Facebook (FB): Ello Is No Existential Threat

Facebook (FB) shareholders may have heard about the newest social network on the block — the young upstart Ello.

facebook-fb-stock-elloThe budding social network isn’t exactly a household name just yet. But could it be? Does Ello pose an existential threat to one of the most iconic Silicon Valley companies of today?

Let’s consider what Ello is and the risk it poses to FB stock before we jump to any conclusions.

Ello: The Anti-Facebook

Ello has literally built its young business by defining what it isn’t. Ello wants you to know: it isn’t Facebook, okay? It’s not some evil corporation enslaved to Wall Street’s incessant demands for quarterly results.

That’s all well and fine, but Ello isn’t exactly an angelic, selfless nonprofit in its own rights.

What has attracted users to the Ello platform — and perhaps away from FB — is the company’s solemn vow not to sell your personal data to advertisers. You know, like the evil Zuckerbergians in Menlo Park do. Instead, the young social media outfit operates on the freemium model: if you want to do certain “special” things on its site like change the background color of your profile or have more than one account, you’ll have to pony up some dough.

You can also use fake names on Ello if you’re into that sort of thing.

While by late September Ello was reportedly signing up 31,000 people per hour, if you own FB stock you should be more worried about Twitter (TWTR) and Google (GOOG) than an up-and-comer with no proven long-term track record.

That’s because a recent study from Piper Jaffray confirmed that teenagers are becoming disillusioned with Facebook. Only 45% of 13- to 19-year-olds reported using FB in the latest fall survey, down sharply from the 72% that reported using it in the spring. TWTR, while its usage among teens fell from 63% to 59% in the last six months, easily leapfrogged FB in the popularity rankings for that demographic. Google+ came in pretty low at 12%, and Ello itself didn’t even make the list.

The simple fact is that Ello just isn’t on Facebook’s level today, and FB even has the jump on Ello in other respects.

For starters, Facebook owns Instagram, which is actually the No. 1 social networking site teens use today, with 76% market penetration. Secondly, Facebook has the resources to use the data it collects to serve up amazing ads. That data also allows it to do seemingly crazy things like move into the healthcare space, where it can offer personalized health services like rivals Apple (AAPL) and Google.

With the popular messaging app Whatsapp in its portfolio and virtual reality companies like Oculus Rift under its control, FB is in a league of its own. Don’t sweat Ello right now. It can’t compete with Facebook on any level.

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As of this writing John Divine owned shares of AAPL stock, GOOG stock, and GOOGL stock. You can follow him on Twitter at @divinebizkid.


Article printed from InvestorPlace Media, https://investorplace.com/2014/10/facebook-fb-stock-ello/.

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