1. NASDAQ: FB

2. FB 1 Year Price Chart

3. No Real Competition

4. FB v. TWTR

5. Broadly, Facebook’s dominance in social media, sustainable competitive advantage, and forward- looking investments enable the potential for substantial monetization over time and thus position the company for long-term growth. FB is a buying opportunity, as I believe the market has not fully priced in revenues from Instagram and higher quality ad offerings, which will be reflected in Q3 (Nov. 4 th ) and Q4 earnings. Timeframe: 4 months, then reevaluation. Target Price: $112.75 Investment Thesis

6. Sustainable Competitive Advantage

7. User Retention

8. Potential revenue boost from favorable exchange rates in Q3 & Q4 International revenue accounts for 55% of total revenue With a 2015 rate hike becoming unlikely, the dollar is expected to drop against the Pound, Euro, and certain Asian currencies Instagram Ad Rev ramp up, this is a meaningful driver of engagement and ad revenue growth Given FB has fully opened ad-buying interface channels to Instagram, I predict Instagram will generate approx. $559 M in revenue this quarter, and $609 M by year end. This is expected to be reflected in Q3&4 revenue Higher quality ad formats, such as video gain traction Near-term Catalysts

9. Expanding ads to Instagram, which has over 400 million monthly active users will only help solidify its market share Previously open to a select group of brand in the US, now any company can advertise on the platform with a “self-serve” option Recent jump in advertising on Instagram, which is expected to be reflected in Q3 and Q4 Instagram

10. Earnings Estimates Comparison Even with conservative estimates on incoming revenue (excluding Instagram), my analysis forecasts approx. $4.329 B in revenue for Q3 2015

11. Revenue + Instagram Compared to the revenue estimate, I expect Instagram to generate an extra $559 million, which will trickling down the bottom line. This may be offset by increased spending on R&D and increased operational costs as alluded by management in previous earnings calls.

12. 2015 FB Revenue Projections Total Revenue, blue line is a conservative estimate of

13. Mobile Ad Growth

14. Industry Video Ad Growth “Facebook pages are now sharing more than 40% more videos than before. Video is still the richest form of media” – Zuckerberg “She also touched on video, and how it was driving Facebook's advertising growth. One of the thing's that's valuable about Facebook video advertising, she said, is that advertisers can target viewers extremely specifically. ” – Sheryll Sandberg, COO

15. Sept. 28 th Facebook 40 minute outage is third time in 11 days, losing $1.2 M in revenue Massive user base expected to taper off revenue growth going into 2016 Trade-off between user-centric focus and ad revenue Management has alluded to this in earnings calls Potential necessary capital needs as a result of competitive intensity and for continued growth Unexpectedly low user engagement amidst intensive competition Near-term Risks

16. User-first focus may compromise advertising and cause short-term revenue risk and volatility Competition from other social services TWTR, LNKD, GOOG+, Snapchat Competition from online and mobile ad dollars from GOOG (still represents the largest company in total online advertising revenue) Future privacy, security, and regulatory risks that pose a threat to FB’s business model Long-term Risks

17. Appendix

18. Competitor Snapshot

19. Profit Margins

20. Total Ad Revenue Comparison

21. Still early in monetizing FB’s base of 1.49 B users Expansion to untapped marketplaces, for user and revenue growth China, India, and Africa Strengthening franchises in Instagram, Messenger & WhatsApp Developing the Ad Platform: Higher quality brand advertisers Use of High-value ad formats (video &app install ads) Introducing self-serve functionality (opens up platform to more advertisers) Ramp of video in FB mobile newfeeds Long-term Catalysts

22. FB’s ROIC?

23. Rising R&D Expenditures

24. Average Revenue Per User

25. Analyst Consensus

26. Mobile Ad Global Position