For Immediate Release
Chicago, IL – February 28, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Meta Platforms
FB
and Snap Inc.
SNAP
.
Here are highlights from Friday’s Analyst Blog:
Can Meta Platforms Rival TikTok?
Meta Platforms
is the world’s largest social media platform by user base. Its website enables users to connect, share, discover and communicate.
As social media continues to evolve, there have been major shakeups within the industry. More people than ever are using social media now, and companies have constantly been trying to keep up with the current trend and stay ahead of the curve.
Meta Platforms has recently shifted a focus on the short-term video trend influenced by TikTok, and is attempting to capitalize on that success with their rival feature, “Reels”.
However, TikTok is currently growing at an accelerated rate that could leave many behind. Let’s take a look into how FB is planning to combat and mimic TikTok’s success with its Reel feature.
TikTok’s Surprise Growth
TikTok, an innovative social media app, has taken the world by storm in the past several years. TikTok launched in 2017 and is owned by Beijing-based technology company ByteDance.
The platform allows social media content creators to edit and upload short-term-length videos with a wide array of tools at their disposal.
TikTok has been downloaded over three billion times and is the seventh most popular app of the 2010s, even though it was released in 2017. TikTok is expected to reach 1.5 billion monthly active users by the end of fiscal 2022 and has become a massive threat to all social media platforms.
Reels
Noticing the growth of TikTok, FB implemented Reels, on Instagram back in August 2020. The idea behind Reels was simple; it was FB’s way to capitalize on the current social media trend with TikTok and rival them. FB was concerned that it would lose its ground in the arena.
Similar to TikTok, Reels give content creators and social media users unique tools to edit and upload short videos onto the platform. Facebook Reels launched on February 22, 2022, and rolled out with updated creative tools and the ability to cross-post Reels from Facebook to Instagram.
Meta Platforms is heavily interested in extracting ad revenue from their Reels feature. FB plans to run advertisements on its Reels feature for eligible content creators. The revenue share split is 55% for creators and 45% for Meta Platforms. This is Facebook’s first attempt at capturing ad revenue from Reels; Facebook already receives ad revenue from its in-stream videos.
Meta Platforms also announced that creators will be able to monetize their Reels content through Facebook Stars, a feature that allows users to be compensated for video and audio content.
In its Q4 2021 earnings, Meta Platforms said that its fastest-growing content is now its Reels feature. Reels was cited as a major contributor to Instagram’s growth and FB is expecting that this will be true for Facebook as well. If FB succeeds, it expects that ad revenue from this feature will be lucrative.
TikTok Clone Failure
Meta Platforms attempted to create a TikTok clone in 2018, shortly after TikTok’s release in 2017. Lasso, FB’s TikTok clone, was supposed to rival TikTok and capitalize on the social media trend caused by TikTok.
Lasso was significantly outmatched by TikTok. With Lasso being a new app entirely, Meta Platforms had to grow its user base from the ground up and it just simply never caught traction. The lead developer for Lasso left days after the app was released.
FB could not utilize the massive user base it had already established on Facebook and Instagram, while TikTok already had an established user base to tap into since it had just been rebranded.
In the past, FB successfully copied other social media features. To combat and rival
Snap Inc’s
Snapchat, FB released Instagram Stories, one of the most popular additions in social media history.
Meta Platforms is infamous for its copy-cat style with social media features and rebranding them as something new and original. Meta Platform’s failure with Lasso is an important aspect to remember whenever trying to gauge how successful its Reels feature could be.
Key Factors to Win TikTok Rivalry
For FB to successfully rival TikTok, it must consistently grow its user base and capitalize on its ad revenue from its newest feature, Reels.
FB has had success with consistently growing its user base; FB’s daily active user base has increased by nearly 36% since 2017. Within the same time frame, its monthly active user base has also increased by roughly 38%.
Due to the nature of its business, FB’s main source of revenue is through advertising. Adding another layer of ad revenue within its Reels feature should increase FB’s overall top line. Monetizing Reels content through Facebook Stars will also help increase their revenue.
Advertising revenue for Meta Platforms has also been increasing since 2017. Its top line has seen roughly a massive 190% increase since then.
Current Sentiment
FB is extremely concerned over TikTok’s growth and expanding presence in the social media world. TikTok is now seen as a major competitor to not only Meta Platforms, but the rest of social media platforms as well.
It seems that FB could struggle to stay up to speed with TikTok due to its massive established customer base and TikTok’s growth rate. Many believe that FB is slowly losing ground in the arena and see some of its copy-cat features as a desperate attempt to stay relevant.
However, FB has proven that it can succeed with its copy-cat strategy due to the success it had when it added Instagram stories, Snapchat’s signature feature. To go toe-to-toe with TikTok, Meta Platforms must focus on their Reels feature by adding unique tools that diversify it from TikTok. Meta Platforms is currently a Zacks Rank #4 (Sell).
Meta Platforms, Inc. price-consensus-chart
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Meta Platforms, Inc. Quote
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