By Wasim Omar
11:57 PM UTC
Both Alphabet Inc. (NASDAQ: GOOG), the parent company of Google, and Meta Platforms (NASDAQ: META), formerly known as Facebook, are giants in the tech realm. Many commentators have gone on to call these players as being somewhat monopolies in their respective domains. Meta Platforms leads the way in the social media space, and Google (GOOG) in search engine and related services. Due to the effectiveness through which these services function, they have each deeply penetrated the global markets. These include both the developed, as well as emerging regions. In this article, we pit both the mighty beasts against one another in terms of their growth prospects. We seek to determine which of the two will most likely be the first to achieve 5x growth.
Alphabet Inc. parents a number of companies, the most significant of which is Google Services. The internet mammoth had started its journey as a search engine, following which the service sky-rocketed in popularity. Today it dominates the internet through its wide plethora of broad services. These include e-mail, cloud storage, ads, video streaming, and much more. Presently the parent company, Alphabet, holds a market capitalization of nearly $1.5 trillion. This makes it the third-largest publicly-traded company in the world.
In 2021, Alphabet (GOOG) delivered $257 billion in annual revenue, breaking the $200 billion mark for the first time. The milestone had signified that the company had succeeded in overcoming coronavirus-related pressures, as well as global supply chain complications.
Moreover, the company stands strong in the market, given the leadership it has successfully attained in various domains. This characteristic strategically ensures long-term growth acceleration. The cloud computing market for instance, which represents a major business segment for Google, is set to value up to $600 billion by 2023. As of yet, Google (GOOG), despite being among the top three global players in this lucrative market, has captured only up to 8% of the total market share. Furthermore, Google’s digital advertisement segment is poised to push the company to new heights. This is especially advantageous for the company’s long-term prospects given the post-Covid mainstreaming of digital advertising.
With Google strategically allocating its capital in high promise areas that poise it to enhance its domination over the internet, Google is exponentially widening the distance between itself and possible competitors. Through its various services, the company is setting its mighty foot into areas that are future industries worth hundreds of billions of dollars. As a result of this strategy, the company’s growth trend remains unchallenged, despite wider market conditions.
Facebook’s rebranding into Meta represents something far more than a name change. It indicates how what was once a successful social media platform has transformed into a family of social media services and platforms. The strategic shift allows the company a more effective means of achieving its core mission of connecting the planet and enriching the quality of interactions.
The company has increasingly been shifting away from purely a connections-based app, as is evident by recent development. Competition has seriously defined the trajectory the company had taken in the past. At present this continues to be the case, with the introduction of Reels, to compete against the incredibly popular TikTok application. Similarly, Founder and CEO Mark Zuckerberg had spoken about his plans of shifting the company towards various ambitions. These included employing community messaging, AI technologies, and so on.
Perhaps the most monumental of the company’s ambitions is the metaverse from which it has chosen to rebrand itself. The move would entail Meta developing hardware systems and the related infrastructure in order to lay the foundations of the future of social media. Needless to say, the venture is one of immense risk to Meta shareholders. This is especially true when considering that the move towards VR social media is not merely a new business segment project to explore. The company is betting everything it has built up to this point on a concept that has never been done before.
Moreover, a gamble of such a critical magnitude comes to the company under incredibly precarious macroeconomic circumstances. In just the last six months, META has seen a 50% fall from nearly $350 to almost $160. To add to these conditions, already worsened by headwinds from the Ukrainian war, Meta dealt with a heavy blow earlier this year. This relates to Apple’s policy shift regarding advertising identifiers, which seems like a targeted assault on Facebook’s ad revenue mechanism. Meta CFO revealed that the company anticipates losing at least $10 billion in ad revenue. This sum amounts to 8% of the company’s annual revenue, and thus panic had spread as a result of the announcement. The company’s stock plummeted by nearly 30%.
This indicates the challenges Meta faces in fulfilling its ambitious growth journey. There are a number of obstacles for it to overcome, and the odds increasingly appear to be stacked against the company.
Both Meta and Google took approximately nine years to multiply their share price by a factor of 5 to arrive at their present levels. In mid-2013, Meta and Google (GOOG) stocks held prices of $32 and $430 respectively. These prices reflect approximately a fifth of their present value. The math, therefore, points to both companies growing at a similar pace on a historical basis. In a forward-looking position, however, things appear starkly different.
In terms of which of the two stocks will achieve 5x growth first, the existing prospects paint a pretty clear picture. Google has allowed itself dynamic flexibility to keep pushing onward without threatening its core sustainability. By strategically setting a foot in the most promising realms with a cautious approach, its prospects remain promising. It manages to achieve this without being too bold in its risk exposure.
META on the other hand has decided to go all-in on an untested concept. This bold gamble will decide the social media giant’s fate in the social media realm. Historically the company has sought growth through the acquisition of robust services such as Instagram and WhatsApp. However, there remain serious concerns about the growth of users of its various platforms. In the final quarter of 2021, the company reported its first-ever decline in its user growth figures. In comparison, Google has evidently been excelling, despite the momentary slowdown it faces with the threat of the looming recession.
For the reasons highlighted above, I believe Google is far more likely to achieve 5x growth first. Meta, on the other hand still faces the battle for its long-term survival.