Subscribe to Money Morning get daily headlines subscribe now! Money Morning Private Briefing today's private briefing Access Your Profit Alerts

Will a Weak Facebook Earnings Report Open Doors for these Competitors?

We know investors will want a few key details from today's Facebook earnings report, like how much more user growth the site expects, if it can increase ad sales and how it'll tackle mobile usage.

But something people haven't questioned as much is if there are any competitors lurking in the shadows that could eat away at Facebook's online presence.

Turns out Facebook has reason to be concerned.

MarketWatch's David Weidner last week addressed some competition creeping into Facebook's world. In his article "Here's the app that could kill Facebook," Weidner detailed how an up-and-coming app could actually threaten Facebook's hold on social networking.

Tack this on to the list of reasons to avoid Facebook stock – in case you needed any more.

Path: A Facebook Threat?

The app in question is called Path.

According to Path's website it's "the smart journal that helps you share life with the ones you love."

Through one button members can "post beautiful photos and videos, who you are with, where you are, what you are listening to, what you are thinking, and when you go to bed and wake up."

Part of its appeal for Weidner was the sharing capability as the app has a limit of 150 people. Instead of Facebook's general broadcasting vibe, Path is more personal.

Path automatically makes changes for you including your location and lets you know when "loved ones" have "stopped by."

Weidner noted there's still the potential to overshare, similar to Facebook, but the application is faster than the social media giant and has a sleek design.

But perhaps one of its greatest appeals is the availability: It only comes on mobile devices for the iPhone and Android. There's no website. This could be a key point for Path since we know Facebook has failed to deliver a strategy to monetize mobile users.

Path has an interesting financial story, one that appealed to big investors such as Richard Branson, according to Weidner. Path's founders rejected a $100 million-plus buyout offer from Google Inc. (Nasdaq: GOOG).

Another interesting – but not surprising – note is that Path's CEO David Morin is a Facebook alum. He worked on the Facebook Platform and oversaw the Facebook Connect project, reported Tech Crunch.

In these lean economic times users may embrace Path as a less-is-more alternative or, as Weidner noted, the anti-Facebook.

Path's user numbers are minute compared to Facebook: At the end of 2011, there were 300,000, compared to Facebook's 900 million. Maybe Path will never reach Facebook size, but where Facebook's growth has already peaked, Path could still have its explosive growth phase to look forward to – something investors love in a tech start-up.

Any More Threats to Facebook Earnings?

Weidner's Path analysis made me wonder if another competitor could fare better than Facebook: LinkedIn Corp. (NYSE: LNKD).

According to its website, as of March 31 LinkedIn was the "world's largest professional network on the Internet with 161 million members in over 200 countries and territories."

It recently underwent a redesign, as announced on its corporate blog by LinkedIn product manager Caroline Gaffney. The new design comes with a simpler look, network updates at the top of the page and easier scanning. It kind of reminds me of the old, simpler Facebook. thought so, too, and pulled the following from the blog announcement: "This simpler and cleaner design makes it easier to navigate the page and quickly find the updates you're looking for – whether that's a news article your boss has recently shared or it's to see who has just started a new job."

Sound familiar?

They say imitation is the greatest form of flattery and maybe LinkedIn is on to something. Maybe users will just get tired of going to two different sites and want to combine friends, family and professional contacts into one place.

I was curious to see how LinkedIn is doing with its mobile revenue since that could be Facebook's Achilles' heel.

From LinkedIn's fourth-quarter earnings report, mobile usage is the fastest-growing segment of its business, according to Mobile access accounts for 15% of all LinkedIn visits, a 9% increase for mobile since the middle of 2011.

But similar to Facebook, LinkedIn hasn't mastered mobile revenue and is still looking for ways to monetize advertising on the mobile devices.

CEO Jeff Weiner acknowledged this and said, "We were very focused on getting the product right and the user experience right. Now that that's in place, we're going to start to run some tests with ads within the mobile environment."

As noted by tech site GigaOM, for LinkedIn its mobile site doesn't take away from users on the website, but it has actually seen a rise in connection density it received from mobile users and the network's connections.

So as investors will be listening intently today to see if Facebook has any news on mobile revenue, keep in mind it's a challenge also faced by competitors. While users can't change this for the companies right now, they do have a choice in which site they devote their time to – and Facebook might not remain at the top of their list.

LinkedIn stock has soared 60% this year, a standout among last year's troubled tech IPOs. Facebook stock has slumped almost 30% since it went public May 18. Facebook stock was down almost 7% in the first hour of trading Thursday.

Related Articles and News:

Join the conversation. Click here to jump to comments…

Leave a Reply

Your email address will not be published. Required fields are marked *

Some HTML is OK