TikTok Is Just Noise for Facebook Stock

Although TikTok has captured young internet users’ attention, FB stock is more built for the long game

In the ever-evolving social media war, Facebook (NASDAQ:FB) and FB stock stand out to me as the true winners. Sure, Facebook’s year-to-date haul of nearly 40% doesn’t hold a candle to Snap’s (NYSE:SNAP) startlingly brilliant 137% rally. And of course Twitter (NYSE:TWTR) receives free marketing from the highest office of the land.

The Next Year Won't Be as Rocky for Facebook Stock as You Might Think
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Yet comprehensively, no one beats out the social media network that Mark Zuckerberg built. First, we can talk about the company’s 2.4 billion monthly active users. To put this figure into perspective, that’s over 31% of the world’s population, which stands around 7.7 billion. It’s no hyperbole to say that buying Facebook stock is buying a share of the world.

More critical for FB stock is the social media king’s demographic distribution. Unlike other rivals like Snap, which caters to a very young audience, FB features considerably more balance. For instance, in a Pew Research Center study in 2015, 82% of internet users aged 18 to 29 also used Facebook. For internet users aged 30 to 49, this allocation only slipped to 79%.

Impressively, a whopping 64% of internet users aged between 50 to 64 use Facebook. And for the 65-plus crowd, the distribution is still a remarkably high 48%.

Thus underlines the core bullish thesis of Facebook stock: social media is all about people. And the more people you have, the more relevant your platform is. Moreover, relevancy has a direct correlation with attracting advertisers.

Because of this comprehensive dominance of FB stock in the metrics that matter, it’s difficult to imagine anyone rivaling it. That said, a relatively new phenomenon should give some shareholders pause.

Is It TikTok for FB Stock?

A few days ago, CNBC ran a report that TikTok was aggressively poaching Facebook employees. Being that I’m ridiculously old and irrelevant, my first thought was, why is Kesha stealing Facebook employees? Later, I realized that TikTok – a subsidiary of Chinese parent-company ByteDance – represented the latest phenomenon in social media.

After reading about TikTok, I’m still not 100% sure what it is, so forgive this brief and potentially inaccurate summary. But from my understanding, it’s an app designed for budding singers, musicians, and entertainers. Ranging from amateurs to those with real talent, these active users – called “Musers” – submit videos showcasing their skills.

As Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube platform demonstrates, real demand exists for such platforms. I’ve seen countless videos of amateur musicians play covers of famous songs, as well as original material. Admittedly, many of these contributors are very good.

And for the lucky few who turn heads on TikTok, they can achieve both social media fame and a record deal. Thus, it’s a great gig for talent agents, where potential stars come to them. For everyone else, I’m assuming at the least it’s a fun way to blow off some steam.

While TikTok doesn’t have the North American numbers – it has about 26.5 million MAUs in the U.S. – it has 500 million MAUs altogether. Unsurprisingly, a majority of this tally comes from Asia.

Plus, the biggest threat to Facebook stock is that TikTok resonates with young people – the audience Facebook bought out Instagram to capture. In fact, TikTok is the number one most-downloaded app for Apple (NASDAQ:AAPL) iPhones. Overall, the company has over one billion downloads.

The fact that the company is setting up shop in Mountain View, California is surely no coincidence. But should investors panic on FB stock?

Stay the Course with Facebook Stock

Although the TikTok phenomenon is one to be respected, I don’t think people should read too much into it. While the parent company is poaching Facebook employees, I view this more as personal opportunism: the rewards are potentially greater for cashing out on a brilliant upstart rather than a long-established name.

Furthermore, the biggest weakness I see for TikTok – aside from demographic imbalance – is functional limitations. Primarily, the consumer driver here is a platform for budding professional entertainers. Surely, that appeals to many people – just watch “American Idol,” for instance. But I just don’t see this as a sustainable, long-term platform.

With Facebook, what you do is only limited by your imagination. You can market your business, reach out to potential employers, or look for a long-lost friend. There is no underlying pressure to do anything more than what you want. That, among many other attributes, makes Facebook practical for almost everyone. And this is why you shouldn’t worry about FB stock.

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


Article printed from InvestorPlace Media, https://investorplace.com/2019/10/tiktok-is-just-noise-for-facebook-stock/.

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