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Facebook Stock: Are Teens Losing Interest in it?

Posted On August 24, 2017 3:54 pm
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A Facebook Animation of someone watching it on their computer screen

Market research firm eMarketer recently published a report which says that teens are losing interest in Facebook Inc (NASDAQ:FB) and flocking to Snapchat and Instagram. After the report, Snap Inc (NYSE:SNAP) shares which had been languishing for weeks got a relief. But we believe that Facebook stock won’t be affected by the latest trend because it’s enjoying a massive surge in users and ads revenue on Instagram. Moreover, Facebook is becoming the dominant player in the lucrative advertising market, while Snapchat is becoming less attractive for advertisers due to conversion issues and falling engagement.

The eMarketer report predicts that — in 2017 — about 14.5 million people aged between 12 to 17 will use Facebook Inc (NASDAQ:FB), showing a 3.4% decline when compared to the user count recorded in 2016. The basic reason for this decline is the massive exodus of teens favoring Snapchat and Instagram. Snapchat’s per month user count in the US is expected to rise 5.8% to 79.2 million monthly in 2017. But Instagram, which is the property of Facebook, remains the fastest-growing platform.

Instagram will experience a whopping 23.8% rise in active monthly users in 2017 to 85.5 million (in the US). The Instagram Stories feature alone has 250 million daily active users as of June — up from 200 million in April.  Snapchat has only 166 million daily actives for its entire app (Instagram’s entire app has 700 million monthly active uses), indicating that Snapchat has still a long way to go to compete with Instagram. At this point, Snapchat cannot compete with Facebook, which has about 2 billion active users — an upside for Facebook stock holders.

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The current rally in Snap Inc (NYSE:SNAP) is temporary, and the company will need to do introduce a lot of new, innovative features to survive in the highly competitive market. In July, Morgan Stanley said in its report that advertisers are increasingly turning away from Snapchat amid the platform’s falling efficiency. The respective report praised Facebook Inc (NASDAQ:FB)’s Instagram for giving the advertisers access to sponsored “lenses” feature, resulting in skyrocketing ads engagement and revenues for the companies. The report also noted that Snapchat faces a major threat from Instagram. The firm cut its price target of Snap by 42% to $16.

Earlier this year, RBC Capital and Ad Age surveyed 1,600 marketers to gauge the success and popularity of advertising on Snapchat and Instagram. Around 65% of the marketers said they were more interested in advertising on Instagram than doing so on Snap Inc (NYSE:SNAP)’s Snapchat.  

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