Facebook (FB) made a host of announcements at its annual F8 developer conference this week, everything from a chatbot platform for its Messenger app to a 360-degree camera for making virtual reality movies. Analysts on Wall Street have been busy analyzing the news out of F8 attempting to discern the winner and losers as well as the impact on Facebook’s actual revenue and profits.
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Here are excerpts from some of the reports:
Ross Sandler, Deutsche Bank: User Growth Massive, But Messenger Monetization Still Early Days. “The strategy across all its products remains increasing daily consumption (sessions/time), while introducing new layers of abstraction that allow for control of content distribution, eventually leading to potentially new monetization opportunities. Google and Snapchat seem to be the only two app developers in western markets that can attempt to keep pace with Facebook, everyone else is getting relegated to niche verticals or demographics.”
“We are still struggling to see how Messenger paid formats materialize without a ‘promoted accounts’ type ad product, but cross-promotion of Bots with core Facebook newsfeed ads is a smart way to get things jumpstarted near-term.”
Ben Schacter, Macquarie Capital: F8 Unsurprising but Optimistic. “One area that was notably not a focus was search. We continue to believe that FB’s massive advertiser base positions it well to distribute sponsored search results, but FB barely mentioned search during this F8. FB also made scant mention of the early delivery problems of Oculus, as the company continues to focus on the long term potential for VR/AR. We do like FB’s strategy of working to improve the tools and technology for VR developers and creators, as exemplified by the open source strategy of its first VR camera.”
Michael Nathanson, MoffettNathanson:Facebook F8 Day 2 Clearly the Undercard (from a Wall Street perspective). “The most interesting sessions involved Facebook’s evolution as an ecommerce platform and its growth in payments. A cursory presentation on its Audience Network along with no mention of LiveRail or Atlas helped to confirm our assertion that Facebook’s efforts to build a more robust ad-tech stack are either dead on arrival or at least significantly delayed.”
Youssef Squali, Cantor Fitzgerald:F8 Developer Conference Impresses; Messenger To Develop Into Richer Eco-System. “We walked away incrementally more constructive on FB post F8 yesterday, a gathering that highlighted the company’s rich portfolio of brands and management’s 10-year vision. Particular attention was given to Messenger, the instant messaging service, which is being augmented with chatbots and other functionality to develop into a richer platform for communications and commerce. We believe management is building Messenger into a ‘portal’, which will create an ecosystem that keeps its massive user base within its walls, engaged whether these users are communicating with friends and family, consuming content, communicating with businesses or transacting (preferably doing all four!). If successful, Messenger has the potential of becoming a material third leg of the ‘monetization stool’ for Facebook, a potential not reflected in our estimates currently.”
Ben Thompson, Stratechery:The Problem with Facebook’s Ten-Year Plan. “In other words—and this is at the root of what worried me about the keynote—there is actually no evidence that Facebook can pull off the playbook that Zuckerberg presented as fait accompli. There is no question the company is very good at growing and monetizing existing products, but whether or not the company can build a new billion user product starting from pure technology is an open question.”
Eric Sheridan, UBS: Facebook as a Platform – The 10 Year Agenda. “Given the scale of Messenger (900mm MAUs) & key advantages vs. other forms of customer service/communication (instantaneous, personal, scalable, etc.), we believe Messenger can play a disruptive role in the worlds of eCommerce & local commerce in particular—effectively serving as an ‘app store’ for B2C interaction. Key open questions remain timing/scope of monetization (FB will begin testing Sponsored Messages on Messenger and new ad types for Messenger bots on core FB) & read-throughs for WhatsApp.”
John Blackledge, Cowen and Co: Recapping Day 1 of F8: Messenger, Video, Instant Articles and More. “Following Facebook Live’s launch in the summer of ’15 exclusively for celebrities and public figures, FB opened up its Live streaming feature to iOS users in January followed by Android users in February, and yesterday at F8, given Live’s success, FB announced the opening of its API to developers. 360 Video and Live have multiple uses cases, but FB highlighted in one session on how journalists and publishers can use both tools to tell their story and drive engagement for their content. For Live, FB also mentioned that is generates 10x more comments than regular videos. We estimate FB video revenue rises from $1.8BN in ’15 to $10BN by ’21.”
Ronald Josey, JMP Securities: Messaging and Video Continue to Take Shape As Facebook Lays Out Its 10-Year Roadmap. “As Messenger enables more 1:1 communication between users, brands, and businesses we believe the platform can be used for more transaction and commerce related activities, which we believe could create incremental advertising inventory for Facebook. There are currently 1+ billion messages sent every month between users on Messenger and Businesses and Pages on Facebook and we believe the opportunity here is to enable more transactions and customer touch points. As the Messenger Platform evolves and as consumers adopt this form of personal interaction, we could envision Messenger essentially replacing App usage.”
James Cakmak, Monness, Crespi, Hardt & Co: Takeaways from F8. “The stars of the show were clearly Messenger and Video, but the forum also provided an opportunity for Mr. Zuckerberg to defend some of the latest scrutiny into its Free Basics initiative, while also making it clear to Microsoft and Google that Facebook is by no means going to fall behind in AR. Moreover, we were intrigued by how bots were center stage, but also presented in an almost humanizing way, in contrast to more technical discussions from Google’s machine learning efforts and Microsoft’s Cortana. We are actually bullish on efforts from all three companies, but believe this characterization can help yield a steeper trajectory of adoption for Facebook.”
Evan Wilson, Pacific Crest Securities: F8 2016: Day One Focuses on Messenger and Live. “Still has much to prove with businesses and developers. FB has a difficult reputation with businesses and developers. After scaling back on Parse and LiveRail (which dominated last year’s F8), pulling organic reach from businesses that collected followers and creating, then killing, the social game industry, we think it needs several solid F8s to win back a loyal following beyond advertisers. We think the FB story is predominantly about its ability to monetize its feeds (which has been stellar), instead of expecting much help from third parties.”
