Facebook Inc (NASDAQ:FB) stock might be struggling since the beginning of last month but these trends will make FB bulls feel very good.
There's no doubt Facebook Inc (NASDAQ:FB) stock has been the best social media play till date and still continues to be the best social networking play. However, FB stock is struggling since the beginning of last month moving sideways for most of the time. The recent negative commentary pertaining to FB stock hasn't helped much either. Given all this, the latest eMarketer research findings have some good news for Facebook bulls and all the bulls should read this. These eMarketer research findings also justify our long-term bullish stance on FB stock, which is also one of our top stock picks from the technology sector, which have outperformed the NASDAQ by over 163%. Let's take a closer look.
More advertisers rushing to Facebook platform.
Advertising revenue forms bulk of the Facebook's total revenue and time and again ad load saturation on the core Facebook platform has been raised as a red flag for FB stock. But this hasn't the slowed revenue growth. Now, if you go by one of the latest eMarketer articles, the advertising revenue of Facebook looks set to maintain its long-term secular growth. In this article, it is reported that according to G2 Crowd data small and medium businesses (SMBs) are crowding Facebook platform for their marketing initiatives. A G2 Crowd survey found that 24% of respondents had "planned to prioritize investments toward marketing and advertising in 2017". This number is more than double the number of persons who were willing to spend on other aspects of their business such as sales personnel, new facilities etc. Further, for 80% of respondents, Facebook was the preferred destination for marketing purposes.
Moreover, in another poll by Netsertive, 41.5% of the SMBs in US credited Facebook as "the best social network for driving in-store sales and foot traffic", much higher than any other medium. LinkedIn was a distant second at 11.1%. G2 Crowd’s chief research officer opines "[Marketing technology] vendors don’t focus enough on smaller companies, largely because of the assumption that they’ll spend less on sophisticated marketing tools." This assumption could work for Facebook as more SMBs prefer Facebook as their preferred digital advertising medium and for one more reason. In another survey at the starting of the year, it was found that 40% of US SMBs were planning to increase spending on digital media with more focus on mobile ads and online video. All these findings go in sync with Facebook's present initiatives and strengths. This segment is totally difficult to ignore in spite of their limited budgets as the number of SMBs are in millions in the US.
Facebook is lucky to have Instagram.
In our past coverage, we have covered in detail how Instagram is driving Facebook stock. Now, there is some more good news which reemphasizes the fact Instagram looks set to be a major growth catalyst for FB stock for some time. Of late, publishers and advertisers have been piling on Instagram. Ask me why? Top media publisher are seeing top-notch levels of engagement for their content and ads on Instagram. BuzzFeed News, one of the publishers on Instagram saw the engagement levels of its content, of which videos were a major part, increase by 687% between May 2016 and May 2017. It's a no-brainer why publishers are also increasingly turning to video ads to bolster their bottom lines. Further, Dentsu Aegis Network study forecasts worldwide ad spending on digital video will jump 25.4% next year and to add to that, spending on Instagram video ads is also predicted to go up over the coming year.
Well, if you are thinking that's all, what Instagram is offering as a good news at present for FB stock then there's still something more. According to eMarketer’s latest forecasts of social network usage in US and UK, usage levels of Instagram and its rival Snap Inc's (NYSE:SNAP) Snapchat is expected to rise by double digits which compensates for the lower usage of Facebook among teens and young adults, the most sought after demographic among advertisers. eMarketer principal analyst Debra Aho Williamson stated: "Facebook is fortunate that it owns Instagram, which remains a strong platform for teens. Although usage of the main Facebook app is declining among teens, marketers will still be able to reach them on Instagram." The usage rate declines are not to be worried as they are very minor.
Despite the slip in usage growth among teens, Facebook is still the dominant social media player and it is set to remain like that for some time. Bill Fisher, eMarketer’s UK senior analyst also echoes similar thoughts as he opines that "Facebook is still the big winner in social media, and it will be further enthused to see Instagram’s longer-term prospects looking even better than Snapchat’s." The image below further reiterates Facebook's dominance which has the largest penetration among all the social media platforms.
Having all said this, the Facebook stock has still many other growth drivers which make it a good long-term buy. All Facebook bulls should ignore the recent weakness in FB stock and try to buy more into the stock on any major dip. The Mark Zuckerberg led company keeps expanding its growth drivers with its latest moves. In messenger, Whatsapp and now investment in content, FB stock has no dearth of growth catalysts.
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