There is a huge catalyst for Facebook Inc (NASDAQ:FB) stock, but it’s not the social network platform.
In less than four years after its initial public offering (IPO), Facebook stock climbed an impressive 197%. Most of that surge probably came from growth in its main Facebook app. Moving forward, however, there are a few other things that could propel the stock to even higher levels.
Here’s What the Bears Missed About Facebook Stock
The term “ecosystem” is not usually associated with Facebook. Rather, it’s mostly used by e-commerce companies and hardware device manufacturers that make money from selling to consumers directly. But due to the network effect, Facebook has built one of the strongest ecosystems in the Internet industry.
You see, Facebook is much more than its main social network app these days. The company is dominating the messaging app space.
First up is “Messenger.” The company used to have this service as a messaging feature in its main app. Back then, Facebook users could send messages to each other directly from Facebook. But in 2014, the company decided to discontinue the messaging feature on its main app and introduce it as the standalone app, Messenger.
Although some users would prefer the old way, Messenger turned out to be a huge success. Today, it is the third most downloaded free app in the “iOS” app store. (Source: “iTunes Charts,” Apple Inc, last accessed April 5, 2016.)
Note that this is not the only messaging app offered by Facebook. Through its $19.0-billion landmark acquisition in 2014, the company also got hold of “WhatsApp,” the most popular messaging app in the world.
In February, WhatsApp announced that its number of monthly active users (MAUs) has surpassed one billion. That’s nearly one-seventh of the Earth’s population! (Source: “One Billion,” WhatsApp Blog, February 1, 2016.)
Having a huge userbase is no doubt a good thing, but monetizing it could be a different story. Since Facebook no longer charges the $0.99 annual fee on WhatsApp, how can the company make money from it?
Running third-party ads? Not really. WhatsApp said that instead of running ads, the app will try to let users communicate with businesses and organizations that they want hear from.
This might seem a bit confusing at first. But by offering this service, WhatsApp has the potential to become the ultimate platform for businesses to communicate with consumers on an individual level. For instance, diamond ring vendor Rare Pink found that 10% of its clientele have asked the company to communicate with it exclusively via WhatsApp. (Source: “How WhatsApp Became a Store Front for Diamond Rings,” Forbes, November 30, 2015.)
Mind you, Facebook’s ecosystem extends well beyond messaging apps. For instance, the company’s photo-sharing app “Instagram” has more than 400 million MAUs. The most impressive part is the app’s advertising growth. Instagram opened up advertising last September. In just six months, the app has attracted 200,000 advertisers. (Source: “200,000 Advertisers on Instagram,” Instagram Blog, February 24, 2016.)
Today, Facebook owns four of the top ten apps in the iOS app store: Messenger, Instagram, Facebook, and WhatsApp. The ecosystem of apps could become a huge catalyst for Facebook stock once monetization further improves.
The Bottom Line on Facebook Stock
And let’s not forget that just as you realize its dominance in the app world, Facebook is moving into the hardware business. It has recently started shipping its virtual reality headset, “Oculus Rift,” one of the hottest gadgets today.
The company’s giant userbase ensures that whatever it plans to do next, there could always be a huge following. And that’s reassuring for Facebook stock investors.