Speedwell Research

One of the world’s most influential tech companies, and just one of a handful businesses to ever reach a trillion-dollar valuation, Meta’s family of apps have achieved ubiquity on an unprecedented scale with ~3 billion active users. Their revenues have grown at a ~50% CAGR since IPOing while being wildly profitable with a ~50% core margin. The virtues of their business were clear: unlike traditional media, Facebook generates free content posted by their users, who in turn also drive free traffic from inviting their friends. All Facebook had to do was sell ads, and to make things even better, they would receive more personalized data from their users than any service prior, which enabled them to create the best ad targeting machine ever created, demanding the highest ad prices of any peer. Their core business generated $57bn in EBIT on $115bn of ad sales in 2021.

But a nexus of adverse events threatened Meta: TikTok started to loosen their grip on the next generation of users with an app so addicting, most of Gen Z was spending the better part of 90 minutes a day on it. Leaked slides showed concerning engagement trends not just for Facebook, but Instagram too. The FTC launched an anti-trust case against them seeking to unwind past acquisitions. The EU and various other regulators sought to undermine their ability to collect data, and in one swift iOS roll out, Apple severely severed their ability to target ads. This is all while CEO Zuckerberg would plummet tens of billions of dollars into “The Metaverse”, creating the illusion that nothing short of a new business model would save them. And with the stock down 70%, the market is pricing the company as if it is done growing forever.

However, the story is far from over. At just 38 and one of the youngest CEOs of all time, Mark Zuckerberg isn’t just trying to react to the current turmoil, but set his company up for the far future.

In this deep dive, we analyze the social media landscape, Meta’s competitive threats, their best-in-class AdTech engine, parse their app usage metrics, break down their capital allocation ROIC and capex spend, and much, much more.

At over 47,000 words, this is our longest deep-dive yet, but the couple hours it will take to read is a fraction of the 800+ hours we spent researching and crafting this report. However, given the length (>160 pages), we have decided to roll it out concurrently with a PM summary, both of which subscribers can download today!

We hope you enjoy, and please let us know what you think!

You can find the following and more in our report:

1. Founding History.
2. Business History.
   • Going Viral.
   • Scaling up.
   • Expanding Beyond a Website.
   • The App Era.
   • Facebook 2.0.
3. Business.
   • Family of Apps.
4. Advertising Industry and Competitive Landscape.
   • Advent of Digital Ad Industry.
   • Advertising TAM.
   • Meta’s Advertising Machine.
   • Ad Revenue Drivers.
5. Competition.
   • Jobs to be Done.
   • Disruption & Orthogonal Competition.
   • Usage Metrics.
6. Advertising with Facebook.
   • Data Privacy.
7. Metaverse.
   • Metaverse Monetization.
8. ROIC and Capex.
9. Valuation.
10. Investment Narrative.
11. Risks.
12. Management and Culture.
    • Management.
    • Culture.
13. Financial Model.
    • Short-term Financials.
    • Summary Model.
    • Historical Model.
14. Conclusion.

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