Facebook (FB - Free Report) , in its efforts to tap growth in emerging nations, launched a trimmed version of the company’s highly popular photo sharing application, Instagram that requires significantly less data but operates faster.
The new app called Instagram Lite for Android users is designed especially for the developing nations where data connection is weak and bandwidth lower.
Facebook introduced a stripped down version of its main application in 2015 and followed it with a Messenger Lite in 2016. In March, the company took Facebook Lite to more countries including developed nations.
Efforts such as these are music to investors’ ears as these will help the social media giant expand its user base further and thereby make a great advertising choice.
Expansion to Drive Growth
Facebook is leaving no stone unturned to target more users. The company’s user base continues to grow at a significant pace driven by new features and tools that improve engagement.
Facebook has significant growth opportunities in the emerging countries. However, low internet penetration in these regions is a concern. By bringing the Lite applications to these nations, the social media giant will be able to target users who are plagued by limited data plans.
We note that the company is experiencing better growth in international markets than in the United States. In the last reported quarter, Facebook’s Daily Active Users (DAUs) were 1.45 billion, reflecting a 13% year-over-year increase on the back of growth in international quarters.
On the other hand, DAUs increased in the United States and Canada by 1.6% on a year-over-year basis and 0.5% when compared sequentially. The company's focus to expand globally as the domestic market nears saturation is therefore prudent in our view.
Instagram Hits 1 Billion Mark
Instagram has emerged as an important cash cow for Facebook. The platform has doubled its user base over the last two years, crossing 1 billion monthly users recently.
Moreover, Stories on Instagram surpassed 400 million daily actives. The company is now enabling users to add soundtracks on Stories, which will make it exciting and engaging.
Additionally, it will also be more attractive compared to Snap (SNAP - Free Report) owned Snapchat, which has just 191 million users. The launch of a longer form video hub called IGTV will help it better compete with Alphabet’s (GOOGL - Free Report) YouTube and Twitter (TWTR - Free Report) .
Although no exact numbers with regard to contribution from Instagram were shared, growing adoption among advertisers is evident. Per eMarketer, Instagram will generate $5.48 billion in U.S. ad revenues in 2018, up 70% year over year. The firm reports that 28.2% of Facebook’s mobile ad revenues comes from Instagram.
Facebook currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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