Facebook Inc (FB) Stock Can Ride Messenger to the Moon

Facebook Inc (FB) Stock Can Ride Messenger to the Moon

Messenger could be poised for some nice revenue generation

By Tom Taulli, InvestorPlace Writer & IPO Playbook Editor  |  May 9, 2017, 11:46 am EDT

Facebook Inc’s (NASDAQ:FB) recent F8 conference was certainly no disappointment. The company showcased its efforts with augmented reality, which seems to be about crushing Snap Inc (NYSE:SNAP). But there were also futuristic experiments, such as a brain-to-computer interface and even the ability for skin to hear language. Yes, such things seem kind of zany, but hey, not long ago, so did Facebook and FB stock, right?

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Definitely.

OK, but what were some of the things at F8 that are, well, more about the here-and-now? What may be the drivers for revenues for Facebook stock?

Interestingly, I think there was something that actually did not get too much attention: the Messenger platform. Even though there are roughly 1.2 billion monthly active users, the monetization has been fairly minimal. But this is likely to change soon — and yes, should be a nice boost to FB stock. As seen with Instagram, the company does have a knack for wringing dollars from apps.

Messenger and Facebook Stock

Yet Messenger may prove an even bigger opportunity. The reason is that the app is a perfect fit for local commerce. Messenger is highly engaging, often used while people are on the go.

What’s more, millions of businesses already have Facebook pages, which are seamlessly connected to Messenger (note that 80% of messages from these pages come from Messenger). It’s also fairly easy to create a bot, which is essentially an app.

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To this end, FB released Smart Replies, which leverages AI (Artificial Intelligence) to process common messages that restaurants receive from customers, such as for the hours, menu items and so on. The strategy is to blend human responses with automation – which should help to improve with the overall scaling. Although, there are already various large restaurants, such as Subway, Yum! Brands, Inc. (NYSE:YUM) and Domino’s Pizza, Inc. (NYSE:DPZ) that use bots to allow customers to place orders.

And some companies are pushing the boundaries of innovation. Just look at Sephora, which has a bot that scans your photo and suggests the best lipstick color match. There is also a promotion to get a discount at a local retail outlet.

According to Facebook vice president David Marcus: “When you come to think of it, Messenger has become the de facto Yellow Pages without having any phone numbers. We have a shot of becoming the Yellow Pages of messaging too.”

The market for local commerce is definitely enormous — and should provide quite a bit of opportunity for Facebook stock. According to the most recent investor presentation from Yelp Inc (NYSE:YELP), there 26 million local business in the U.S. and the spending on advertising is a whopping $140 billion.