Why are teenagers turning away from Facebook?
The teenagers who made Facebook so popular are starting to leave – what’s going on?
Facebook now accounts for one in every five minutes spent on smartphones, and one in eight on the web overall. Its scale is vast and it continues to grow. Even though the increasing move to mobile challenges every online business to redesign its web pages and to rethink advertising, Facebook is one of the few that has largely cracked it. Not only did it beat revenue expectations by more than $100m, but almost exactly half of its $2.02bn in revenue in the most recent quarter came from mobile advertising.
So the site ought to be on a huge high – and after it announced those results last night, shares did indeed surge 15pc. But there is a problem: growth among US teenagers is flat, and overall it fell slightly. Investors, seeing a bleak future where the cool kids have moved on to something else, panicked. Some $16bn was wiped off the company’s value. Thanks to after-hours trading, shares are now likely to open below last night's close: starting at $49.01 they rose to $57.98 and then sank to a low of $47.25.
Whether it is Snapchat or the 20m-times-downloaded Android and iOS version of BlackBerry Messenger, there’s no disputing that Facebook is feeling the pressure from other platforms. As CFO David Ebersman said on the social network’s earnings call, Facebook “did see a decrease in daily users specifically among younger teens”. He was keen to preface those 11 explosive words with the observation that “usage of Facebook among US teens overall was stable from Q2 to Q3”, but the markets took little notice.
Analysts such as Creative Strategies’ Ben Bajarin believe that research indicates Facebook is leaking valuable ‘millennial’ users quickly, and some bloggers have argued that Facebook is for teenagers what LinkedIn is for adults: it’s the much less exciting, permanently recorded social network where you are always likely to encounter bullies, your parents or – worse still – your parents’ friends. On SnapChat, with its simple proposition of simple, impermanent messages, that won’t happen. The idea that teens are leaving a trail of detritus around the web that will catch up with them the second they apply to university or for a job has been shown to be nonsense: only really stupid teenagers get caught, in the digital age or any other.
Facebook is, in part, a victim of its own success: to borrow its own unfortunate phrasing, it is practically “fully penetrated” in the US teen market. At such saturation points, the only way to go is down. Mark Zuckerberg said as recently as July that “There’s been a lot of speculation and reporting that fewer teens are using Facebook, but based on our data that just isn’t true.” He can no longer make that claim today, even if Ebersman did observe that the data he was talking about yesterday was a bit sketchy. The concern is where US teens lead, the rest of the world’s will follow. The evidence of Nokia, Yahoo, Friendster and countless other sites prove how fickle the web's users can be.
Add to this the increasing appearance of Facebook on the front pages of newspapers, whether it’s over groups that glorify rape or because it prevaricates about removing videos of beheadings and it’s hard to think its anywhere near as cool as once it was. Its success was powered by novelty and a simple stream of endless gossip about friends and acquaintances. At its current scale, it’s hard to see that as sustainable. Underlining how new the whole social advertising business is, Bernstein said "we don’t think there is enough visibility into the demand for Facebook ads to make a high conviction call on the stock".
But there is, of course, one huge advantage: the 350m photographs uploaded to Facebook every day may be equal to the number SnapChatted, but on Facebook they are permanent. Users’ whole lives reside on the social network. Escape is difficult and inertia is inescapable.
So it's no wonder that Pivotal Research called the whole market shift an "over-reaction". As the firm's Brian Wieser said, "So long as [teens[ can be reached on Facebook to a degree and so long as FB has a unique capability to reach more total people than any other media owner, Facebook retains advantage in its ad sales efforts against most advertisers." He upgraded the shares to Buy.
Indeed, Facebook isn’t going anywhere imminently. Services such as SnapChat and BBM must prove that they are more than simply utilities, and Facebook itself must prove it can monetise its users effectively, even if they're not as young as they used to be.