Facebook FB continues to be under fire over privacy concerns. A study by Privacy International revealed that 20 out of 34 Android apps disclosed sensitive user information to the company.
As soon as users opened these popular apps, the pre-installed Facebook Software Development Kit (SDK) automatically collected details of user activity in the app without their consent. Some of the apps include Kayak, Spotify SPOT, Duolingo and TripAdvisor TRIP among others.
Not only is the data available to Facebook but is also vulnerable to misuse by hackers. Notably, the user data shared with Facebook is through Alphabet’s GOOGL Google advertising ID.
The data collection practices clearly violate European Union's General Data Protection Regulation (GDPR), which came into effect on May 25, 2018. The regulation places tight control on how companies deal with user data.
Though Facebook updated its SDK to collect data with users’ permission after GDPR took effect, many popular apps are yet to incorporate the new update. Moreover, some developers complain that the data collection issue persists even with the new SDK in place.
However, Facebook has not shied away from making aggressive investments to secure its platform and undertaken numerous measures in the past year.
We believe the company’s efforts to enhance security will boost user confidence and attract more ad dollars, which contribute significantly to the top line (98.6% of third-quarter 2018 revenues).
Facebook, Inc. Revenue (TTM)
Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote
Can Stories Drive Ad Dollars in 2019?
Moreover, Facebook has been benefiting immensely from the increasing popularity of Stories across all its major platforms, particularly Instagram. Therefore, the company is making it easier to run ads in Stories. The company rolled out ads in Facebook Stories in third-quarter 2018. It also worked on improving the look of the ads to make them suitable for Stories.
The addition of shopping features to Instagram Stories has increased its popularity significantly with daily active users (DAUs) touching 400 million. Notably, Instagram is Facebook's fastest growing division based on its more than 1 billion monthly users and 500 million daily users.
Moreover, to monetize WhatsApp, Facebook is planning to roll out ads on WhatsApp status. Notably, about 450 million DAUs use WhatsApp status globally. WhatsApp has an estimated user base of over 1.3 billion.
Facebook’s efforts to use its existing platform to generate additional ad dollars bode well. Further, the company is expected to replace Google as a leader in digital ads, driven by the growing popularity of video advertisements and Instagram, per investment firm Cowen.
Notably, Facebook (including Instagram video ads) is expected to generate $10.2 billion in video ad revenues by 2020, which equates to 87.3% of total market revenues.
Facebook currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) Stocks here.
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