In case you are an investor who is looking to rake in some big money in the tech industry, you would have probably thought about buying shares in Facebook, which is now known as Meta.
This is because Facebook seems to keep making money year in year out so you might be thinking that it is a good place to park your money with less risk.
However, before you finalize the decision to buy Facebook stocks, there are some things you must be aware of before. This is not something you just jump in, collect your profits, and then jump back out.
If it was so, we at EmmarniTechs would have been millionaires by now. Ok, enough about us. Let us talk about you. There are some risks involved in buying Facebook stocks, just like any other company stocks.
So you have decided to buy that facebook stock, right? Read through this article to be well informed before you go ahead with your decision.
The Facebook stock was trading at just $90 in 2015. It then skyrocketed to $200 in 2018 before coming to a halt after the earnings of the tech company were made public.
As I mentioned earlier, when buying company stock, there are some risks involved that you have to address first before you go in. Let us take a look at them below.
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Depending On Ad Revenue
Facebook makes the majority of its money from selling ads. The company revealed that about90% of its revenue was sourced from the sale of ads.
The 90% dependence on ads for revenue has now grown up to almost 100%. This means that when you buy Facebook stocks, you would be looking to the sale of ads to get your profits, and a company that relies on ads to get its revenue is just like an investor that concentrates on only one source of investment.
Competition Of Social Media Platforms
Facebook is known for buying out a company that seemed to compete with it. This is a move to stamp out any competitors and I would have done the same thing if I had the money to buy out my competitors.
No need to be struggling with them for market share. However, Facebook cannot buy out all its competitors. For example, Snapchat refused to sell to Facebook twice for about$3 billion.
Twitter also refused. It is not likely that we will see Facebook become history in the tech world. However, MySpace was also once a dominant force on the internet yet not such people know the name today.
Facebook has a far better chance due to the money at its disposal and its user base of more than 2 billion. MySpace is proof that consumer taste can change at any time.
Market Risk
One of the biggest risks that any stock can suffer is the market risk. The NASDA is known to have lost more than 75% of its value when the dot-com crisis emerged.
This shows that one cannot predict accurately to go in their favor at all times.
Regulatory Risk
Another form of risk that any investment can suffer is the regulatory risk. Facebook is using a technology that is relatively new and social media is also a market that is not being regulated at the moment.
However, if you have studied the American industry, then you will know that various industries gradually become regulated over time.
And when this happens, Uncle Sam will be standing at your waiting to take about 30% of your profit earnings away for the government to spend.
Almost all investors are people who hate regulations and that is a fact.
Conclusion
So these are some of the things you have to watch out for when you decide to buy Facebook stocks. It is not just about Facebook stocks but rather any other tech company out there that you may have been thinking of purchasing stock from.
Make sure to do proper investigations and analysis before you go into the investment
