TICKERS MENTIONED
- TWTR - LONG
- SNAP - SHORT
KEY POINTS
- Could Lead to Shifting Ad Budgets: FB will be prioritizing user content over Facebook Pages (e.g. Business/Brands) in its News Feed, suggesting that "Pages may see their reach, video watch time and referral traffic decrease". FB isn't eliminating these posts, just pushing them farther down the feed, so the most likely takeway is that ad inventory and/or engagement growth wanes. If that were to occur, we suspect CPMs (ad pricing) would increase in response, potentially pushing some ad budget toward the smaller Social Media players
- Disproportionate Win for Smaller Players: We wouldn't expect this to happen at any grand scale, but minuscule shifts would move the needle for smaller players like TWTR and SNAP given FB's relative size. For context, FB's 3Q17 ad revenue growth was ~7x and ~16x what TWTR & SNAP had respectively produced in total 3Q17 ad revenues. So let's just say advertisers decide to shift 50bps of what they had spent on FB in 3Q17 over to TWTR and SNAP in 3Q18. That would translate to incremental 3Q18 ad revenue growth of 10% and 24% for TWTR and SNAP, respectively. Note that we were already expecting TWTR to produce double-digit ad revenue growth this year (potentially as early as 1Q18) vs. consensus estimates of low- to-mid single digit growth. See deck/replay below for supporting analysis.
TWTR | New Best Idea Long (Deck & Replay)
January 3rd, 2018
[click here]
Let us know if you have any questions or would like to discuss in more detail.
