberg in particular reminded me of something that Kirkpatrick said on our show.

David Kirkpatrick: "His North Star does not have to do with profits, and that's something that you have to be extremely cautious about as an investor, is that Zuckerberg did not do this for the money. In the end, in my opinion, he cares more about Facebook having a positive impact on the world than on it having a positive impact on the pocketbooks of his shareholders."

Hill: And that's one of the things he went on to say, sort of to echo your point, Jason, about, Sheryl Sandberg is there, really, to focus on the business. But Matty, anyone who thinks that Zuckerberg is going to do anything for an extra dollar of profit probably isn't paying attention.

Matt Argersinger: I totally agree. I think, as Foolish investors, we like to see the grander vision lead the business, as opposed to the profit vision. And honestly, we see that with Amazon . I think Jeff Bezos didn't set out -- I mean, he likes making money, as all of us do, but I don't think he set out to make billions of dollars and become the richest man in the world, which he now is. I think he said, "I want to build a company that's the most customer-centric company in the world." And he's accomplishing that. And that's always been the driving force.

Moser: I think that was a great comparison there with Amazon. I had actually made note of the same thing. I think Facebook's stock gets a similar pass. We know that in the near term, expenses are ramping up for these guys, they're going to spend more money on trying to make the platform better and safer, and that means hiring a lot of people to get in there and actually sift around and weed out that nasty content. And we saw already, they're completely eliminating Bitcoin and cryptocurrency advertising from their platform altogether. So, I think, yes, the market gives them a little bit of a pass because of the size of that network and the possibilities that the future holds for something like this.

David Kretzmann: I think, over the long-term, serving society or having a platform that is a net benefit to society and generating profits, those aren't mutually exclusive things. A lot of us here at The Fool, we follow conscious capitalism, the idea that you can do good and make money at the same time. So, over the long-term, I think this is a net positive for Facebook.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Chris Hill owns shares of Amazon. David Kretzmann owns shares of Amazon and Facebook. Jason Moser has no position in any of the stocks mentioned. Matthew Argersinger owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and Facebook. The Motley Fool has the following options: short March 2018 $200 calls on Facebook and long March 2018 $170 puts on Facebook. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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