Facebook (FB - Free Report) recently announced that it now has 300 million daily active users (DAU) of Stories on its main platform and Messenger on a combined basis.
The social networking giant also revealed that it is rolling out ads to Stories in the core Facebook app globally, which will operate similarly to ads in Instagram Stories.
Growing Popularity of Stories
Facebook has been benefiting immensely from the growing popularity of Stories across all its major platforms, with Instagram taking center stage. Instagram and WhatsApp are the top two most popular Stories product in the world.
On the last conference call, management noted that Instagram Stories has 400 million DAUs and WhatsApp Status has 450 million.
However, competition for Stories within the platforms is not a concern for the company. A Facebook commissioned study by Ipsos found that 68% of the users are using the feature on at least three apps regularly and 63% plan to use it more in the future.
Focus on Stories Monetization
Facebook is making it easier to run ads in Stories as it is proving to be highly engaging for people to interact with businesses.
Per the Ipsos survey, 62% of people favor a brand or product after seeing it in a story. This is also evident from the brand lift which, per Facebook, iHeartRadio, Kettle Chips and KFC witnessed after posting their ad campaigns on Facebook Stories.
This strategy also helped Overstock to gain 18% increase in return on ad spend and 20% decrease in cost per acquisition, as stated by Facebook on the last conference call.
However, management is apprehensive whether monetization of Stories would be at the same rate as News Feed. Per the company, Stories, being a new format, is taking a while to gain ground with advertisers. Thus, lower level of monetization from Stories is anticipated to hurt top-line growth.
Nevertheless, management stated on the last earnings call, “we have so many different places where you have Stories formats in Instagram and WhatsApp and Facebook, as volume increases of the opportunity, advertisers get more interested.”
Zacks Rank and Stocks to Consider
Facebook currently has a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader Computer and Technology sector are Fortinet (FTNT - Free Report) , Apple (AAPL - Free Report) and Radware (RDWR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Fortinet, Apple and Radware is pegged at 16.8%, 9.7% and 19%, respectively.
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