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Facebook (FB) Opens AR Studio, Unveils World Effects Tool

Zacks Equity Research
Updated

Facebook Inc. FB, in a further push into the world of augmented reality (AR), announced the opening of AR Studio for all developers.

The company also unveiled the “World Effects” feature that will allow users to add 3D objects onto the background of photos or videos shared using Facebook or Messenger camera.

Per TechCrunch, the 3D objects launched include a floating heart, a pointer, unicorn and robot and word bubbles with messages like “love,” “bae,” “heart” and “miss you”.

We believe that these initiatives will help the company increase user engagement and improve the time well spent on the platform.

Notably, Facebook has gained 53.8% year to date, substantially outperforming the industry’s 24.3% rally.

Facebook in AR

Facebook introduced AR Camera Effects platform and AR Studio tool at the F8 developers’ conference in April.

Talking about its first AR platform, on the earnings call held in May, CEO Mark Zuckerberg was quoted saying, “We want to give developers the power to build all kinds of AR tools in the camera so more people can experience augmented reality on their phone. Creating the first open camera platform is a huge step forward, and we're excited to keep pushing augmented reality forward.”

The camera platform as noted by the CEO is expected to offer “a much greater diversity of use cases”, providing users with “thousands of options instead of just 10 or 20 at a time” compared with other apps.

Facebook’s focus on increasing investments to foster development of AR was reiterated on the last conference call as well. Facebook’s AR studio is expected to help developers compete with Apple and Google.

The company strongly believes that technologies like AR will revolutionize the future and emerge as big business opportunities. According to a recent IDC report, revenues from the global AR/VR market will grow to a whopping $143.3 billion by 2020.

Counter Snapchat

We note that the World Effects feature is again heavily inspired by Snap’s SNAP World Lenses feature on its messaging app, Snapchat.

Facebook has a history of mimicking the features of Snapchat on its platforms and making them more popular. Instagram Stories, a blatant copy of Snapchat’s feature of the same name, has more than 300 million DAUs compared with Snapchat’s total DAU of 178 million.

However, Snapchat has been offering some serious competition in terms of attracting teenagers/young adults to its platform. We note that Snapchat is highly popular among the younger demography.

With the addition of these tools, Facebook is expected to improve user engagement on the platform that will eventually lead to more ad dollars for the company. As we know, advertising forms the mainstay of Facebook’s revenues, the company’s attempt to lure users to its platforms is prudent in our view.

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Facebook, Inc. Revenue (TTM)

Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote

Zacks Rank & Key Picks

Facebook carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include IPG Photonics Corporation IPGP and NVIDIA Corporation NVDA, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for IPG Photonics and NVIDIA is projected to be 19.7% and 10.3%, respectively.

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