“Whether it be the imminent decision by Amazon to go into drug stores — those stocks indicate a very near-term threat — or the multiple price target increases for Netflix after that barn-burner of a quarter or a terrific new Google phone to rival Apple, there’s always something going on with these stocks,” the “Mad Money” host said.
So, when Facebook said it acquired anonymous polling app tbh, Cramer felt the largely unnoticed deal was worth looking into.
While details of the deal remain undisclosed, TechCrunch reported that it heard the price was under $100 million, meaning the deal would not need clearance from regulators.
The app’s name is a play on the phrase “to be honest” and lets users ages 12 and over make anonymous polls on an array of topics. Many of the polls reflect positive messages: one asks users to pick a person who “sticks by your side;” another asks who would be the “best to bring to a party.”
According to a blog post from management, tbh has been downloaded by 5 million people who have sent 1 billion messages on the platform.
“It’s not well known among the analysts, who are too old to use this kind of thing, but this app, as of [Wednesday], is topping the ‘148 Free iPhone Apps’ list ahead of Instagram and, more important, ahead of the enemy, Snapchat,” Cramer said.
The app’s four co-creators, Nikita Bier, Nicolas Ducdodon, Erik Hazzard and Kyle Zaragoza, will join Facebook and use the social media giant’s resources to continue development.
Cramer said that, for Facebook, a successful purchase will end up being anything that captures younger audiences’ attention before they divert to Snap’s platform.
“Let’s just say that [tbh] seems like a gateway to Instagram that detours you from Snap, and for $100 million, once it’s blown out in the Facebook ecosystem, it seems like money well spent,” Cramer said.
With Facebook concerned about splitting users between its Instagram app and rival Snapchat, Cramer said the acquisition looked like something of a “pincer move” by Facebook to steer users toward Instagram for a “rounding error” of a price.
Facebook’s move was emblematic of FANG, the “Mad Money” host said: making a strategic purchase that will drive growth with its content while competitors, like Snap, spend a lot more money on flashy programming announcements.
“Do I want to buy the stock of Facebook because of this? Let me give you a really odd answer: yes. Yes, because if this rate of adoption continues, then the price tag would have been $1 billion a few months from now, not $100 million, and Snap would have gotten massive publicity about how it intended to blunt anything Facebook does to move younger if Snap had made the purchase first,” Cramer said.
“It is something that puts the whole Snap-tops-Instagram-among-teens narrative, which has hurt Facebook’s stock, into question,” Cramer concluded. “For $100 million smackers, it’s a terrific insurance bet and it’s a potential nail in the growth story of Instagram’s chief teen rival, Snap. It’s a great use of that gigantic cash hoard. And isn’t that really what being a part of FANG is all about?”
Disclosure: Cramer’s charitable trust owns share of Facebook, Apple and Alphabet.
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Source: Tech CNBC
Cramer: Facebook's latest acquisition is a 'terrific insurance bet' against Snap