Facebook FB is clearly looking at new options to boost time spent on its platform. The company’s recent announcement to allow users to add music to photos and videos after Stories is a move in this direction.
Currently, Facebook is testing the feature and is allowing only few users to explore the option. Very soon, the feature will be made available to its 2.2 billion monthly active users (MAUs).
Earlier this June, the social media giant allowed users to add music to Facebook Stories, which was a big hit.
Stories Boosts User Engagement
Facebook has been benefiting immensely from the increasing popularity of Stories across all its major platforms, with Instagram taking center stage.
Instagram Stories has 400 million daily active users (DAUs). Notably, Instagram is Facebook's fastest growing division based on its more than 1 billion monthly users and 500 million daily users.
Recently, Facebook also announced that the company now has 300 million DAUs of Stories on its main platform and Messenger on a combined basis.
This reflects that Facebook’s strategy of mimicking Snap’s SNAP Snapchat has been successful as the Stories have become more popular than Snapchat. Notably, Snap has 188 million DAUs as of second-quarter 2018.
Even before users were able to make music clips part of Stories, Facebook launched a feature called Lip Sync Live. The feature allows users to lip sync to a popular song alone or with friends, while streaming a Facebook Live video.
To launch Lip Sync Live feature, Facebook had partnered with major record labels and music publishers to host content on all its platforms. Currently, it is further monetizing on this deal by allowing users to add music to photos and videos.
We believe the addition of such engaging features on the platform will help Facebook drive meaningful engagement and boost the time spent by the users, eventually attracting advertising dollars.
Facebook, Inc. Revenue (TTM)
Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote
Ads Drive Revenue Growth
Facebook is making it easier to run ads in Stories as it is proving to be extremely engaging for people to interact with businesses. This is expected to attract ad dollars, which contributed 98.6% of total revenues in the last reported quarter.
However, competition from ad dollars is too intense due to the presence of other platforms like Alphabet’s GOOGL Google, YouTube and Twitter TWTR.
Additionally, expenses related to royalties that Facebook is offering to major record labels and music publishers for using their content are expected to hurt margins.
Moreover, aggressive investments for the initiatives related to improving ad transparency, removal of fake accounts and curbing fake news is expected to hurt profitability in the near term.
Facebook currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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