A full transcript follows the video.
This video was recorded on March 28, 2017.
Mac Greer: Let’s begin with Facebook news that looks a whole lot like Snapchat. On Tuesday, Facebook released its Stories feature in its main mobile app. Stories allows users to post photos and videos that disappear after 24 hours. Does that sound familiar at all? Stories was already part of other Facebook apps like Instagram, WhatsApp, and Messenger. Now, Jason, they say imitation is the sincerest form of flattery. But I’m guessing that if you’re Snapchat, you could do without this type of flattery.
Jason Moser: I would imagine. I think they’re probably thinking, “Wow, at some point, could you not just do something original?” But, I mean, that’s the name of this game. Social networking in general, it’s innovative to a point, but at the end of the day, it’s all about free flow of information and figuring out ways to communicate with people.
So, whether you’re Facebook or Twitter or Snapchat or Instagram or whatever, you’re always figuring out ways to add new little bells and whistles. I do think, as time goes on, it strikes me that — and I’m not the biggest on these platforms. I really don’t use Facebook all that much, I don’t use any of these other things, other than Twitter. But I think, it becomes more and more difficult to use these platforms. It seems like they add more and more bells and whistles to the point that it becomes more and more difficult to use, when really, one of the arguments from inception was that they’re easy to use. So, I wonder if we’re going to hit a point where they become so difficult to use that they start turning people off, because you do hit a point where you start adding so many bells and whistles in the hopes of evolving and innovating that you start scaring people away.
I think that’s something that, while old people like us might consider Snapchat difficult to use, I think a lot of the kids that use it generally like its simplicity and quick, free-flowing nature. To me, the question with Snapchat has always been what can they be beyond the Snapchat app? And when they went public, when they were doing the roadshow, they redefined themselves as a camera company because even I think they realized that just being Snapchat isn’t going to cut it. That’s not going to be a way for them to get big and justify the valuation that the market is giving them today. I do think it’s important to note that whether you are using Facebook or Instagram or Messenger or WhatsApp, you’re still using Facebook. I think that’s a testament to the best strategy in this space — to own a portfolio of a lot of these apps so that you’re going to hit every age group. Facebook is kind of for old people. Instagram is maybe Facebook for younger people. Maybe they’re trying to turn Messenger into a SnapChat style offering, as well. It’s a unique space, but I think it’s really difficult to compete with Facebook because they’re already so big.
Ron Gross: Yeah, I can’t argue with any of that, actually —
Moser: Well, that’s good. Stop.
Gross: [laughs] I don’t think Facebook Stories is going to steal any of Snapchat’s glory. I don’t think Snapchat is actually worried that all of the sudden people are going to start leaving their platform and moving to Facebook. It didn’t happen with Instagram, I don’t think it will happen with Facebook proper. But it does behoove Facebook to have a complete offering — to not have that option to create a story and do those things would hurt it a bit. You want to have all the new bells and whistles on your platform, unless, as you said, it becomes a little too complicated. Now, for my mother-in-law, it’s going to be too complicated. But she just won’t use that part of it, she will continue to like and share things that are embarrassing about her family. But for the folks our age that do want that ability, it’s now, there.
Greer: And I hear you say that no one is going to leave Snapchat, or, people aren’t necessarily going to leave Snapchat to go to Facebook because of this. But if you are Facebook, you’re in a much better position than Snapchat. So, you outlast Snapchat, then you’re the only game in town.
Gross: Absolutely. We’ve been talking about the usability and the apps and the companies. Then we start to talk about the stock and the capital structure and all that stuff. You would never choose to be Snapchat as opposed to Facebook, the behemoth here, with an airtight balance sheet, cash flow flowing in, just an incredible market position. Snapchat, I wouldn’t touch it.
Moser: This is less about stealing people using Snapchat, and more about giving folks a reason not to leave any one of those four Facebook platforms. Snapchat has 158 million daily users or something like that. It sounds like a lot, until you compare it to what Facebook has, and then you realize it doesn’t really matter, it’s relatively inconsequential, especially when you consider that there’s probably a decent amount of cross over there. So, it’s really just about Facebook and all of its associated platforms offering the ability to do these extra things as a value add. It’s less about stealing Snapchat’s users, and more about offering their users more features.
Greer: Let’s talk about Facebook the stock. Shares up around 25% over the past year. Going forward, what do you think about the stock?
Gross: I’m a shareholder. It’s hard to make the argument that it’s cheap as a value investor, because you have to look out into the future so much and rely so much on the future, so I’ll suspend my value investing, I’ll take off that hat for a minute and say, I’m a shareholder. I have no intention of selling the stock any time soon, maybe ever. It’s the kind of stock that I’m just happy to let sit there, and watch what Zuckerberg can do.
Moser: Yeah. I think it’s very easy to justify owning this stock today, and hanging on to it indefinitely. We talked a lot about this last decade being the Google decade, this coming decade is probably going to be more of the Facebook decade, given the nature of the move to social. I think that’s an advantage that Facebook holds over Google. Google is very utilitarian in nature. You go to Google to find something, and then you go somewhere else when you found what you wanted to find. Facebook is garnering a lot of eyeballs that stick around those properties for a while. So, it strikes me as probably a bigger opportunity over the coming decade to be part of that Facebook story, versus something like Google, given those are the two big players in the ad space.
I do want to make the point that, it’s a big company today, $400 billion plus. You hear a lot of people talk about, in order for the stock to double, they need to double their market cap. That’s not necessarily the case. They could, in theory, buy back shares, return capital to shareholders in certain ways that the company doesn’t necessarily have to double for the stock to do well. With that said, it’s a very big company. As it stands, it’s still just an ad play. Now, I say “just” — it’s a massive market opportunity. But, we’ve seen how far Google has gotten thus far with it, and that’s pretty far. Facebook has already caught up to it, more or less. So, looking out forward, it’s a bit of a reach to say this is a no-brainer winner, but I think it’s a pretty steady-eddy holding that you could hang on to for a while.