Facebook Inc (FB) stock has been one of the greatest beneficiaries of the app economy. With shares up 43% in the last year alone, the social network is now worth about $330 billion — good enough to make it the seventh-largest company on earth.
But, unlike Alphabet Inc (GOOG, GOOGL), FB never vowed to “not be evil” in its incorporating documents. CEO Mark Zuckerberg was too sly for that.
It’s a good thing Facebook never took that vow, because in an effort to create its next big-time app, it’s doing some borderline unethical things. Frankly speaking, FB stock could benefit from Facebook’s challenged moral compass.
Here’s what Facebook is doing — and how it could help shareholders.
FB Moves to Expand Its Grip on App Economy
Since 2012, Facebook users have been able to sync photos from their phone to a private album on Facebook, where they were stored for safe keeping. The theory was that it would make photos more accessible to share.
Well, the freeloadin’ days of free photo storage are over. Facebook is deleting all your synced photos on July 7. That is, unless you download its new app, Moments, in which case they’ll be transferred over there. You can also download them to your own computer via a zip file before judgment day if you wish.
I see what Facebook is doing here. It’s trying to build another app with hundreds of millions — and potentially billions — of users. And these aggressive tactics just might push enough users over to get a good start on those plans.
It’s not unlike the strategy FB adopted with Messenger, when it re-routed the original chat function and instead required users to download the standalone Facebook Messenger app. Today, Facebook Messenger has about 900 million monthly active users.
Also important to note: Instagram has over 400 million users, and Facebook’s WhatsApp currently has more than 1 billion users. And there are 1.65 billion Facebook users as of today.
The Menlo Park, California-based tech behemoth wants users to spend more time on Facebook-owned apps. More engagement with Facebook’s products and services means more advertising impressions, more advertising dollars and more potential juice for FB stock. With the incessant rise in popularity of apps like Snapchat, though, that battle has become more difficult.
Facebook’s whole “Moments” push is challenging. It simply feels wrong, but this strategy has worked before and certainly helped to earn FB stock owners huge returns.
Unless users get fed up and start leaving Facebook’s ecosystem altogether, I don’t see there being much downside for shareholders.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
