Facebook (NASDAQ:FB) wants to push irrelevant content out of people's News Feeds. That's great news for everyone -- including shareholders. The social media giant wants users to see more breaking news, information about favorite sports teams, and articles on topics people care about. The company found that more people clicked on and shared content they were actually interested in viewing. Imagine that!
It's important to remember that Facebook generates revenue from advertising. Facebook differentiates itself from other online platforms by having a massive user base (1.2 billion monthly active users, or MAUs) and the tools necessary for advertisers to target the audience. Even though the company plans to continue to push a small amount of content into people's News Feeds, even a little bit can make have a big impact.
By putting more relevant content into people's News Feeds, Facebook can:
- Drive more traffic to a media provider's site,
- learn more about what users like, and
- help advertisers learn more about users in order to create advertising content that will resonate.
Although all of the points are important, it's No. 3 that that can have an impact on the top line. Again, if advertisers can generate high returns on their investments, they will send more dollars Facebook's way.
If it sounds like Facebook is encroaching on Twitter's (NYSE:TWTR) territory, well, you're right. Twitter is putting up incredible sales growth numbers using Content Marketing, which "is a marketing technique of creating and distributing relevant and valuable content to attract, acquire, and engage a clearly defined and understood target audience -- with the objective of driving profitable customer action." Content Marketing is the advertising wave of the social media future, and Facebook wants to grab its share of the spoils.
The stage appears to be set for a showdown between Facebook's News Feed and Twitter's Timeline over the next five years. But I would look at it a little differently. I don't see a winner-take-all scenario here, as eMarketer estimates the digital ad market will be $173 billion in 2017. So there's plenty of room for both companies to exist.
Users will end up being among the big winners. The competition to attract advertisers will push both companies to improve their products over time, making sure their user experiences get better and better. And the genesis of the improvements will be from the data Facebook and Twitter collect.
The other big winners will be Facebook and Twitter shareholders. Both companies have a critical mass of users: 1.2 billion MAUs for Facebook and more than 230 million MAUs for Twitter. Both companies are generating incredible revenue growth today. And as they attract and retain more and more users, they will generate considerably more revenue over time, making Facebook and Twitter must-have stocks for any growth portfolio.
David Meier owns shares of Facebook and Twitter. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. 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.