NETWORK EFFECTS DRIVE FACEBOOK TO REACH 2 BILLION USERS 19 YEARS LATER
Facebook surpassed 2 billion daily active users, a testament to the power of network effects. As more people joined Facebook, the network became more valuable, attracting even more users and creating a virtuous cycle that drove the company's growth. Facebook's ability to constantly reinvent itself has helped it maintain its position as the premier social media platform for consumers and its advertiser partners.
This recent quarter showed the following user and engagement metrics.
Daily Active Users:
2B (+4% Y/Y)
Monthly Active Users:
2.96B (+2% Y/Y)
Family of Apps Daily Actives:
2.96B (+5% Y/Y)
Family of Apps Monthly Actives:
3.74B (+4% Y/Y)
Potential Investment Implications
From an investment perspective there are many clear takeaways.
First is the power of network effects. Large marketplaces or networks can maintain growth and competitiveness for many years despite the cyclical nature of human interests. Ebay is an excellent example of a legacy marketplace that continues to hold its own.
The second is around reinvention. In our investment portfolio we have two pillars. The first pillar is secular growth areas such as automation and the shift to digital. The second pillar is transformation stories, where companies seek to realign their business to where the world is headed.
The data today shows how a 19-year-old company can continue to thrive on top of healthy and growing network effects that have been powered by reinventing the product over and over.
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