Snapchat's Threat to Facebook May Be Over-Hyped

By Markets Fool.com

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As far as potential "Facebook (NASDAQ: FB) killers" are concerned, at most, a handful of tech companies deserve mention in the discussion. Such is the benefit of acquiring a healthy chunk of your would-be competitors, as Facebook undeniably has in recent years.

Though Alphabet, Amazon, and perhaps Verizon now also deserve a place in the discussion, vanishing video titan Snapchat's ascent represents the most insurgent threat again Facebook's social media empire.

As has been widely documentedin recent months, Snapchat's continued rise has, to some observers, triggered a minor, yet important, lull in Facebook's user engagement. However, as one current report shows, it appears that isn't the case after all.

Facebook shrugs off engagement concerns

According to a recent report from Morgan Stanley's research arm, Facebook appears poised to retain its place as one of the most powerful names in technology for the foreseeable future.

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As Morgan Stanley's analyst Brian Nowak put it, "Analysis of Facebook daily user growth show strong -- and inflecting -- second quarter engagement, despite Snapchat concerns." Nowak went on to say, "We don't believe Snapchat is having a material impact on Facebook's engagement or daily active user (DAU) growth."

Nowak's analysis also detailed Facebook's usage among 18- to 24-year-olds and 25- to 34-year olds, two important age cohorts that often lead to shifts in social media usage. Among those aged 18-24, arguably the most critical set of users for Facebook given Snapchat's outsized popularity with the group, Facebook's ratio of daily active users (DAUs) to monthly active users (MAUs), a way of showing increasing audience engagement, has actually increased of late. The same trend has also occurred lately with 25- to 34-year-old mobile users.

It's worth noting that, by Morgan Stanley's reckoning, Facebook remains by far the most popular social network, not only in terms of total absolute users, but also in terms of engagement. The company confirmed this late last week, announcing it enjoys a mind-boggling 1.7 billion MAUs and 1.1 billion DAUs.

Facebook's dominance unlikely to change

To be clear, Snapchat's rise, particularly among its insanely engaged, younger user base, portends well in terms of the four-year old start-up making good on its $16 billion valuation. The crucial distinction in reconciling Snapchat's increasingly prominent place within the media new world order as it relates to Facebook is that the two events shouldn't be seen as mutually exclusive.

In terms of its core social media property, Facebook continues to implement ways to maintain its user engagement and its overall user base. The company has created new ways to make sharing extremely easy for users, like auto-generated reminders of "friendship anniversaries"and the like. What's more, online giants Facebook and Alphabet are each developing their own solutions to continue to expand their addressable audiences. Case in point, Facebook recently conducted the first successful test of its Internet-beaming drone dubbed Project Aquila. Though certainly altruistic to an extent -- Internet access has been linked to a host of positive economic and social statistics-- bringing more people online also expands the potential user base for online services like Facebook and Google.

Creating new tools like better sharing prompts, and new ways of expanding its user base like Project Aquila, should each help Facebook continue to grow its presence. It helps that Facebook also owns popular social networks and messaging services including Instagram, Messenger, and WhatsApp. So, while Snapchat's rise presents perhaps the most alarming challenge to Facebook's social media empire, don't worry: Facebook isn't going anywhere anytime soon.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Amazon.com, Facebook, and Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.