FB Stock to Gain in This Facebook vs Snap Battle
Facebook Inc (NASDAQ:FB) has done it again! On the first day of F8—the company’s annual developer conference—Facebook CEO Mark Zuckerberg launched a new augmented reality platform and the company announced new products, which clearly showed how the social networking giant will continue to be the leader in the coming years. Facebook stock closed at $140.96 on Tuesday and is poised to go higher.
Snap Inc (NYSE:SNAP) also was not far behind in showcasing its AR efforts on Tuesday. The company introduced new “World Lenses,” which was another way to use its “Lenses.” Snap stock also jumped about three percent on Tuesday to close at $20.55. However, the market clearly sees more potential in Facebook’s AR/VR products and this is likely to hit Snap shares. (Source: “Introducing New World Lenses,” YouTube, April 18, 2017.)
Facebook rolled out the first-of-its-kind AR platform for developers and introduced a social virtual reality product called “Spaces,” which lets users hang out with their friends in a virtual world. Zuckerberg had always been clear about VR being the next computing platform for the social media juggernaut. But AR is what will give it the edge in a world dominated by mobiles and where users need not have a VR wearable device. This would lead to more engagement on the platform and more upside for Facebook stock.
Zuckerberg was rattled by the growing popularity of “Snapchat,” the app that heavily used augmented reality to create new experiences for its users. He not only copied most of the features of Snapchat for Facebook products, but also made “Instagram,” another copy of Snapchat. However, the company made use of these features better than Snap, and today, its photo-sharing app boasts of more subscribers and higher growth.
This is a huge setback for Snap, which has seen a slower growth in its subscriber base following the success of Instagram.
Chart courtesy of StockCharts.com
The above chart shows how Facebook stock and Snap stock have moved since the beginning of this year, and the picture is not a pretty one for Snap Inc.
So far, Facebook Inc has won the first round in the Facebook vs Snap battle!
Facebook vs Snap: The Battle for AR Dominance
Facebook had bought the maker of VR headsets, Oculus VR, about three years back for about $2.0 billion because Zuckerberg believed virtual reality to be the next computing platform and a high potential area for Facebook. It could be used not just for gaming, but also experiencing live events, being in a consultation with a doctor, and many more such experiences, if users could just wear these headsets in the comfort of their homes.
FB stock investors are excited by the prospects of this vision. But Snap is also not likely to give up its hold on the AR/VR market that is likely to grow by leaps and bounds in the coming years.
It was reported last December that Snap has acquired Cimagine Media, an AR firm that specializes in computer vision, real-time image processing, international marketing etc. But the most important fact is that it aims to help retailers benefit from the potential of AR technology. This augmented commerce feature may result in Snapchat becoming a popular platform for shopping for the users. (Source: “Snap reportedly acquired augmented reality startup Cimagine Media for up to $40 million,” VentureBeat, December 24, 2016.)
If Snap could make teens and millennials shop on its platform using its AR features, it would be good for the camera company. However, Facebook could come up with its own version of augmented commerce and take the lead there too, with its sheer number of active users. With its AR platform open to developers, Facebook would be the place to go for AR/VR content. The growth possibilities would keep pushing Facebook stock higher.
Hence, the second round of the Facebook vs Snap battle also goes to Facebook.
Facebook vs Snap: The Battle for Ad Dollars Would Be Tough for Snap Stock
Given the fact that Facebook has about two billion users and together with Google parent Alphabet Inc (NASDAQ:GOOG), commands more than 50% of the digital advertising market, Snap Inc would always be third in line for a long time to come.
But looking at the way Snap is going, it does not appear that it is trying to be like Facebook. Snap Inc wants to carve its own identity. It is happy to grow in its own chosen niche and is not competing with Facebook for ad dollars, simply because it can’t. Snap is not even targeting to be a global phenomenon.
The advertisers look at Snap as the third option after Google and Facebook and would be watching the growth of the camera company over the next few quarters.
Hence, we can be sure that Snap Inc is not a threat to Facebook, which again emerges as the clear winner.
The Bottom Line on Facebook Stock
The only controversies that would keep hitting Facebook stock would be the ones surrounding offensive and violent videos. The company would have to keep working on this.
We have been writing about Facebook Inc, saying that the company has many growth catalysts that would keep FB stock flying high for years to come. In the Facebook vs Snap battle, it looks more like Facebook has no competition at all. However, there could be the possibility of Facebook vs Apple in the AR/VR market as the latter launches its “iPhone 8” in September this year and becomes focused on increasing its presence in the AR space. But until that happens, the stock will continue marching upwards.