Facebook, Uber in Talks to Integrate within Messenger - Analyst Blog

By Zacks Equity Research,

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Facebook Inc. ( FB ) and taxi-summoning mobile app Uber are reportedly discussing plans to collaborate. Although the details of the negotiations are few, Uber is likely to be integrated within Facebook's messenger app.

The collaboration will benefit both Facebook and Uber in the long run. The partnership will significantly expand Uber's customer base. Facebook, on the other hand, will get access to a huge amount of data related to users' payment behavior, frequency of taxi usage and traveling information.

Based on this data, Facebook will be able to build customer profiles, which will help advertisers to post relevant ads. Moreover, data about users' payment behavior will help Facebook to develop the nuances of its e-Commerce operations. The integration with Uber will eventually help Facebook to offer payment options through its Messenger app that will further boost its top line over the long term.

Facebook is gearing up to expand its e-Commerce offerings. The social network is testing a 'Buy' button that will allow users to purchase goods from merchants without leaving the core app. The company currently will not charge any fees on the transactions done over the network.

Facebook is testing the new button with a selected few small and medium-sized merchants in the United States. Once satisfied, it will be available to both mobile and desktop users, who can use their credit cards (registered with Facebook) to purchase goods.

Earlier, Facebook had tried several options to expand its e-Commerce offerings without much success. The simplicity of the current payment process will boost conversion rate, which is the primary aim of every merchant. We believe that a higher conversion rate will enable Facebook to charge merchants in the long run.

Per eMarketer, global business-to-consumer (B2C) e-Commerce sales will increase 20.1% to $1.5 trillion in 2014. This is expected to hit $2.4 trillion by 2017, which presents a significant growth opportunity for both Facebook particularly due to its massive user base.

Amid growing competition from Google ( GOOGL ), Yahoo! ( YHOO ) and Twitter ( TWTR ) for attracting ad dollars, e-Commerce offerings will diversify Facebook's revenue source over the long haul. In the recently ended second-quarter 2014, advertising contributed approximately 92.0% of Facebook's top line, which is a concern.

Moreover, higher investments on product and infrastructure development will hurt profitability in the near term.

Currently, Facebook has a Zacks Rank #4 (Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: FB , YHOO , TWTR , GOOGL

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