Facebook Inc (NASDAQ:FB) announced the re-design of News Feed, possibly the most important real estate for Facebook on mobile devices. The new look is more vibrant and in our view will help users better manage and organize their own personal news feeds. The redesign will be rolled out gradually on the Web and on mobile. The goal of the change is to increase engagement, and some think the changes better enable Facebook to match up vs. competing services like Twitter and Pinterest. Many reports are out today and we note what a few analysts are saying below:
BAML Analysts note:
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Though the impact of the news feed redesign is difficult to estimate on the quantity of ads served (users may be better able to avoid ads), a better news feed user experience will likely increase engagement and increase overall monetization opportunities for Facebook Inc (NASDAQ:FB). We continue to see an opportunity to generate more revenue per FB user, and larger news feed ads could yield higher click through rates (ads in specific news feed categories could be more targeted) and higher ad pricing (from more advertiser demand for new formats). We are maintaining our Buy rating and our 12-month Price Objective of $35.
We investors expect the changes to the News Feed to drive revenue growth in 2013 and beyond. Richer Stories will drive user engagement through more appealing content that augments the appearance of News Feed and should better appeal to each user’s interests. Richer Stories will prevent the Facebook Inc (NASDAQ:FB) experience from becoming stale in the eyes of its users. A more engaged audience allows Facebook to charge more for its targeted ads as users will be less likely to gloss over content in the News Feed. Choice of Feeds will also have a positive impact on targeted ad prices as the user will feel compelled to provide more information about “likes” in order to receive a more interesting “personalized newspaper.” Also, the “Games” News Feed will bring greater awareness about different games to an interested audience, potentially resulting in greater Payments revenue.
More information on users provides greater targeting abilities for ads, and as relevancy and effectiveness improve, Facebook Inc (NASDAQ:FB) can charge higher prices. Mobile Consistency will provide a more integrated Facebook experience from the perspective of the user, decreasing the urge to bypass using Facebook on one platform because it is not as visually appealing or up-to-date.
Topeka Capital had the following to say:
In our view, Facebook Inc (NASDAQ:FB)’s updated news feed offers better presentation of content, and signals that the Company is looking to garner a slice of the rapidly growing on-line video ad dollar.