As the social media pure-play companies prepare to report quarterly earnings, analysts will look for sector leader Facebook Inc. to provide more color on initiatives designed to address concerns about the quality of content shared on its platforms, while Twitter Inc. and Snap Inc. face questions about their respective paths toward sustained profitability.
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Facebook is the largest publicly traded social media company by far, with more than 2 billion average monthly active users globally, according to its latest quarterly earnings report, and the only one of the three public pure-plays with a history of profitability. Twitter and Snap each count well under 500 million global users by their respective metrics.
While analysts expect Facebook to continue to report growth in revenue and income, the company has been under increasing pressure to address concerns about the spread of false or misleading information on its platform.
Facebook has announced a number of initiatives aimed at addressing these concerns, including recent updates aimed at reducing the amount of branded media content that appears in users' News Feeds and surveying users on whether they view various news sources as trustworthy. The company has acknowledged that the changes could have implications both for its platform's overall engagement and for specific publishers, though exactly how much of an impact remains an open question as some of the changes are still in testing stages or just beginning to be rolled out.
Analysts largely welcomed Facebook's platform and content adjustments but said more specifics would be helpful in gauging the potential impact on the company's fortunes.
Daniel Ives, head of technology research at GBH Insights, said in a Jan. 25 note that while the News Feed update could stunt ad growth in the short term, it should pay long-term dividends.
"We believe this overhaul was the right move for longer term user engagement and driving 'meaningful content,' which remains the core ingredient in Facebook's recipe for success for the coming years," he wrote.
Reticle Research Principal Analyst Ross Rubin acknowledged that Facebook's trustworthiness survey feature has received criticism, but he said in emailed comments that the survey could be a "positive" for the company over the long term in that it would provide further insight on users' changing preferences.
Analysts also continue to monitor Facebook's streaming video efforts, including its video on demand service Facebook Watch, as well as potential regulatory challenges stemming from the European Union's new data protection rules, which become law in May.
For Twitter, S&P Capital IQ consensus estimates indicate the Street is optimistic that the company may have turned around a string of net losses on a GAAP basis in the recently ended quarter, though questions remain about the impact of recent leadership and platform changes on the company's long-term growth. Meanwhile, estimates remain bearish for Snap, with analysts expecting the company to report a loss of 33 cents per share on a GAAP basis, according to S&P Capital IQ.
Twitter on Jan. 23 announced that its COO Anthony Noto, whom some say was key to the company's marketing and revenue-generating efforts, including its shift into live video, resigned to join Social Finance Inc. as its CEO, effective March 1.
The next update to its video efforts could be a Snapchat-like feature that will make it easier for users to post videos on its app, according to a report Bloomberg News.
Snap also has been tweaking its platform and user experience as it seeks to capture a broader audience. The company announced a large-scale update in November 2017 to more clearly separate user-generated content from publisher content. More recently, Reuters reported Jan. 23 that Snapchat is working on a feature that will let users share public stories with people not using the app.
Attempts by social platforms to broaden their user base always carry some risk, said Greg Sterling, vice president of the Local Search Association.
"You have to be very careful that you're not alienating the loyal audience that built [the site] while you're trying to reach out to new audiences," he said. "It's a tightrope walk to do that successfully. It's possible, but it's very challenging."
Pivotal Research Group analyst Brian Wieser in a Jan. 8 research note estimated that Snap's revenue will grow by 50% during 2018, but said the company's limited market share will hinder its future growth opportunities. For Twitter, Wieser said he believes the social media giant has potential to grow in 2018, but he warned investors to use caution when evaluating the company.
"We're doubtful that [Twitter] can grow its top-line beyond the low double digits any time soon," Wieser wrote.



