Cramer: Facebook's latest acquisition is a 'terrific insurance bet' against Snap

Key Points
  • "Mad Money" host Jim Cramer says Facebook's $100 million purchase of anonymous polling app tbh is a "terrific insurance bet" against Snap.
  • Cramer says the defining thing about FANG, his acronym for the stocks of Facebook, Amazon, Netflix and Google, now Alphabet, is that the companies are always pursuing new initiatives.
  • With Facebook concerned about Snap and Instagram splitting users, Cramer sees the social media giant's latest acquisition as a way to capture a mission-critical younger audience.
Facebook's latest acquisition insurance against Snap

CNBC's Jim Cramer finds that the defining thing about the FANG stocks, his acronym for Facebook, Amazon, Netflix and Google, now Alphabet, is that they are always "in motion."

"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 13 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.

In an emailed response to CNBC's request for comment, a Facebook spokesperson wrote:

"tbh and Facebook share a common goal - of building community and enabling people to share in ways that bring us closer together. We're impressed by the way tbh is doing this by using polling and messaging, and with Facebook's resources tbh can continue to expand and build positive experiences."

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.

And while it's not as monumental as Amazon's purchase of Whole Foods or Netflix's booming international subscriber growth, it may still put Facebook in a class above the rest, he 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?"

Correction: This story has been updated to reflect that the tbh app permits users age 13 and over.

WATCH: Cramer reviews a little-known Facebook acquisition

Cramer: Facebook's latest acquisition is a 'terrific insurance bet' against Snap

Disclosure: Cramer's charitable trust owns share of Facebook, Apple and Alphabet.

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