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Rihanna Uses Instagram to Hit Back at SNAP: Cheers for FB?

Snapchat-parent Snap Inc.’s SNAP shares fell 3.64% on Mar 15, after singer Rihanna rebuked the company for running an ad (involving her and ex-boyfriend Chris Brown) on the platform that promotes domestic violence.

Interestingly, Rihanna used her Instagram account to criticise Snapchat. Instagram is the photo and video sharing app of social-media giant Facebook FB.

As celebrities often have huge influence on their fans and followers’ behavior, we believe that Rihanna’s criticism of Snapchat will immensely benefit Instagram’s user base.

Notably, per Socialblade, Selena Gomez is the top celebrity user of Instagram.

Per a recent report by eMarketer, overall U.S. user base of Instagram is expected to grow 13% in 2018, while that of Snapchat is anticipated to rise 9%. Moreover, Facebook is expected to account for 11.3% of all U.S. advertising spending in 2019.

Worst-Performing Social-Media Stock

Snap has been the worst performer among the social media stocks, losing 13.5% in the past year. In comparison, Facebook’s shares have returned 31.3% while Twitter TWTR has gained a massive 135.6%.

 


 

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The dismal performance can be attributed to Snap’s inability to attract advertisers amid stiff competition from its well-established peers. Slowdown in user growth has been attributed to the popularity of Instagram Stories, which is a blatant copy of Snapchat’s feature of the same name.

Reportedly, Snapchat has admitted that increasing competition from big players like Facebook, which has better resources, is a big threat as the latter can easily lure users to its platform. At the end of November 2017, Instagram Stories had more than 300 million daily active users almost double that of Snapchat’s 187 million.

Moreover, Snapchat’s recent redesign has failed to satisfy the user base. On Feb 22, its shares plunged almost 7% after social media personality and reality TV star Kylie Jenner severely criticised Snapchat’s redesign.

Lack of Control on Content

Snap has been blamed for it lackluster attitude toward filtering inappropriate content. Facebook and Twitter have also been blamed for spreading fake news, hate speech and terrorism related videos.
 

Snap Inc. Revenue (TTM)

 

Snap Inc. Revenue (TTM) | Snap Inc. Quote

This kind of content helps the platforms gain limelight rapidly, thereby providing a significant boost to traffic and subscriber base. This ultimately attracts advertisers. However, we believe inappropriate content hurts their credibility, eventually denting brand value. This negatively impacts top-line growth in the long haul.

Similar to Facebook and Twitter, we expect Snap to become more vigilant about filtering inappropriate content. This will drive subscriber base going forward.

Competition Escalates for Snap

Although Snap is trying to launch new features on a continuous basis, these are yet to contribute meaningfully to top-line growth. Moreover, competition is intensifying in the social-media market.

Facebook has now enabled users to share Instagram Stories as WhatsApp status. This is further expected to boost engagement, which doesn’t bode well for Snapchat.

Moreover, Twitter recently launched a camera feature that directly competes with Snapchat’s location-based Story posted in the Discover tab of the application.

Zacks Rank & A Stock to Consider

Snap has a Zacks Rank #3 (Hold).

Paycom Software PAYC is a stock worth considering in the same sector, sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Paycom is currently pegged at 25.75%.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


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Facebook, Inc. (FB) : Free Stock Analysis Report
 
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