It was inevitable. Hashtags finally made their debut on Facebook (NASDAQ:FB) earlier this week. For users, this means an easier way to view discussion feeds and one more method for staying connected to a virtual community. But what about for investors? This is yet another change that will make the site stickier, boosting switching costs for Facebook's more than 1.11 billion monthly active users.
Hashtags build community
For longtime Instagram, Twitter, Tumblr, and Pinterest users, hashtags are nothing new. For anyone else who's still catching up, these are the keywords, trends, or topics within a social-networking platform that are prefixed with the pound symbol. You might see something like "#NBAfinals" or "#Obama" crop up as users offer related commentary about these topics in their tweets or posts.
But what really makes hashtags powerful is that they're hyperlinked to a feed that displays all conversations mentioning that hashtagged word or phrase within a given social-media site. Or, as Facebook announced in its press release, it's "a simple way to see the larger view of what's happening or what people are talking about."
With hundreds of millions of people using Facebook every day, the company had an opportunity to create additional, untapped value by bringing together people who are talking about the same things, especially if they might not be otherwise connected. For instance, the popular TV series Game of Thrones recently aired its "Red Wedding" episode and "received over 1.5 million mentions on Facebook," according to the company. The buzz for this year's Oscars translated to 66.5 million interactions on Facebook, and the company is smart to want to capitalize on those numbers.
All of these interactions among users can be brought together into relevant, powerful conversations. All it takes is a simple, linkable hashtag.
Aside from making Facebook more useful for members, there are other important implications sure to pique the interest of investors:
- Facebook can now easily steal traffic from Twitter, Tumblr, and Pinterest. How? For users who reshare to Facebook their posts from other social-media platforms, their hashtags will become clickable, linking back to the related conversation on Facebook.
- Facebook advertisers will gain higher returns on investment through the use of hashtags, as the same hashtag can now be used across all social networks.
- In the future, advertisers are likely to be able to target their advertisements based on users' hashtag habits, giving advertisers a new marketing opportunity.
There's more coming
The hashtag has always been known as a major driver behind microblogging website Twitter. Facebook's move to adopt the hashtag undoubtedly places the company as a direct competitor to Twitter. That's a good thing for Facebook investors -- Twitter is no small social network. It had more than 200 million monthly active users reported as of last December, up from 140 million last March.
And don't expect the changes to stop here. Facebook says this initial hashtag rollout is just the beginning. There's plenty more to come for advertisers, according to the company:
Hashtags are a first step in surfacing relevant and important public conversations. Over time our goal is to build out additional functionality for marketers, including trending hashtags and new insights so that you can better understand how hashtags fit into your overall Facebook advertising strategies and drive your business objectives.
This hashtag rollout is yet another way Facebook continues to strengthen its value proposition for advertisers.
Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.