The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First.

Facebook Stock Forecast

Summary:

• Facebook has enabled in-app purchases on its Instant Games platform. This includes mobile and web games published through Instant Games.
• Facebook will take 30% commission from in-app purchases processed through Instant Games. This should help Facebook diversify outside its extreme reliance on advertising revenue.
• On Android and iOS, Facebook will take its 30% cut on Instant Games after Google and Apple get their 30% commission.
• The long-term potential of Instant Games comes from its HTML5-based device-agnostic design. Instant Games is a brilliant implementation of the Progressive Web Apps ecosystem.
• Facebook paid $19 billion for WhatsApp. It is only fair that WhatsApp users start accepting that nothing is free forever in this life.

Facebook’s (NASDAQ: FB) decision to enable in-app purchases on its Instant Games platform is a long-term tailwind. Facebook will get 30% commission from in-app purchases on Instant Games titles. This roll-out covers web and mobile games using the Instant Games platform. Google (GOOG) and Apple (AAPL) will still get their customary 30% cut on in-app purchases on Instant Games via Facebook’s mobile apps. Facebook will take its 30% cut after Google and Apple deducted their 30% commission first.

(Source: Facebook)

By enabling in-app purchases, more game developers will join the Instant Games platform. There are only few Instant Games titles right now. However, the $1 billion Disney (DIS) Tsum Tsum game is coming to the Instant Games platform of Facebook. Imposing a 30% in-app purchases commission from a billion dollar-grossing mobile game like Disney Tsum Tsum is a delightful future scenario for Facebook.

There are over a million casual Android/iOS games. Most of them can be converted to HTML5/JavaScript design of Instant Games. Going forward, Google, Apple, Microsoft, and other companies are working hard to make Progressive Web Apps the future de facto framework for mobile apps. The no-download, only streaming game implementation on Instant Games platform is a great example of how Progressive Web Apps works.

(Source: Hackernoon.com)

Why Instant Games Can Boost Facebook’s Diversification Strategy

 The importance of Instant Games to Facebook is obvious. It will help Facebook increase the long-term revenue of its non-advertising business. Facebook is overly dependent on advertising. As illustrated by the chart below, Facebook only earned $711 million in non-advertising revenue last year.

(Source: Statista)

By enabling in-app purchases on Instant Games, Facebook can benefit more from the estimated $70.3 billion/year mobile games industry. The cross-platform design of Instant Games (games are made using HTML5 and/or JavaScript) means they are also accessible to web browser users and casual PC gamers.

Instant Games are available on Facebook’s web and mobile apps and Messenger. Instant Games will also probably be enabled soon on Instagram and WhatsApp. Instagram has more than 800 million users. WhatsApp has 1.5 billion users. Those two mobile apps can host Instant Games and hook millions of players and potential in-app purchasers.

Line Corporation made billions of dollars from its messaging app through freemium games. Facebook spent $19 billion to acquire WhatsApp. WhatsApp can finally be monetized through in-app purchases on Instant Games. Facebook is obviously spending a lot of money on datacenter load and bandwidth to host the 1.5 billion users of WhatsApp. It is time WhatsApp starts hosting Instant Games and targeted ads.

Why The Instant Games Platform Is Attractive To Developers

The best-selling point of Facebook’s Instant Games platform is its no-download game design and device-agnostic game dissemination. Developers can create an HTML5 game and have it run on any device.  Game developers and publishers can monetize a single on many platforms without the need to port them to work on different operating systems and hardware platforms.

There is a list of free/cheap game engines that support the Instant Games platform. Individuals, small and large studios can use free game engines like Defold, Gideros, and Cocos Creator to create HTML5 games. Defold is actually a free giveaway from King Digital – one of the world’s top-grossing publisher/developer of mobile games. King and other developers might convert many of their hit Android/iOS games to the Instant Games platform after the implementation of in-app purchases.

Top-grossing mobile games rely on in-app purchases to generate revenue.

Conclusion

Facebook’s can probably hit $200 once it starts making $1 billion to $3 billion from in-app purchases on web/mobile games. Facebook’s more strict policy on third-party sharing of personal information means ad buyers and social marketers are going to be more prudent in using Facebook ad platform. Facebook therefore needs expansion products which can offset the expected deceleration in its advertising business.

No-download, streaming games are precursor to the promising vision of Progressive Web Apps. Apple, Google and Microsoft should take a lesson from Facebook on how they should implement their strategy on Progressive Web Apps. Facebook is now implementing monetization of its Progressive Web Apps platform. It is ahead of the pack.

I Know First has a pessimistic forecast for FB. However, I am still endorsing Facebook’s stock as a buy. I am gamer and a regular in-app purchaser. I understand how addictive in-app purchases can be to competitive gamers who do not want to waste time waiting for their daily energy allocation. Competitive players on the Instant Games platform will likely spend real dollars to buy stamina/energy/life to continue their playing time on Disney Tsum Tsum or Everwing.

Past I Know First Forecast Success with FB

I Know First has made accurate predictions on FB in the past, such as its bullish article published on October 6, 2017. 

For the 3 months period since the date of the forecast, the stock returned 9.12%.

This bullish forecast for FB was sent to I Know First subscribers on October 6, 2017.

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I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.