In 2014, Facebook (NASDAQ:FB) started the transition from social networking company to a mobile app company. Last year, Facebook released seven new apps, and it snatched up another, the WhatsApp mobile messaging app, for $19 billion. It also released the one-touch photo and video messaging app Instagram Bolt in select markets outside of the United States.
I expect Facebook to continue growing its app portfolio in 2015. I see several more opportunities for Facebook to follow its blueprint of spinning off features buried in its flagship app. What's more, all of these potential apps represent immediate revenue opportunities for Facebook.
Perhaps I'm jumping the gun with this one, but the growing amount of video content on Facebook is starting to deserve a home of its own.
Facebook recently made a deal with the NFL to bring NFL highlights to news feeds and a deal with Lions Gate to host five independent films based on the Twilight series. Additionally, the company is working to court YouTube stars away from Google (NASDAQ:GOOG) (NASDAQ:GOOGL).
Facebook has yet to determine how to monetize its videos, though, as it's strongly opposed to pre-roll ads in news feeds. The deal with the NFL allows Facebook to place ads after the videos, but the company stresses that it's just a test to see if post-roll ads are effective.
If Facebook made an app specifically for videos, pre-roll ads would suddenly gain a lot of efficacy. Users are telegraphing their interest in videos by opening the app and thus are more likely to sit through an ad to see the content they're looking for.
Facebook already has a few brands on board for video advertising, and more than 800,000 small businesses uploaded videos to Facebook last September, representing a ton of potential video ads. How big could this be? In 2013, YouTube generated an estimated $1.4 billion from mobile. That's a big opportunity, even for Facebook.
Facebook recently updated its Graph Search feature for the first time in about two years, and the company has indexed hundreds of billions of Facebook posts that include locations. Facebook could use those data to provide recommendations for "Chinese food" or "bar" in a stand-alone app, taking on Yelp (NYSE:YELP).
Facebook already has a Nearby Places feature in its flagship app, but it's buried deep in the app. It's not exactly a full-featured Yelp competitor, but it provides a solid backbone to build on. If Facebook can use its user posts to help create personalized local search results, it could provide a strong alternative to Yelp.
Yelp generated only $338 million in revenue over the trailing 12 months, but Facebook already has local businesses purchasing ads on its platform. Providing those businesses with another means to target their ads -- search keywords -- and more opportunities to do so would be a significant opportunity for Facebook to generate higher than average ad prices and additional revenue.
Android App Store by Facebook
This one's a little more tricky than the previous two. Third-party app stores are the norm in China where Google (and Facebook) is banned, but it's still possible to install a third-party app store even if Google Play is pre-installed on your smartphone. It's unlikely, however, that Google will approve an app that aims to usurp its multibillion-dollar app store.
There are workarounds to install unapproved apps on Android, which still aren't as complicated as installing Facebook Home. What's more, Facebook has the perfect platform to broadcast the potential new app.
But why should Facebook make its own app store in the first place? Because Facebook does a better job recommending apps than Google. Additionally, an app store is the perfect place to insert app-install ads, which gain efficacy when the user intends to download a new app.
Just the tip of the iceberg
This article has explored how Facebook could use just one approach to making new apps -- piecing out features buried in its flagship app. The company also has opportunities to add new features to existing apps like Hyperlapse for Instagram or Stickered for Messenger. With the rollout of Atlas and its Audience Network, Facebook could create stand-alone apps as well, like Rooms, which lets users anonymously chat with people who want to talk about the same things they do.
A diversified portfolio of apps will help Facebook continue increasing engagement among every demographic while creating additional revenue opportunities. While Facebook's user growth doesn't seem to be slowing down significantly -- 160 million net new monthly active users (MAUs) in the last year compared with 180 million in the year prior -- engagement among younger users has been a point of focus lately. More apps means more opportunities for engagement with those younger users and all others.
Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A and C shares), and Yelp and owns shares of Facebook and Google (A and C shares). 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.
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