Facebook's (FB) Instagram Stories Boasts 250M Daily Users

Facebook Inc’s (NASDAQ:FB) photo-sharing service, Instagram's rivalry with Snap Inc’s (NYSE:SNAP) Snapchat is heating up. Reportedly, in a span of two months, the social media service’s feature, Instagram Stories, has added 50 million daily active users (DAUs), taking the total count to 250 million. In addition, Instagram said that it has launched a feature whereby users can now share replay of their live videos in Stories.

This is definitely not good news for Snapchat. In its last earnings, the company reported Snapchat having 166 million DAUs. Notably, it added only 5 million DAUs in fourth-quarter 2016, as well as last quarter, which happens to be the lowest since third-quarter 2014. User growth holds the key to attracting advertisers, which is the primary source of revenues for Snap. A slowdown in user base growth rate may look unattractive to advertisers.

Snap, after a strong IPO debt has failed to keep the momentum going. This has polarized Wall Street’s opinion of the stock, with the majority having cautious sentiments. Interestingly, analysts have related the slowdown in Snapchat’s user growth to the popularity of Instagram Stories, a blatant rip-off of the former’s hallmark feature.

In August last year, Facebook added the “Stories” feature – a slideshow of photos and videos that vanishes after 24 hours – to Instagram. “Stories” proved to be a massive hit, with 200 million daily actives by Apr 2017. This prompted Facebook to add the same on Messenger as well as its main platform. Not just Stories, the company has also added a lot more features that are eerily similar to Snapchat, like augmented reality (AR) filters, hashtag stickers, and direct messaging features (enabling users to send text and disappearing photos and videos in the chat section).

According to analysts, this is a brilliant case of a copycat improvising better than the original. Facebook not only introduced Snapchat-inspired features but made it more popular than Snapchat. Tech Crunch observes that Snapchat’s focus on a single demography (millenials) as well as absence of a proper international expansion strategy has cost it dear.

Analysts have long maintained that Facebook always had an upper hand at unveiling features that are similar to other social media services. This is because if these “inspired” features do not work, Facebook can easily roll them back like it has done previously with Poke, Slingshot and Bolt.

After all, platforms like Facebook, Instagram, WhatsApp and Messenger do have their own inherent features that will prevent them from losing users. A worldwide presence is another added factor. Facebook, Messenger and WhatsApp boast one billion plus users each, while Instagram, with 700 million users, is fast catching up.

On the other hand, if the features become successful, like Facebook Live – inspired heavily by Twitter’s Periscope – it can boost revenues considerably. Facebook Live has emerged as a major cash cow. The company had mentioned that video was emerging as a “megatrend” on the same lines like mobile. Consequently, Facebook is trying to incorporate more and more video-oriented content to increase the flow of ad dollars.

Meanwhile, Snap is trying hard to win over investors. It has been hawk eyed on boosting TV-style content on its platform. The company has inked deals with Walt Disney’s (NYSE:DIS) ABC Network, Comcast’s NBC Universal, Vice Media, BBC and more. Recently, it inked a $100 million content deal with Time Warner Inc (NYSE:TWX) to create 10 shows for its platform across various genres.

Zacks Rank & Stock Price Movement

At present Facebook carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company has outperformed the Zacks categorized Internet Services industry year to date. The company’s shares increased 32.36% compared with the industry’s gain of 29.95%.

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