Cho Research

About the Author Cho Research

Best tech/finance blogger on TipRanks. Alex Cho is ranked 7th among all financial bloggers, with a sector focus of technology stocks. The research he publishes captures the long-term growth potential of tech franchises, and market valuation. His research recommendations over the span of five-years has averaged into an annualized return of 19.3% across 392 ratings of which 66% were successful. Over his years of publishing, Alex Cho has been an indispensable source of information for an investment minded audience, which is why his lifetime viewership has exceeded ten million in total since 2012, across various media platforms. Furthermore, he’s frequently cited in various local business journals across the United States, and is frequently tagged with the “in-depth” designation on Google News for his public articles. The quality of his research is well known, and is well-respected which is why he’s frequently cited by other authors, journalists, bloggers and experts. Alex Cho was a former founding partner of Alexander & Cohen Capital Management, has worked as a consultant for mid-stage tech companies looking to raise capital or form an exit strategy, with the most recent consultation billed to a client that was generating revenue of $10 million+ in the web domain/registrar segment. Alex Cho is frequently invited to interview members of management at various Fortune 500 tech companies’ due to his outstanding media credentials, and credibility. Furthermore, he frequently attends various tech media events at the request of the event organizers. Alex Cho has a great relationship with Wall Street and Silicon Valley, as well. In the Venture Capital Space, he has sources that are inclusive of VC Partners, and independent research from PitchBook, Mercury Data, eMarketer, MergermarketGroup, and so forth. Anyone facing the public with investment related material needs quality sources, which should be inclusive of insights from Private Equity and various sell-side institutions and debt rating agencies as well (Standard & Poor’s, Fitch, & Moody’s). Alex Cho publishes with the support of Bank of America Merrill Lynch, Morgan Stanley Americas, Royal Bank of Canada Capital Markets, United Bank of Switzerland AG, Barclays Americas, Goldman Sachs, J.P. Morgan, Credit Suisse AG, PiperJaffray, Wedbush Securities, Oppenheimer & Co., Nomura Securities, BMO Capital Markets, Raymond James, Pacific Crest, SunTrust, Mizuho Securities, Deutsche Bank and Canaccord Genuity. Alex Cho attended ASU via the MAPP program with a 3.76 GPA in business-finance. The genius behind Cho has less to do with his academic accomplishments, but rather his ability to navigate, adapt, and improve the quality of his work through all the activities he has engaged. In the past year, Alex Cho has launched a new marketplace service referred to as Cho’s Investment Research. To learn more about this service, or to receive article notifications, be sure sure to subscribe. We provide frequent updates via our Blog Posts, which goes out to our subscribers.

Facebook (FB): The Instagram Story Looks Compelling

Facebook (FB) could exhibit somewhat of a revenue surprise if it were to transition ad-units for “buy buttons” on Instagram according to Morgan Stanley. The rationale does sound good, as Facebook’s large installed base of users on Instagram (1.1B users) could be more responsive to a direct buying experience, as opposed to the current format in which ads are displayed and lead to a separate landing page. There could be new ad-units in store, which could appeal to marketers and help with the diminishing narrative of marketer ROI when compare to other platforms, namely Google.

To sustain stock price gains, the emphasis among analysts and investors has shifted from the core Facebook app and towards Instagram. Assuming there’s a good pipeline of ad features attached to Instagram; advertising revenue will continue to trend higher. Speculation tied to social commerce via more streamlined ad formats and payment processing done natively on Instagram could be indicative of a bigger advertising opportunity.

Analyst Adam Jonas at Morgan Stanley believes that the social commerce opportunity is worth $4 billion incremental revenue, assuming Facebook takes 10% of sales revenue from each transaction (depending on what advertisers are willing to bid for conversions). Social commerce could result in $35.7 billion in sales on the platform assuming 5% market share relative to total e-commerce activity (which could be doable).

There are a number of challenges tied to this, as Facebook’s payment features aren’t really used or adopted by much of the userbase. Efforts to improve payment features, or to store credit card or debit card information for on-platform purchases could be challenging given the perceived headwinds from privacy skeptics and so forth. But, even without a meaningful number of users adopting Facebook’s payment features advertisers already use Facebook with the intention of selling goods and services via e-commerce sites like Shopify or Amazon 3rd-party listings. Therefore, the additional ad format and the ability to buy directly off of Facebook would then force Facebook to dedicate resources into creating a separate store tied to Facebook Pages, which would be another derivative product like Facebook Marketplace, but more specific to various e-commerce brands.

The technical challenges aside, the userbase has to be willing to adopt this specific feature, and with the way most advertisers have clung to the status quo, it wouldn’t be surprising if Facebook maintained what seems to be an effective enough of a model. Facebook has attempted to introduce a “buy button” feature back in 2014, and even offered payment functionality to send money back and forth from friends. Eventually, though other payments apps like Venmo took over the social payment segment, and Facebook also ditched efforts tied to on-platform commerce. In other words, there might not be much of a social commerce narrative aside from the one that already exists.

Source: PiperJaffray

In terms of user metrics though, Instagram continues to win mindshare among the younger demographics. As of the most recent PiperJaffray Spring survey, Instagram edged out Snapchat as the most popular platform with 84% of teenagers using the app versus 81% for Snapchat. Meanwhile Facebook continues to trend lower among teenagers with 44% reporting that they use the app in the Spring 2019 survey versus 53% from Spring 2018 survey (7 percentage point drop in usage from a year ago among the teenage demographic for Facebook).

Hence, the growth thesis in terms of users and on platform engagement has shifted to Instagram as opposed to Facebook. Not to mention, aggressive monetization tied to Instagram stories and the introduction of conversion-based bidding, and lower pricing in general tied to Instagram Stories (due to the heightened engagement/usage of Stories) has been additive to revenue.

Facebook’s growth narrative could improve, but the optics on growth is really Instagram dependent as it provides the bulk of the new ad inventory growth at present. Rather than emphasizing the potential channels to increase advertiser activity, Facebook needs to do whatever possible to keep the growth and engagement levels high on Instagram.

To read more on the nitty gritty of what’s going on in the tech industry, click here.


Disclosure: The author has no position in Facebook stock.

Read more:  Advertisers Shy Away from Facebook (FB), But the Stock Isn’t a Sell Just Yet



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