So far this year, Facebook Inc (NASDAQ:FB) has more than doubled the broader market’s strength, with FB stock climbing more than 27% since the beginning of January. The social media site-turned-tech giant has also been no stranger to the headlines and with the exception of ongoing conversations about the impact of “fake news,” much of the press has been positive.
Last week at F8 — Facebook’s conference for developers and entrepreneurs who build products and services around the website — the company set the tech world abuzz with its plans to dive head first into augmented and virtual reality (AR/VR). But despite the sexy AR/VR announcement, the only news out of F8 that matters for Facebook stock is about its Messenger platform.
Messenger was the focus of F8 last year as well; that’s when Facebook first announced that it wanted to make the chatting feature a full-fledged platform, complete with chatbots. Since then, users have increasingly been able to get news, order food, play games, filter photos, track flights and more, all without leaving Messenger.
This year, Facebook announced more specific plans to improve and monetize the platform, which now boasts 1.2 billion users (up from 900 million last year).
It’s All About Monetization
Beyond technical improvements, Facebook announced chat extensions (allowing users to bring bots into person-to-person conversations), a discover feature (to help users find the best, most popular bots), and a tracking feature (for businesses).
The discover feature is the most relevant to actual profits because, no matter how you slice it, Facebook (and other tech giants like Google) are really advertising companies … and this tab translates to advertising real estate, which translates to money.
Sure, other features and technical advances and a growing user base are important to profit — but they all become almost instantly meaningless if there’s no way to sell ads on the platform.
AR/VR, on the other hand, represents some of the hottest areas in tech. But the fact that they’re nascent technologies means monetization is further off. One has to build a platform and attract both publishers and users before monetization matters. While it’s important for Facebook to be a player in the world of VR, it’s not immediately important to Facebook stock investors or Facebook’s profits.
If Facebook can continue attracting businesses and users to Messenger, that and the success of easily monetized Instagram — which is stealing Snapchat’s thunder and recently passed 700 million users — offer an attractive one-two punch for the company’s bottom line.
Everything else from F8? Shrug. FB stock as it stands now doesn’t need it. Keep an eye on VR and AR if you’re curious, but keep a closer eye on advertising developments for the company’s core offerings like Messenger.
Hilary Kramer is the editor of GameChangers, Breakout Stocks, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
