Facebook Inc (NASDAQ:FB)’s business has little in common with The Walt Disney Company (NYSE:DIS). We have heard a lot about the social networking giant’s multi-app strategy. Barclays analysts Paul Vogel and Michael Urciuoli consider it a multi-brand strategy, which involves developing brands that can live outside of the core. The analysts believe that Facebook continues to build out its brand offering just the way Disney built up its franchise. Vogel and Urciuoli have an Overweight rating on Facebook with $78 price target, reflecting a 19% upside.
Disney has been to where Facebook is today
About a decade ago, Disney was not a diverse company as it is today. At the time, investors criticized the company’s lack of age diversity. Disney relied too much on youngest kids, and had little to offer to attract older kids or adults. In the following years, the company built and acquired brands that helped it diversify and expand its business, without losing its core. The Disney brand continues to attract younger kids. But with Marvel, Pixar, Lucas and ESPN, the company now entertains almost every age group.
Facebook is heading down a similar path. With the purchase of Instagram and WhatsApp, and the launch of Paper, the social networking giant is developing brands that complement its core and extend its offerings to cater to different types of consumers. You can’t be all things to all people. Trying to create a product that appeals to everyone could be a recipe for disaster.
By acquiring WhatsApp, growing Instagram and launching the Paper app, Facebook is creating brands that could be attractive to different types of users. It simply creates unique offerings for different use cases and preferences of individuals. In the long-term, if the Menlo Park-based company can create a unified approach to its offering, it will see immense targeting and advertising potential. For now, its newer offerings won’t make a significant contribution to its revenues. The core Facebook will continue to drive the revenue and earnings growth.
But in the long-term, Facebook will have to create a link between its various products, maybe through a unified login, to improve targeting potential.