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Facebook Inc (FB): Instagram Video Equals InstaProfit

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Facebook Inc (NASDAQ:FB) recently unleashed a video feature for Instagram. In a blog post announcing the upgrade, the company basically states that people are going to be able to share mini-video clips and include the filter feature with it.

Facebook Inc (NASDAQ:FB)

An effective strategy for monetization

Going forward, it is highly probable that a picture advertisement will show up at the end of a 15-second video clip. It’s almost always easier to advertise in a video than it is to advertise using banner advertisements. But then again, Facebook Inc (NASDAQ:FB) never bothered to monetize the Facebook video feature, so this is just speculation at best.

Another opportunity is to charge companies for product placement in Instagram videos, with brand names otherwise being blanked out in the videos that a user generates. After all, it was James Bond and his wearing of Ray-Ban glasses that turned Ray-Ban into a household name.

I am sure there are a variety of ways that Facebook Inc (NASDAQ:FB) can effectively monetize its services. The trouble comes from creating technology that accomplishes this without being too obvious.

Instagram video is in direct competition with Vine. Vine also allows users to share short clips with friends and family. One of the greatest weaknesses of Vine is that it is not very well known, whereas Instagram has over a hundred million active users. By launching Instagram video and offering filters, Facebook has reduced its exposure to competition. The company has a lot of money on its balance sheet, but it can’t afford to buy every company that crops up on the block with a good idea.

Since its IPO, Facebook Inc (NASDAQ:FB) has increased its spending on research and development by 871.5%. The significant increase in spending has resulted in some minor successes like Instagram Video and the introduction of hashtags on Facebook. Some major failures include Facebook Inc (NASDAQ:FB) Home and Facebook phone.

The company’s growth is primarily product driven right now.

Consider an alternative like Google

Investors have to bank on Facebook’s success in creating great products. But there’s no way of knowing the amount of commercial success its future products will have. Therefore, we have to consider investing in companies like Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN). These two companies are diversified and continue to grow.

I believe that Google will continue to be a successful investment opportunity, and there’s a lot of untapped demand internationally for global advertising. The fastest-growing category for advertising is in mobile and Internet-driven advertising. Google Inc (NASDAQ:GOOG) is well positioned with the Android operating system, and the company’s revenues from Motorola Mobility Holdings Inc (NYSE:MMI) could also improve depending on how effectively the company is able to market and sell its products outside of the United Sates.

Over the short-term, analysts anticipate significant revenue growth. The growth will primarily be driven by Android application sales. IDC projects that Google’s Android OS will grow at an 18% annual growth rate until 2016. The same company also assumes that 1.4 billion smart phones will be shipped in 2016. Assuming that digital advertising and Android sales continue to grow in the double digits, the future will be bright for Google Inc (NASDAQ:GOOG). Analysts back my assumption by projecting a 15% growth rate on average for the next five years.

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