Facebook Inc (FB): Is “Facebook Home” Good For Shareholders?
Money Morning Staff: The much anticipated announcement from Facebook today (Thursday) has left us investors with two questions.
The first, what is Facebook Home?
The second, is this finally the development that CEO Mark Zuckerberg needs to rally investors behind Facebook stock, and lift it back above its IPO price of $38?
The social-networking giant Thursday unveiled Facebook Home, a customized homescreen for Android smartphones. Facebook Home highlights all things Facebook – a dream come true for anyone who loves the social media tool.
In Zuckerberg’s words:
“We are not building a phone. We are not building an operating system. We are building something that is bigger than an app. We want to shift people’s focus on phones away from apps and towards content. I think this can start to be a change in the relationship we have with these computing devices.”
Basically, Facebook Home brings all of the social network’s services under one spot reached through the phone’s operating system.
After downloading Facebook Home to an Android Phone, a user will be able to get things like Instagram, Facebook Messenger, Facebook Camera, Facebook News Feed, updates and posts all on the mobile device’s homescreen.
At the core of the interface is a feature dubbed Cover Feed. This allows a user to seamlessly move through links, photos and status updates. Double tapping anything that floats by to “like” it highlights how Facebook efficiently assimilates its features into Android.
Facebook Home will be available as a download in Google’s Play store to select devices including Samsung’s Galaxy S III and Galaxy S4 and the HTC One X starting April 12. The goal is to update the app every month, adding more features and support for more devices.
A new HTC phone, HTC First, will be available April 12, and come with the Facebook software preloaded.
Is Facebook Home Good for Facebook Stock?
Investors must have liked something they heard: Facebook stock rallied Thursday to its highest point since mid-March.
If the company had instead announced a Facebook phone instead of the new Home feature, it’s likely investors would have bailed. Zuckerberg has repeatedly said he had no aspirations of creating a Facebook phone, and even tried one before with no success.
The problem is, Facebook Home might not be much better.
“It’s best characterized as an experiment,” Jan Dawson, chief telecoms analysts at research and consultancy firm Ovum, told The Wall Street Journal.
“It’s potentially a big deal,” he said, but only if Facebook users really do want this software.
The motive for Facebook Home is clear. Facebook wants to grab hold of more mobile users’ time, to provide more mobile ad revenue. Some 67% of American adults are Facebook users, more than half accessing the site from mobile devices.
But according to recent data from the Pew Research Center, Facebook’s user numbers are declining: 61% of current Facebook users say they have taken a break from the site, while 20% have broken off completely from the site. Reasons include time constraints, lack of compelling content and concerns they were spending too much time on the site.
It’s unlikely Facebook Home is popular enough to get investors to support the stock long-term. While there might be short-term boosts to Facebook, and some trading opportunities for quick profits, the company still needs solid earnings for an extended period of time to prove it’s a stock worth holding.
Facebook stock closed at $27.06 Thursday, up 3.09% for the day and 29% below its IPO price.
Related: Social Media ETF (NASDAQ:SOCL).
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