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Why Facebook Inc (FB) Stock Will Outshine the Snapchat IPO

If you want proof that Facebook Inc (NASDAQ:FB) can dominate any market it wants to, look no further than its recently debuted ‘Stories’ — a feature for its Instagram platform. Stories is a near clone of Snapchat’s ‘story’ feature, which allows users to store a series of pictures and display them for a full 24 hours. (Otherwise, pictures and videos shared via Snapchat vanish within a few seconds of posting them.)

Why Facebook Inc (FB) Stock Will Outshine the Snapchat IPO
Source: Shutterstock

Here’s the part that has owners of FB stock salivating: Whereas it took Snapchat almost six years to cultivate a following of 150 million users, it only took Facebook five months for Instagram’s Stories platform to secure the same number of daily users. The service has 600 million active monthly users.

Granted, FB had some leverage. It already boasts 1.8 billion monthly users, and easily funneled many of them to the nascent Stories feature. Regardless, the rapid rise of Stories in itself should serve as a warning to all other digital communications companies and simultaneously delight Facebook stock holders — the social networking giant can simply out muscle any and all other contestants.

FB Stock: Customers List + Good Idea = Success

Pre-internet, most corporate business models were the development of a great product or service, and then using the usual mediums to promote the daylights out of that product/service and drive as much revenue as possible.

After the internet “seasoned” a bit, a new business model emerged … a list of people, who are potential users/buyers of services, offered by that list’s owners, or offered by third parties who essentially rent that customer list. Facebook has an incredible list of members that are not only actively online, but are well profiled for marketers.

Instagram Stories’ rapid growth is evidence that hitting up the right list can make all the difference in the world.

It’s not just the accessible user pool that has made Stories such a success, however — the feature really is a very slick utility for the Instagram’s regulars. The tool allows members to piece together a collection of videos and photographs that more completely tell that members “story”… the pinnacle of promoting “me” on the popular social media platform.

It is a more compelling platform than Snapchat. Not only are Facebook friends easy to find using the integrated Stories platform, links to outside pages are permitted. Stories users also have a larger palette of drawing and captioning options.

Crunching the Numbers for Facebook

As for what Stories may mean for the FB stock price, take any projections with a grain of salt, but some outlooks peg Instagram’s 2017 revenue potential at $3.6 billion … top-line growth spurred by the fact that 74% of U.S. companies intend to use Instagram as an advertising platform this year, up from 2016’s 53%.

That revenue is and will be driven by the ads that appear among Instagram messages, and the ads that will soon start to appear within different segments of each Stories entry. Some of those ads will be full-screen advertisements, surfacing as viewers swipe their way through all the images and video clips in one of those Stories.

It’s not clear how much of that revenue will specifically be generated by stories. For perspective though, eMarketer expects Snapchat to drive just a little less than a billion dollars in revenue this year, and a leaked internal memo from last year suggests even Snapchat is looking for a figure along those lines. Given its rapid growth already though, Stories’ may have dwarfed Snapchat’s top line a year from now.

Bottom Line for Facebook Stock

Hindsight is 20/20, to be fair, but in retrospect, one can’t help but wonder if Snapchat should have sold itself to Facebook when it had a chance to do so a couple of years ago. A rebuked Mark Zuckerberg decided to copy Snapchat at its own game, and successfully did so. FB had something Snapchat never had though … a huge customer base to start with, and a suite of social media tools that all work together.

In more direct terms, Snapchat is an online tool, while Instagram is one spoke of a digital lifestyle hub.

It’s this sheer size and clout that has made and kept FB stock at the top of the pile among social media names, and why Snapchat could be fighting a serious uphill revenue battle right around the time it aims to go public later this year.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/01/facebook-inc-fb-stock-will-outshine-snapchat-ipo/.

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