Please ensure Javascript is enabled for purposes of website accessibility

Snapchat's Threat to Facebook May Be Over-Hyped

By Andrew Tonner – Jul 29, 2016 at 8:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Despite mounting claims to the contrary, one recent study shows Facebook's "sharing crisis" may be a bunch of hot air.

Image source: Facebook.

As far as potential "Facebook (META -0.74%) killers" are concerned, at most, a handful of tech companies deserve mention in the discussion. Such is the benefit of acquiring a healthy chunk of your would-be competitors, as Facebook undeniably has in recent years.

Though Alphabet, Amazon, and perhaps Verizon now also deserve a place in the discussion, vanishing video titan Snapchat's ascent represents the most insurgent threat again Facebook's social media empire.

As has been widely documented in recent months, Snapchat's continued rise has, to some observers, triggered a minor, yet important, lull in Facebook's user engagement. However, as one current report shows, it appears that isn't the case after all.

Facebook shrugs off engagement concerns

According to a recent report from Morgan Stanley's research arm, Facebook appears poised to retain its place as one of the most powerful names in technology for the foreseeable future.

As Morgan Stanley's analyst Brian Nowak put it, "Analysis of Facebook daily user growth show strong -- and inflecting -- second quarter engagement, despite Snapchat concerns." Nowak went on to say, "We don't believe Snapchat is having a material impact on Facebook's engagement or daily active user (DAU) growth."

Nowak's analysis also detailed Facebook's usage among 18- to 24-year-olds and 25- to 34-year olds, two important age cohorts that often lead to shifts in social media usage. Among those aged 18-24, arguably the most critical set of users for Facebook given Snapchat's outsized popularity with the group, Facebook's ratio of daily active users (DAUs) to monthly active users (MAUs), a way of showing increasing audience engagement, has actually increased of late. The same trend has also occurred lately with 25- to 34-year-old mobile users.

It's worth noting that, by Morgan Stanley's reckoning, Facebook remains by far the most popular social network, not only in terms of total absolute users, but also in terms of engagement. The company confirmed this late last week, announcing it enjoys a mind-boggling 1.7 billion MAUs and 1.1 billion DAUs. 

Facebook's dominance unlikely to change

To be clear, Snapchat's rise, particularly among its insanely engaged, younger user base, portends well in terms of the four-year old start-up making good on its $16 billion valuation. The crucial distinction in reconciling Snapchat's increasingly prominent place within the media new world order as it relates to Facebook is that the two events shouldn't be seen as mutually exclusive.

In terms of its core social media property, Facebook continues to implement ways to maintain its user engagement and its overall user base. The company has created new ways to make sharing extremely easy for users, like auto-generated reminders of "friendship anniversaries" and the like. What's more, online giants Facebook and Alphabet are each developing their own solutions to continue to expand their addressable audiences. Case in point, Facebook recently conducted the first successful test of its Internet-beaming drone dubbed Project Aquila. Though certainly altruistic to an extent -- Internet access has been linked to a host of positive economic and social statistics -- bringing more people online also expands the potential user base for online services like Facebook and Google.

Creating new tools like better sharing prompts, and new ways of expanding its user base like Project Aquila, should each help Facebook continue to grow its presence. It helps that Facebook also owns popular social networks and messaging services including Instagram, Messenger, and WhatsApp. So, while Snapchat's rise presents perhaps the most alarming challenge to Facebook's social media empire, don't worry: Facebook isn't going anywhere anytime soon.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Amazon.com, Facebook, and Verizon Communications. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$111.41 (-0.74%) $0.83
Alphabet (A shares) Stock Quote
Alphabet (A shares)
GOOGL
$97.46 (-1.02%) $-1.00
Amazon Stock Quote
Amazon
AMZN
$93.41 (-0.77%) $0.72
Verizon Communications Stock Quote
Verizon Communications
VZ
$39.02 (0.26%) $0.10
Morgan Stanley Stock Quote
Morgan Stanley
MS
$90.91 (1.09%) $0.98
Alphabet (C shares) Stock Quote
Alphabet (C shares)
GOOG
$97.60 (-1.24%) $-1.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
360%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.