Every time you click on a Facebook ad, Mark Zuckerberg becomes a bigger billionaire. The social network company’s stock was up 11 % in pre-market trading on Thursday after blockbuster results a day earlier beat market expectations. The company’s closing market value was $306 billion on the results day. Facebook’s stock was trading at $121, up from $108 on Wednesday, after a 52% year-on-year rise in quarterly revenues.
Overnight, this increased the company’s value by a humongous $37 billion or so to about $347 billion. Compare this with the fact that all of Infosys is worth about $44 billion. Zuckerberg owns about 29% of the company – which means on a single day, his personal wealth went up by 10.7 billion US dollars. Or Rs 71,000 crore.
And what a contrast Facebook’s surge was from Apple Inc, whose shares took a beating on Tuesday – when its market value fell by $46 billion after its results. Quarterly revenue was below a year ago and a full $1.4 billion below analyst expectations.
The irony is that the two events are interlinked in a strange way. It is because of Apple’s heady growth that Facebook could succeed, but it is high noon for Zuckerberg while it is a sunset of sorts not for Apple perhaps but certainly its path-breaking product, the iPhone. The iPhone changed the “ecosystem” by bringing in independent apps into smartphones, and its biggest beneficiaries are Facebook and Google. Perhaps Facebook more because it has captured the imagination of consumer advertisers with a series of innovations ranging from native advertising in news feeds to use of video.
Apple’s stock fell 6.3% on Wednesday. Its market value still stands at an awe-inspiring $538 billion, but it needs new products – or, given Apple’s innovative history, a new product category, to make market magic again. But it is the iPhone that enabled the game to shift from device to content, and Zuckerberg is its biggest individual beneficiary. Now, iPhone sales plunged to 51.2 million in the latest quarter from 61.2 million a year ago. But it has milked the market since its launch nine years ago and changed the world --- and lost its founding pioneer Steve Jobs in the intervening years. Android clones have decidedly taken off while iPhone maintained its exalted image. Facebook is a gainer from both as it is a social platform agnostic to software platforms.
Apple’s first-ever decline in iPhone sales and its first revenue decline in 13 years shows a market that is saturated. There are more than 2 billion smartphone users on the planet now. But Facebook now has 1.65 billion active monthly users riding that saturated market, about 250 million more than China’s population.
Both Google and Facebook have gained from the revolution that iPhone ushered in as both thrive on mobile advertising – with Google more focused on search and Facebook on newer kinds of click ads.
Apple and Google are innovating away still. Apple is betting on its music and book services and Google’s parent Alphabet Inc has everything going from self-driving cars to drones and cancer research. But for the moment, it is peaking time for Facebook. Google, whose results disappointed markets this week, has lost about $6.5 billion in market cap this week so far, but still stands at an impressive $479.5 billion in overall value.
Tesla, the electric car maker, may be the next Apple when it comes to breathtaking product innovation, but from the financial market’s point of view, Facebook is stealing Apple’s thunder by riding the very thing -- the smartphone – that took Apple to dizzy heights.