Facebook Suddenly Has Lots of Company

 | Nov 27, 2013 | 7:00 AM EST  | Comments
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twtr

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bbry

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goog

Facebook (FB) has never recovered from its last earnings call. After bidding the shares up to close to $60 on the backs of strong revenue growth, investors freaked out when the CFO revealed that younger teens were now less engaged with the service.

Since then, the stock has drooped to $45.

Facebook is the king of social networks. And it's in the middle of its biggest quarter of the year, which should show that advertisers are continuing to allocate more spending to it.

So, what gives with the slumping stock price?

I have big worries for Facebook going into 2014. It's not that I believe Twitter (TWTR) is going to take business away from Facebook. Both companies should continue to have strong tailwinds behind them from a revenue growth perspective.

My concern is that I think we're about to enter a "golden age" of mobile messaging apps. I think 2014 will be the year of WeChat, Line, Kik and possibly BlackBerry's (BBRY) BBM. There's a chance that it could also be the year of Snapchat and WhatsApp, but I have questions about both.

Why do I like these kinds of companies?

They are exploding in popularity right now globally. And unlike in the go-go days of Facebook, several of them are exploding at the same time, usually in different geographies. WeChat dominates China. Line owns Japan and Spain. Kakao is in South Korea. Kik is hot among young North American teens.

The second reason I like them is that Line, the big Japanese messaging app, is planning a 2014 IPO. This should further attract attention to these companies from the investment community in particular. One thing we've seen in the past is that hot money from one stock can up and leave and go directly into another.

Case in point, in the four months leading up to the Facebook IPO, Google (GOOG) seemed to be always weak as a lot of people got excited about buying into Facebook. Immediately after the IPO and the sense that it was tainted, money seemed to keep flowing out of Facebook and back into Google.

I could imagine the same thing starting to happen if Line has a successful IPO.

Finally, there's the matter of Facebook user engagement. If current trends continue, these various services will continue to bleed users and user engagement away from Facebook. There are still going to be ample opportunities to make boatloads of revenue from monetizing the service in the coming years, but it will appear more and more that users have moved on to the next big thing in tech. Facebook might struggle to hold on to its "cool factor," especially if these private companies keep turning their backs on being bought out by Mark Zuckerberg.

WhatsApp and Snapchat have seen a lot of growth recently, but it's not clear to me that they'll transition into big moneymakers. WhatsApp seems to actively reject ad revenue in favor of $1 download fees. Snapchat is also one-to-one communicating and less group messaging.

In the meanwhile, the other companies I mentioned seem to be expanding their group messaging into true platforms, with gaming downloads and even brand landing pages.

If they continue to explode, Facebook's stock might get "unliked" again.

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