So if you had to invest in one of them today, which one would you take?
The Case for Amazon
It can be easy to assume that Amazon is just an online bookstore that has dabbled in electronics here and there, but keeps it offerings relatively narrow. Nothing could be further from the truth.
This humble company that began out of a single room with Jeff Bezos has now launched into a full-fledged third-party marketplace, with nearly 39% of their business coming from outside vendors. Moreover, they’ve launched subscription services like Prime Video, Prime Music, Audible, and other “Prime” based items, including Amazon Prime itself, and their advertising business climbs an average of 73% every year.
Not enough for you? Amazon’s Web Services, its cloud computing division, also sees nearly a 50% growth every year, and even though their retail businesses aren’t taking off like they thought, they still see a sizeable return from everything else.
Still, their operating margin is around 4%, which is razor-thin in today’s marketplace.
The Case for Facebook
Love it or hate it, Facebook is here to stay. Even though other social networks have seemed to slow down over the last decade, Facebook is steadily picking up steam with no signs of slowing down. With about 2.2 billion users on their platform, Facebook’s user base dwarfs just about every other platform on the market, and it’s not even close.
The bread and butter for Facebook’s business model has been and will continue to be for the foreseeable future, their ads platform. Having seen a 50% increase year over year in the first quarter from the previous year’s fourth quarter, Facebook has found the secret sauce to monetizing their massive user base for purposes of third-party advertisers.
There is still room left to grow, however. Recently acquired Instagram and Whatsapp pose significant opportunities for Facebook to capitalize on, and their Messenger service, which has close to 1.3 billion users, is still left untapped. If Facebook can find a way to monetize those users, they could see even more exponential growth.
The bottom line? Facebook isn’t going anywhere, not as long as they continue to generate around 55$ in revenue with a 50% growth rate to boot.
Now It’s Your Turn
So which one should you buy? Resisting the temptation to offer a definitive “you should do this” judgment, it really boils down to investor preference. Do you hitch your wagon to the advertising star of Facebook’s unstoppable ads platform, or take your chances with Amazon’s entrance – and possible domination – of several different industries. The choice is yours, but one thing is for certain: you won’t be able to make this decision on stock price and revenue generation alone. To pick a winner, you’ll have to go with your gut and hope that the future agrees with you.
Still, why not invest in both?
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