Facebook seems to have copied the soon-to-be public Snapchat more than once, and it sounds like there could be more cloned products coming soon, according to one analyst. Video remains front and center as well, and Facebook also continues to refine its video platform in an attempt to boost engagement even further.
Facebook still the leader
In a research note dated Feb. 28, Susquehanna analyst Shyam Patil said his checks show that Facebook remains the leader in the social networking space. This is based on the company’s share of social ad budgets. Looking at current social ad commitments for this year, he expects Facebook to continue taking the lion’s share at more than 70% of total social ad spend.
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The analyst’s checks suggest that Facebook’s new mid-roll video ad format is appealing to most advertisers, especially as an alternative to YouTube ads and video ads in formats other than social advertising.
He adds that Instagram is still ramping as well, and he expects budget allotment to Instagram to continue growing throughout the year. He notes that this will be the first year the photo-sharing social network has been part of marketers’ “annual planning cycle.” Patil’s checks also suggest that ads in Stories will soon be available on Facebook’s self-serve API.
The great clone war against Snapchat
The Susquehanna analyst also found signs that Facebook is preparing to copy Snapchat yet again. The social network’s Stories offering is the newest clone. It’s pretty much a rollover from Instagram stories, which means that the company copied it once for its photo-sharing social network and then again for its core social platform. Stories is basically the same thing Snapchat is known for, which is disappearing content. Users’ Stories are up for 24 hours, and then they disappear.
The feature is being tested among a small number of Facebook users in Ireland for now, but given that it was already on Instagram, it’s probably just a matter of time before it does become available to everyone on the company’s core social network. Patil’s checks suggested that Instagram Stories has been successful, and they also pointed to good things about WhatsApp’s Status, which is basically a copy of Snapchat Stories.
The analyst’s contacts also believe it won’t be long before copies of Snapchat ad formats such as Lenses and Geofilters also make their way to Facebook, Instagram and/ or WhatsApp.
Facebook stock or Snapchat stock?
Since Facebook keeps rolling out its own products that are similar to Snapchat’s offerings, some might think Snapchat stock will be a great buy in the company’s upcoming initial public offering. However, that might not be the case. In a post for InvestorPlace, Chris Lau argues that Facebook stock will always be a better pick than Snapchat because he doesn’t believe Snapchat will ever be profitable. He said in order to be profitable, Alphabet’s cloud computing costs will have to decline so that the messaging app’s revenues are higher than its costs.
He warns though that if Facebook keeps copying Snapchat, users might abandon both WhatsApp and Messenger and favor Snapchat instead because it looks like the company can’t come up with its own ideas. But he notes that messaging isn’t Facebook’s core business though. Advertising is its “main growth engine,” and the goal is always to make ads visible to users. He feels that the company is just too big to fail. He expects it to keep growing in the area of messaging and to be successful in virtual reality.
Advertisers are interested in Snapchat
Patil’s checks of advertisers show that they’re interested in Snapchat, but they still see the social platform as “experimental.” Thus, they’re not yet willing to allocate large chunks of their budget until they see whether the return on investment is high enough to warrant greater spending. The analyst said his checks see Snapchat as “primarily a branding play to reach millennials.”
Despite the hesitation, he said advertisers do feel that Snapchat’s ad units are interesting and unique, especially Lenses and Geofilters. They’re expensive, but engagement with them look good, he added. However, advertisers reportedly feel the company must improve in several areas, such as reporting and analytics and the ad platform. Interestingly, they don’t care much about user growth in the near term… as long as engagement remains strong. User growth is the one area that has weighed on Twitter since it went public, so it will be interesting to see whether investors are also willing to overlook user growth.
Shares of Facebook stock fell 0.66% to $135.51 during regular trading hours on Tuesday.