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Is Facebook Ready To Unleash A Multi-Billion-Dollar Opportunity?

Speculation is rising that Facebook ( FB ) will open its Messenger chat service to content publishers and advertising, creating a big multi-billion-dollar revenue opportunity and posing a growing threat to Alphabet ( GOOGL ). It’s a battle of stock market champions — both companies get a top IBD rank. Additions to the Messenger instant messaging platform are expected to be unveiled when Facebook holds its annual F8 developer’s conference April 12-14. Richard Windsor, an analyst at Edison Investment Research, said in emailed comments that Facebook’s top new announcement will be the opening of its messaging platform to allow publishers to distribute their content on Messenger. That could enable publishers to engage in direct conversation with users of Messenger and open the door for advertising sales pitches or product upgrades. “We suspect that Facebook will actually go much further and open up the platform entirely to developers to allow other functions within the messaging platform,” Windsor wrote. He expects Facebook will use its messaging platform to creating thriving multiplayer gaming environments, which would accelerate its move to add both media consumption and gaming to its digital content services. The goal would be to entice uses to do more with Facebook than just social networking and instant messaging. “This is the key to changing from being just an app into a fully-fledged ecosystem where users spend an increasing amount of their digital lives,” he wrote. The result is that Facebook would have a greater opportunity to monetize its 1.5 billion users and the 800 million users on Messenger. Facebook still has a very long way to go, but once this is complete, Windsor estimates Facebook will have the capacity to generate over $40 billion in revenue, compared to the $18 billion it generated in 2015. He also said Facebook’s apparent direction is why it’s emerging as Alphabet’s No.1 competitor, “as a large piece of this new opportunity that it hopes to generate is likely to come from Google.” Facebook has already expanded Messenger’s utility to include allowing users to send money to others, though Facebook currently does not charge a fee for the service. It’s also testing a feature that allows people to book an Uber ride through Messenger. More transportation services will be coming to the platform soon, including airlines, Facebook said. Nomura analyst Anthony DiClemente said in a research note Thursday that an advertising network which Facebook announced two years ago is gaining on a similar platform from Alphabet. The ad platform, called Facebook Audience Network (FAN), uses Facebook data to help advertisers place ads across multiple websites, beyond Facebook. FAN is in direct competition with AdSense and AdMob from Alphabet. DiClemente estimates FAN will add $2 billion to Facebook revenue in 2016, more than double that of 2015. The emerging growth drivers of FAN and Messenger will complement the strong revenue growth Facebook is getting from Instagram and video ads, he wrote. DiClemente raised his price target on Facebook to 135 from 125. Facebook stock fell 1.1% in the stock market today  to 108.39. It hit an all-time intraday high of 117.59 on Feb. 2. The company gets a best-possible Composite Rating of 99 from IBD. So does Alphabet, which slipped 0.2% Friday to 730.22. Alphabet hit an all-time high of 810.35, also on Feb. 2. Image provided by Shutterstock .

Ad-Blocking Jumps To 38% Globally After Apple iOS Move, Report Says

Six months after Apple ( AAPL ) made ad-blocking possible on iOS mobile phones, eMarketer says that the trend is gaining steam. It could mean that companies including Alphabet ( GOOGL ) search unit Google, French ad firm Criteo ( CRTO ) and others relying on advertising to make money aren’t totally in the clear yet, though they’ve said that ad-blocking isn’t having any effect on their business. Worldwide, 38% of Internet users reported using an ad-blocking tool in Q4 2015, eMarketer notes, citing data from research group GlobalWebIndex. The rise comes after the percentage of people using ad-blocking tools had generally held steady earlier in the year — 28% in Q3 and Q2 and 27% in Q1, according to the survey. The U.S. showed the lowest ad-blocking adoption rate — 9% — of six large nations in North America and Europe, according a June survey by comScore and Sourcepoint. At 27%, France posted the highest ad-blocking rate, the survey said. Ad blockers serve to reduce the amount of bandwidth a user needs by cutting down the amount of content — seen and unseen — that a page has to load. They can also help with privacy by blocking programs that track users’ browsing habits — good for users, bad for advertisers who want to show their ads to people who are the most likely to buy their products. “It’s apparent that significant amounts of time are spent viewing ad-blocked video, and that’s the crux of the problem as far as publishers and advertisers are concerned,” the eMarketer report said. About 16% of the U.S. online population blocked Web ads during Q2 2015, according to a report from Adobe Systems ( ADBE ) and PageFair, an Ireland-based startup that measures ad-blocking costs for publishers. Ad blocking could could cost publishers $41.4 billion globally this year, up from $21.8 billion in 2015, according to that study. Last month, news site Wired became the latest publication to charge users who have installed ad-blocking tools. “We know that you come to our site primarily to read our content, but it’s important to be clear that advertising is how we keep WIRED going: paying the writers, editors, designers, engineers and all the other staff that works so hard to create the stories you read and watch here,” Wired told its readers in a post. On any given day, Wired added, “more than 20% of the traffic to WIRED.com comes from a reader who is blocking our ads.” To snuff out any momentum, Wired said that people using ad blockers will not have full access to articles on its site and gave ad-block users two options — either agree to see ads while visiting Wired, or pay about $1 a week for an ad-free subscription. Media firms including NBC will not allow people using ad blockers to watch videos on their sites, while the Guardian and Washington Post newspapers are prodding people who use ad blockers to pay for subscriptions instead. Support for ad blocking built into Apple iOS 9 means that iPhone and iPad users can install ad-blocking services from Apple’s App Store. Those products give people the power to pull the plug on Web advertising that they deem annoying — everything from banner and pop-up ads to auto-play videos. Apple stock was up more than 1% in afternoon trading on the stock market today , near 103. Criteo was up 1%, while Adobe fell 1% and Alphabet was down a fraction. Image provided by Shutterstock .

Amazon Will Revive Fire Tablet Encryption In Quick Reversal

Is Amazon.com ( AMZN ) as good at yoga as Donald Trump? The mighty e-commerce firm quickly reversed its decision to remove the encryption option from its latest release of its Fire OS distributed to tablets less than 48 hours after the news became public. Amazon is buckling under intense scrutiny following the discovery that the new Fire OS 5, delivered onto its slate computers, eliminated the option to encrypt data on said devices. News of the change comes at an auspicious moment, as a debate in the U.S. rages about whether  Apple ( AAPL ) should create a tool that would give government access to a terrorist’s iPhone. Apple says that giving the feds such access would make all other iPhones more vulnerable.  The lack of encryption on Amazon devices is both a privacy and security risk, so experts say. Amazon spokeswoman Robin Handaly emailed an updated, prepared statement to IBD late Friday evening about the company’s position: “We will return the option for full disk encryption with a Fire OS update coming this spring.” The company could not be reached for further comment by publication time. Early Friday, Amazon.com said that it removed data encryption because customers didn’t use it. Typically, device encryption is used by device owners to protect their data in case the the device is lost or stolen. “In the fall when we released Fire OS 5, we removed some enterprise features that we found customers weren’t using,” the statement reads. “All Fire tablets’ communication with Amazon’s cloud meet our high standards for privacy and security, including appropriate use of encryption.” Amazon’s own chief technology officer just last month gave a speech strongly supporting encryption  in general. Amazon Joins With Alphabet, Facebook Amazon has already signaled it will join 14 other tech giants in filing court papers that support Apple and its fight against the FBI in its case against the government which attempting to gain access to an iPhone used by one of the dead terrorists in the San Bernardino, Calif., shootings. Other companies involved include Alphabet ( GOOGL )-owned Google, Facebook ( FB ) and  Microsoft ( MSFT ). Yet industry observers have been critical of Amazon’s decision to eliminate the security measure from own its devices — at least prior to the company reversing its position. “Removing device encryption due to lack of customer use is an incredibly poor excuse for weakening the security of those customers that did use the feature,” Jeremy Gillula of digital-rights nonprofit Electronic Frontier Foundation told IBD via email. “Given that the information stored on a tablet can be just as sensitive as that stored on a phone or on a computer, Amazon should instead be pushing to make device encryption the default — not removing it.” The reports of the company terminating encryption have sparked debate on Amazon Web forums. Amazon is relentlessly focused on the customer experience. CEO Jeff Bezos has repeatedly frustrated investors with his mantra of customers first, profits second. It’s a strategy that has evidently paid off — at least according to double digit revenue growth, surging cloud computing sales and a company that may look impenetrable because of its market dominance.