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Are Facebook Stories a Real Threat to Snap Inc Investors?

By Motley Fool Staff - Apr 5, 2017 at 5:20PM

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In the social media space, imitation is once again the name of the game.

In this segment from Motley Fool Money, the team looks at how competition is heating up between social media platforms, specifically how worried Snap (SNAP -0.69%) and its shareholders ought to be since Facebook (META 0.94%) copied its central stories offering. While the social media giant is trying lure the younger users it has lost touch with, Snap is looking in the other direction.

A full transcript follows the video.

This video was recorded on March 31, 2017.

Chris Hill: This week, Facebook unveiled Facebook Stories, a new feature that bears a very striking resemblance to Snapchat. Jeff, if you're Snap -- more specifically, if you are a shareholder of Snap -- how worried are you about this?

Jeff Fischer: You should be a bit worried. But Facebook, for the past five years, has released feature after feature, service after service, that mimicked or copied some of Snapchat's own features. And most have actually failed, but some have gone on to become part of Facebook, the Facebook experience, Instagram being the biggest example of, lately, taking on more and more Snapchat features. Those are going well so far, with their Stories. So, now, Facebook is doing the same thing, mainly with photographs and your ability to tell a story individually with someone, one of your friends directly, or with your audience directly. My wife and I tried this out right before taping. It was just like a Snapchat. I sent a photo to her, she sends one back, we're like, "This is stupid." [laughs] But, kids will like it. What Facebook is trying to do is attract younger people, the 17 to 24 audience that Snapchat is so strong in. That said, these services are tougher to monetize. So, it's kind of funny that right now, Facebook is trying to grab those younger people, while Snapchat is trying to have more Facebook-type revenue from their advertising. They're both melding into each other. 

Hill: If you're Facebook, can't you look at this new feature as, essentially, a loss-leader? If Snap is under more pressure to monetize Snapchat, maybe that means ads start popping up in these Stories, and it becomes a less compelling experience for younger people. If you're Facebook, you're able to say, "Hey, ours is completely ad-free."

Fischer: Yeah, and they don't plan to monetize it any time soon. I think the longer-term thought, maybe we need younger people to be more involved, and over time, they'll evolve to the Facebook platform itself. So, yeah, Chris, I think that's true. And I think the main thing Snap needs to be worried about is growing its audience, period.

Jason Moser: This is far more important for Snap, to be able to evolve beyond the teenage messaging app. Because, ultimately, that is what it is, at the end of the day. I know they like to consider themselves a camera company. I don't know if that's the wisest course of action, either. Facebook can place all these bets all day long, every day. They have so many platforms and so many ways to continue to add bells and whistles to their platforms. It's nothing to them to try anything. Snapchat is really faced with a tremendous uphill battle here of trying to figure out how to attract people beyond that teen to younger 20s demographic. Yeah, sure, they are engaged, but they aren't really big money spenders. How are you going to monetize that audience in a meaningful way? I don't think you can. 

Fischer: Yeah, and Snap prides itself on making its app complex, and Facebook has gone and done the same thing but made it very simple. I will say, they did a good job. It's really easy. It was like a snap to use the new features. It has its charms.

Moser: We've got Simon Fischer over here ...

Simon Erickson: I'm loving that, Jeff! 

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Snap Inc. Stock Quote
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