Facebook’s (FB) Instagram has reportedly topped Twitter’s (TWTR) user base with more than than 300 million active users. Instagram’s growing popularity can be assessed by the massive 70 million photos and videos shared on the platform everyday. We believe that the rise in Internet data consumption remains a favorable trend for the social networking sites that will eventually spur growth for major players in this category.
According to reports, Instagram is also focusing on deactivating “spammy accounts” to improve user experience. It is also working on authenticating celebrities’ accounts by offering “verified” badge to their profiles. We believe that new innovation and technology support will enable Instagram to stand out as a premium video and photo sharing site offering a competitive advantage against emerging players like Snapchat.
Instagram was acquired by Facebook in 2012 for $1 billion and since then has gained immense popularity. Apart from Instagram, other successful acquisitions by Facebook include LiveRail, Monoidics, Snaptu, Face.com, Lightbox, Glancee, Threadsy and Parse that expanded its content and applications for the desktop as well as mobile.
The company spent $456 million on acquisitions in the first nine months of 2014. Earlier this year, Facebook announced the acquisition of WhatsApp and Oculus VR. The WhatsApp acquisition not only expanded the company’s mobile product line-up but also added a predominantly young user base.
The WhatsApp acquisition will help Facebook to leverage its strong presence in Europe, India and Latin America.
Although the Oculus acquisition will not have any positive effect on Facebook’s financials in the near term, we believe this will offer the social networking site an early entry into the virtual reality market. Oculus’ technology is currently limited to gaming, but the company plans to extend it to new industries such as communications, media and entertainment, and education, thus driving growth over the long term.
Stocks to Consider
Facebook currently has a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in this segment include Baidu, Inc. (BIDU) and Internap Corp. (INAP), both carrying a Zacks Rank #2 (Buy).
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