is testing a feature that will allow its users to save shared
links for later reading. The feature is much similar to what
applications like Instapaper and Pocket offer.
The feature is not new to Facebook as the company had tested this
option last year for both mobile and desktop. However, instead of
saving, the feature was used to archive status updates.
Although there is no official confirmation on its launch in the
near future (Facebook is known for experimenting with several new
things, which ultimately are not made live), we believe that the
addition of this new feature will further boost user engagement.
Facebook's stupendous growth in the recent times has been
primarily driven by its improving focus on user engagement and
mobile monetization. In the recently concluded third quarter,
mobile comprised 49.0% of ad revenues, up from 41.0% in the
The sequential increase in mobile ad revenues was driven by an
increase in average price per mobile ad, number of mobile users
and ads shown per mobile user. Mobile monthly active users (MAUs)
surged 45.0% year over year to 874 million.
However, management stated their concern on Facebook usage among
teenagers, which was almost stable in the third quarter on a
sequential basis. This prompted Facebook to allow users in the
age group of 13 to 17 to make public posts. The company also
announced that it will restrict ad quantity in newsfeed in order
to improve user engagement.
Facebook recently expanded its "contact via phone number" feature
to the messenger for
iOS, which was already available for
Android users. The expansion of the feature, which allows
Facebook users to message non-friends via phone number, will help
the company to compete more effectively with WeChat and
We believe that new products such as the Reader and
television-like spot offerings for advertisers (reportedly for
$2.5 million a day) are expected to drive top-line growth going
forward. Additionally, improving customer engagement will help it
to aggressively compete in the ad market against the likes of
We believe that the company has gained significant traction in
its mobile ad business within a very short span of time. This
combined with its massive user base and its ability to track
personal details over time makes it a formidable force in the
online ad market.
However, a volatile macroeconomic environment, higher investments
to expand mobile offerings and increasing competition are
expected to hurt margins in the near term.
Currently, Facebook has a Zacks Rank #2 (Buy).
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