In a war of popularity and profitability, Facebook Inc (NASDAQ:FB) and Snap Inc (NYSE:SNAP) are fiercely clashing to score the title of champion among the fray. Where does Facebook measure up now that it’s learned to be a social chameleon, evolving by adding some of Snap’s best features to its network? How does Snap leverage its coolness factor in the eyes of millennials, the future demographic, and how does the Snapchat-parent company perform from the stance of advertisers? Let’s take a closer look:
Facebook’s Art of Keeping Up with the Joneses
Is Facebook’s next sleight of hand to secure the keys of the kingdom to the social media sphere a mirror-mirror Xerox tactic? It appears the social media titan is picking up more than a few moves from its rival Snap. Whether this will turn out to be more evolved than a knock-off counterfeit or the kind of cunning Machievellian move that helps Facebook one-up the competition is up for debate.
Alitemeter tech industry analyst Susan Etlinger believes, “Facebook and Snapchat are in an arms race, which exposes the vulnerabilities of both companies,” adding, “Facebook needs Snapchat-like features to prove its relevance to younger users, while Snapchat keeps pushing features to sustain its growth. The danger is that both companies get distracted from the bigger picture: how to stay meaningful in an increasingly fragmented digital world.”
Four years ago, Mark Zuckerberg had his eyes on adding Snap to his social network batallion, but Snap CEO Evan Spiegel passed on the alleged $3 billion M&A offer. Fast forward to today, where Facebook has decided to edge out its rival in a game of cloning Snap elements. In fact, Instagram CEO Kevin Systrom does not deny the resemblance between Instagram Stories to Snapchat, going so far as to give “all the credit” to Snapchat.
From Facebook Messenger copycatting Snap filters in December to last August’s launch of Instagram Stories, a chip off the old block of Snapchat’s My Story feature, it is clear that Snap daily active user growth has stalled on the heels of Instagram’s latest blow. As long as Facebook continues to up its transitory visual elements, Zuckerberg has every intention of remaining on top. As Etlinger has pointed out, the true victor will not only be able to replicate the competitor’s strengths, but carve an irreplaceable part in a digitally relevant age.
TipRanks analytics show FB as a Strong Buy. Out of 36 analysts polled by TipRanks in the last 3 months, 34 are bullish on Facebook stock and 2 remain sidelined. With a return potential of nearly 15%, the stock’s consensus target price stands at $160.97.
Snap’s Place in the Social App Homecoming Court
Where does Snap stand amongst the millennials in terms of internet usage? After hosting a conference where Susquehanna analyst Shyam Patil polled a millennial-based panel of five participants between the ages of 16 and 18, he chimes in from the sidelines on the popular Snapchat app parent company with insightful takeaways.
First, when it comes to Snapchat Streaks, which occur when two users are on a consecutive Snap-sending “streak” for multiple days in a row until one breaks the streak, the analyst sees “an important driver of engagement.” Users feel inspired to use Snapchat sometimes for the sole reason of “keeping their Streaks alive.”
Secondly, Patil looks to Discover as another feature with potential, as the panel explained that in addition to subscribing to several of these channels, they simultaneously view this content “on a daily basis.”
“From an advertising perspective, for Snap ads specifically, our panelists stated they almost always immediately skip these ads and could not recall the brand in any ads they had seen so far. However, the panelists were able to recall sponsored Lenses & Geofilters and enjoy interacting with these units,” continues Patil.
In the court of popularity, recently Facebook-acquired Instagram takes second place among the social apps according to the panel. As per the millennial panel, whereas Instagram is seen “as a broad platform to showcase highlights from their lives,” Patil underscores, “Snapchat which is viewed as a platform to share everyday moments with their close friends. From an advertising perspective, it appears that IG’s ads had more of an impact on the panelists with multiple panelists indicating that they’ve made purchases after seeing ads on Instagram. IG stories is viewed by the panelists as a look inside influencers’ lives, but not as much as a way for them to share moments with friends.”
What about Facebook? Apparently, Zuckerberg’s app’s heyday as the cool quarterback of social media school is starting to dim into a passing era, as the panel’s participants not only “do not use Facebook on a regular basis,” but dismiss FB as “their parents’ social network.”
As for the unlucky one of the social bunch, Twitter Inc (NYSE:TWTR) is lowest in ranking. Regardless of whether these five millennials even have a Twitter account, they certainly do not use it, as not one has “tweeted.”
The analyst rates a Hold rating on SNAP with a price target of $22, which represents a just under 11% increase from where the stock is currently trading.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Shyam Patil is ranked #535 out of 4,558 analysts. Patil has a 78% success rate and gains 11.2% in his yearly returns. When recommending SNAP, Patil earns 0.0% in average profits on the stock.
TipRanks analytics indicate SNAP as a Sell. Based on 11 analysts polled by TipRanks in the last 3 months, 5 remain sidelined on Snap while 6 issue a Sell. The 12-month average price target stands at $18.05, marking a 9% downside from where the stock is currently trading.