Social media has transformed the global society in the last two decades. Millennials have grown to rely on technology more than ever and resultantly seeking such platforms to express themselves or connect digitally.
The coronavirus-led economic shutdowns and social-distancing norms have accentuated this reliance, making digital social networks more vital than ever. From scrolling and trolling posts, staying abreast of what’s trending, instant messaging, group video get togethers, influencing others and more, usage of social media platform has hit record levels of likes, dislikes and emojis in 2020.
Per Hootsuite’s Digital 2020 October Global Statshot report, over 4.14 billion people use social media each month and an average of nearly 2 million new users are joining every day. In such a scenario, social network platforms that create the innovative-curve, and not the ones that follow it, will remain at the top of the App store.
With surge in social network users, platform providers like Facebook FB, Snap SNAP and Pinterest PINS have all experienced a massive tailwind in 2020 projected by solid year-to-date gains. These three social media giants are here to stay, and the pandemic has only driven their necessity.
Higher demand for ephemeral content and live streaming, expansion of social commerce as a retail channel through local targeting and branding backed by user data, higher adoption of augmented reality (AR) and virtual reality (VR), growing strength in influencer marketing, rise of social-media communities and increased regularity control and legal scrutiny are key growth drivers, which make these stocks attractive for investors in 2021.
Year-to-date Performance
Snap’s Strengthening Gen Z Playground, Snapchat
Snapchat has become the most preferred social networking medium among Millennials and Gen Z, owing to the immersive experience of Snapchat platform. The company stated that Snapchat reaches 90% of 13-34-year olds in the United States, making it a larger platform than Facebook, Instagram and Twitter among this demography. Snap's market share continues to expand internationally, as well.
This bodes well for the company as user engagement holds the key to attract advertisements, which is the primary source of revenues for Snap. Per an eMarketer report, social network ad spending in the United States is expected to increase 11.4% year over year to over $40 billion in 2020, followed by a rise of 21.3% year over year in 2021, reaching nearly $49 billion.
Moreover, this innovation-driven Zacks Rank #3 (Hold) company continues to produce cutting-edge AR filters and fresh new features that keep users captivated. As of Sep 30, Snap had 249 million daily active users, demonstrating an 18% year-over-year increase. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In line with its focus on AR, the company announced a $3.5 million fund for its AR filter development, which will incentivize more creators and developers to continue to innovate using its AR technology.
Facebook and Pinterest are ramping up efforts in the wake of Snap's accelerating revenue growth (the Zacks Consensus Estimate indicates 42.2% year-over-year increase in 2020 and 40.6% in 2021) as the investing world sees how integral digital interactions are in the “new normal.”
Pinterest Emerges as The Lifestyle Powerhouse
Pinterest is ideal for B2C brands with lifestyle products that can be clearly expressed in a picture. Their self-serve dashboard makes it simple for marketers to set up basic targeting around user gender, age, location, language, and device. Additionally, its partnership with Shopify SHOP is helping smaller merchants to get on Pinterest.
On Dec 10, the company stated that there has been a 35% year-over-year increase in the number of monthly boards created, including a 44% increase in beauty, a 95% increase in women's fashion and a 36% increase in home decor categories.
Moreover, this Zacks Rank #3 company is benefiting from user base expansion, boosted by coronavirus-led lockdown and availability of features like Today and Shop tab for Pinners. According to Statista, 77% of global Pinterest users are female. In the United States, Pinterest reaches 83% of women between ages 25-54. The same group makes 80% of the buying decisions in U.S. households.
Enhanced product offerings, wider Pinner and advertiser base, simplified ad systems through Verified Merchant Program and Pinterest Partners Program for small businesses are key catalysts for growth in 2021.
The Zacks Consensus Estimate for earnings in 2020 and 2021 have jumped 244.4% and 61.5% to 31 cents and 42 cents per share, respectively over the past 60 days.
Facebook’s Family of Social Media Platforms to Drive Growth
Facebook controls the largest of the world’s social media outlets, with 2.54 billion people using at least one of the family products (Facebook, Instagram, Messenger and/or WhatsApp) on a given day.
Ephemerality and end-to-end encryption are also driving popularity of WhatsApp. Per the company, WhatsApp Status is the most popular ephemeral Stories product in the world. Facebook continues to promote WhatsApp business as a private way of interaction between businesses and customers. Rapid adoption of WhatsApp Business by small and mid-sized businesses is noteworthy.
Additionally, to attract more advertisers (over 3 million and counting), Facebook has unveiled tools to promote posts and evaluate business performance directly on Instagram. Moreover, Facebook is also looking for ways to monetize Instagram Stories, and adding the Checkout feature to the platform is a step in that direction.
Moreover, this Zacks Rank #3 company will be spending over $3 billion in the next 10 years on VR. Facebook is investing heavily to develop a VR content ecosystem. The launch of its VR headset, Rift, Oculus Quest and Quest 2 is a move in that direction .
Despite regulatory charges from the Federal Trade Commission and dozens of states claiming the company needs to be broken up, the company is poised to grow in 2021 backed by steady advertiser demand and user engagement.
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