Google Plus vs. Facebook

Google Vs. Facebook: What Is The Verdict For 2012?

Introduction

Seeking a better social network model than Facebook's one, Google (GOOG) released Google Plus last year and thereby caused quite a stir in the tech world. With more than 153 million monthly users, Google seems a prime Internet destination. Facebook (FB) - the most visited social networking website and the second largest Internet destination - received 137.6 million visitors per month. The combination of the battle for internet dominance, the inevitable Facebook IPO, and the continued Google+ expansion heats up the Facebook and Google rivalry in 2012.
However, Google's dominance is evidenced by the fact that the search engine giant's Q2 2012 gross profit of $7.2 billion is more than 1.6 times as large as FB's ttm revenue of $4.3 billion. Does this sheer size difference translate into continued supremacy for Google in the coming future?

Company Profiles

With ttm revenue of $43.2 billion, Google generates most of its profits from the AdWords product. Larry Page and Sergey Brin founded Google in 1998, and together still own 16% of the company. Google's growth has exploded over the last decade, through a series of technological innovations and business acquisitions. Recently the "Big G" has made advances in the field of social networking, and it leads the development of the mobile Android operating system. Processing over a billion search inquiries per day, Google is the world's most visited website and runs over one million data center servers worldwide.
Initially, Facebook was a private network for Harvard students only, including Zuckerberg - who later dropped out of college. Now, with nearly 960 million users, Facebook is by far the most used social network in the world. Over 40% of the U.S. population has a Facebook account. Facebook is ranked number two in U.S. website visits, making it the top contender against Google in regards to web traffic. With ttm revenue of $4.3 billion, Facebook went public in May of 2012. Obviously, in terms of size, Google has the upper hand in online advertising dominance. A large part of Google's success is the display of ads that are tailored to search results. Another significant chunk of revenue comes from AdSense ads targeted to website audiences.

Tracking Financials

Here is how Google and Facebook financials compare according to the latest Morningstar data. Google's year-on-year revenue growth for 2010-2011 was 29%. In contrast, Facebook's 2010-2011 year-on-year growth was 88%; quarterly comparisons are not available due to its recent debut as a public company. Google's market cap is $243.5 billion, compared to Facebook's $42.1 billion. Neither company declares dividends.

		Google	Facebook
Revenue Growth (2011/2010)		1.29	1.88
Free Cash Flow Growth (2011/2010)		1.58	2.33
P/E TTM		21.9	129.9
EPS TTM		34.21	0.17
ROE TTM		19.0	2.9
Debt/Equity		0.1	0.0
Market Cap		243.5 bil	42.1 bil

Note: the more advantageous figures are indicated in bold.
The data in the table above reveals that Facebook still trades at high multiples in terms of sales and free cash flow. On the other hand, it is hard to argue with Google's huge cash flow and its ability to innovate. For example, Google is moving aggressively into the fiber network arena.
Over the last six months Google strongly outpaced the S&P, as the chart below shows.

Comparing Google to Facebook is somewhat like comparing apples to oranges. Google is a large growth type stock while Facebook just recently went public, and therefore has no established track record for fair comparison. With so much speculation surrounding Facebook, it makes an accurate valuation difficult to establish. FB's current share price is about $20, having plummeted since its May IPO opening price of $38 per share.