Undeniably, this is the social media age and it is hard to imagine anyone with access to the Internet without a social profile. In the recent past, the birth of various social media platforms led analysts to believe that Facebook (FB, Financial) was losing its presence among people especially teenagers. However, it might have been a tad bit early to have written off Facebook’s presence among teenagers as this report from Forrester based on a survey conducted in the US establishes that Facebook is still teens’ favourite social networking website.
Focus on mobile.
In my opinion, the acquisition of Instagram and now, WhatsApp were made with the intent of growing mobile engagement. As stated by management in earnings call, Instagram reached 200 million monthly actives in the first quarter from a mere 22 million monthly actives a couple of years back, when it was acquired. It is not hard to imagine the possibilities with such a humungous database given the fact that Facebook has the capability to develop customized products for advertisers. While the company is looking to monetize Instagram via ads in near future, WhatsApp will play an instrumental role in expanding Facebook’s reach by offering a simple and lucid messaging service.
Launching Slingshot
Recently, the social network giant launched a photo messaging app that directly competes with Snapchat, called the Slingshot. This is a definite indication of the fact that Facebook is in no mood to leave any stone unturned in engaging the adolescent population. Initially, the company launched Slingshot only for the US population but the period of exclusivity was short-lived as the company took no time to roll out the app to its international users. It is important to note that the launch of Slingshot will have a positive impact on mobile engagement of users, a segment that Facebook is aggressively targeting for its immense potential.
Bidding on data
It is always interesting to see a battle that involves tech giants because of the strategies that play out on the field are unimaginably astute. Facebook and Google (GOOG, Financial) (GOOGL, Financial), are two big names in the field of online advertising that aim to offer best possible products to its advertisers. In one such attempt, Facebook has officially announced that it will track the user’s behaviour via the “like” button in order to serve better targeted ads. Till now, Facebook had been collecting and using data about users on its site using the “like” button but now it will expand this mechanism to any other website having the “like” button.
In contrast, Google has always used this mechanism in its search and display network in order to build a sturdy basket of offerings for the advertiser. Google has been a long reigning leader in the online ads space with an approximate of 32% market share under its command. Facebook is a distant second in this space but the recent surge in its daily monthly active users and development of better targeting techniques has made it a potential threat to Google. While, Facebook has already inched closer to Google by working on more or less similar ad serving mechanisms, the former has also begun to execute on its strategy of targeting the small business groups.
Back in 2011, Google started the “Get your business online” campaign in India with a view to get small businesses online and eventually on the ad platform. Now, even Facebook has understood the significance of small business groups as evidenced by its latest Facebook Fit tour conducted in New York City with the intent to woo small business owners with better tools and customer insights. Thus, in conclusion, it can be said with certainty that even though Google is a leader in the online ads space but it is already facing the heat because of rapidly growing reach of Facebook.
Takeaway
It is no stranger to us that Facebook had a lacklustre launch on the exchange and the Street punished the stock hard for bearing an unjustified value. However, over the past quarters, Facebook has demonstrated a commendable performance that has been primarily driven by mobile. Facebook has a gold-mine of data and the inclusion of Instagram and WhatsApp will only add to the massive database of the company which the advertisers madly love. Thus, these fundamental strengths make Facebook a competent buy for your portfolio
