Is This Facebook's Next Cash Cow?
News broke on Monday morning that Facebook Inc (NASDAQ: FB) is developing Facebook at Work. The new platform will allow users to separate their personal and professional social lives while still enjoying the familiarity of Facebook's tools and services.
The most prudent investor should expect Facebook at Work to provide a significant amount of resources and efficiencies for both employers and employees.
Could this be the company's next big cash cow?
Consider LinkedIn Corp (NYSE: LNKD) for a brief comparison. LinkedIn generated $1.5 billion in revenue in 2013. Meanwhile, Facebook generated $7.8 billion in revenue in 2013.
Facebook may have just unlocked the long-sought-after avenue to generate additional revenue from businesses, while providing even more value for those businesses without them having to strictly advertise across the platform.
This is a major opportunity for the social media juggernaut.
But does it warrant a sweeping buying opportunity for investors?
That's a far more in-depth question than one may think. Facebook has employed the same trial release product approach as rival Google Inc (NASDAQ: GOOGL) has taken, unveiling products for consumers to use and testing the demand for such products through usage.
The Investing Angle
For the more conservative investor, this provides an alert signal of sorts. Pay very close attention to the rollout of Facebook at Work. Listen and read every release that states how precisely the product will be used, the features within it, and most importantly how the platform will be monetized.
It's also important to watch the potential impact on LinkedIn.
Consider the demographics of both companies: Facebook has a dominant hold over the 24-and-under demographic when compared to LinkedIn. Over the next decade, that 24-and-under demographic becomes 34-and-under.
Facebook is also projected to top $14 billion in revenue in fiscal 2015, according to Statista.
With the rollout of Facebook at Work, and the hyper growth situation it could create, the NAV of the new platform has the potential to provide Facebook with an additional $1.12 billion in revenue by 2015 and an additional $4 billion in revenue per year by 2020.
It's possible Facebook at Work will represent 8 percent of the company's revenue in the immediate future, with upside beyond that.
Of course, there's also a chance users don't jump on board -- only time will tell.
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