Facebook Inc. FB recently unveiled a new messaging application called Messenger Kids for children below the age of 13 in the United States.
The app is currently available only on Apple App Store and will subsequently be released on Amazon App Store and Google Play Store in the coming months.
We believe Facebook’s attempt to target this demography will eventually lead to an expansion in its total addressable market (TAM). Notably, Facebook has gained 49.1% year to date, substantially outperforming the industry’s 21.8% rally.
All About the App
Facebook mentioned in its blog post that the app is designed to enable kids to communicate with their friends and family through video chats and text messages as well as share photos and videos. The app features GIFs, frames, stickers, masks and drawing tools that are “kid-appropriate and specially chosen.”
Although the app is meant for kids, it doesn’t give them the right to control it on their own or have their own Facebook account. It will instead be exclusively controlled by parents, starting from setting up the child’s account to approving contacts from Messenger Kids Controls panel on parents’ main Facebook app.
Per Facebook’s Product Management Director, Loren Cheng, the app has been launched after productive discussions with over thousands of parents, associations like National PTA and Blue Star Families as well as advisors in the field of child development, online safety and children’s media and technology.
Facebook has kept the app free from advertisements and in accordance with the Children’s Online Privacy and Protection Act (COPPA).
Focus on Expanding its Reach
Facebook’s user base continues to grow at a significant pace driven by new features and tools that improve engagement. In the last reported quarter, the company’s Daily Active Users (DAUs) increased 16% year over year to 1.37 billion.
We believe the launch of parent-controlled Messenger Kids will give parents more reasons to stay on the main app to monitor their child’s activity. The time spent per user on the core Facebook platform is therefore expected to increase.
Per TechCrunch, when users of Messenger Kids turn 13, their profiles will not be automatically updated to a regular Facebook profile. Instead, they will have to create one separately.
Facebook’s intention to foray into the under-13 demography is prudent in our view as Messenger Kids will help the company expand its user base on the main platform. An uptick in user base will help it draw more advertisers and bring in more advertising dollars.
However, it remains to be seen whether Messenger Kids suffers the same fate as Snap Inc. SNAP, which failed to draw support for its under-13 app, SnapKidz. The service launched in 2013 was later discontinued.
Zacks Rank & Key Picks
Facebook carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader technology sector include Intel Corporation INTC and NVIDIA Corporation NVDA, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Long-term earnings growth rate for Intel and NVIDIA is projected to be 8.4% and 11.2%, respectively.
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