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Instagram and Video Push to Aid Facebook's (FB) Q2 Earnings

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Facebook’s Instagram is expected to hog the limelight as the company reports its second-quarter 2018 results on Jul 25.

Instagram’s Solid User Base: Key Catalyst

Instagram has emerged as an important cash cow for Facebook. The platform's user base has doubled over the last two years, crossing 1 billion monthly users recently.

Instagram’s rapidly expanding user base is a key catalyst in this regard. Per eMarketer, almost 28.2% of Facebook’s mobile ad revenues come from Instagram.

Moreover, Instagram has more than 2 million active advertisers. The Instagram Stories platform, which was opened to global advertisers in March 2017, has been gaining traction.
 

Facebook, Inc. Price and EPS Surprise

Facebook, Inc. Price and EPS Surprise | Facebook, Inc. Quote

 

Further, Stories on Instagram surpassed 400 million daily actives. The company is now enabling users to add soundtracks on Stories, which will make the platform more exciting and engaging.

Additionally, it will also be more attractive compared to Snap (SNAP - Free Report) owned Snapchat, which has just 191 million users.

Further, the recently launched Instagram Lite for Android users is expected to improve Facebook’s efforts to tap growth in emerging nations. The Instagram Lite app requires significantly less data but operates faster.

Click here to know how the company’s overall Q2 performance is likely to be.

Video Initiatives to Drive Growth

We note that mobile activities continue to pay off big time for the social media giant, with mobile advertisements recording stupendous success. Notably, in the last reported quarter, mobile ad revenues surged 60% year over year to $10.7 billion, contributing 91% to total ad revenues.

Facebook’s huge user base of over 2.2 billion combined with Instagram’s strong user base presents a larger canvas for advertisers and makes the platform highly attractive.

The company’s growing video initiatives are also driving video-based advertisements on the platform. Advertisers prefer video advertisements as these appear to be the most lucrative medium to attract the audience.

However, investors would eagerly be watching the negative impacts of Cambridge Analytica scandal, and the data sharing and handling issues that may have damaged the brand’s reputation among advertisers.

Zacks Rank and Key Picks

Facebook carries a Zacks Rank #2 (Buy).

Twitter and Upland Software (UPLD - Free Report) are stocks worth considering in the broader Computer & Technology sector. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

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