Facebook announced today they are opening up Instagram to more advertisers, and the stock price is up moderately. Facebook has consistently stated they prioritize user experience ahead of short-term profit maximization, and this is why they continue to leave enormous amounts of monetization opportunity (advertising dollars) on the table. As shareholders, we agree with Facebook’s priority because we believe it makes the company worth more in the long-run.
We view today’s announcement as a positive signal that Facebook is comfortable they can ramp up advertising to some extent without overly compromising user experience. The increased advertising dollars should pass through to the bottom-line. We also believe that Facebook will find more ways to monetize the business in the future without significantly detracting from user experience. We believe the stock (FB) has significantly more upside from here because significant monetization opportunities remain. You can view our complete Facebook thesis here.