Why Facebook Inc. Can Overcome a Decline in Teen Use

The rumors of Facebook's demise seem to have been greatly exaggerated. At least, according to new research. Find out why Facebook investors don't need to worry about minimal declines in Facebook use among teens and young adults.

Jul 4, 2014 at 3:00PM

Facebook (NASDAQ:FB) is on a roll. A recent report by Forrester Research shows how the demise of the social media giant was greatly exaggerated when researchers from Princeton dubbed it the next MySpace and predicted it would lose 80% of peak users by 2017.

Forrester's data revealed that the percentage of teens using the service did drop from February 2013 to November 2013, but only slightly. According to comScore, 88.6% of those 18-24 years old used Facebook in November of 2013, while 91.5% used it in February 2013.

The nearly three-percentage-point drop is a concern, but far from catastrophic. 

Fbinstag


Before, during, and after the much-publicized decline, Facebook did three things that should quiet its critics and more than offset gradually declining young adult and teen usage. 

Facebook purchased Instagram
In April of 2012, Facebook had the foresight to purchase Instagram for $1 billion -- $300 million in cash and the remainder in Facebook stock. According to Facebook's last earnings call for Q1 of 2014, Instagram hit the 200 million mark for monthly active users, or MAUs, in March of 2014. That's a substantial jump from the 22 million MAUs it had in when acquired in 2012. By comparison, Facebook has 1.28 billion MAUs as of the Q1 2014 earnings call. 

In April of 2014, Instagram brought in another 85 million unique visits in the U.S. alone. It also has a higher engagement per follower than either Facebook or Twitter (NYSE:TWTR). It has 50 times more engagement than Facebook and 120 times more than Twitter, according to Forrester. 

Facebook has already shown that it knows how to monetize its own network by selling ads, but has yet to generate any ad revenue from Instagram. Look for it to do do so in the future. This will add another revenue-generating channel to Facebook and increase the value of the company.

Facebook also purchased What's App
Facebook also put down a great deal more for What's App -- 19 times more, to be exact. The messaging platform had 450 million active users at the time, mostly overseas. According to co-founder Jan Koum's blog, it now has more than 500 million active users, who are sharing 700 million photos and 100 million videos. Overseas locations, including Brazil, India, Mexico, and Russia are adding subscribers the fastest.

The goal of reaching 1 billion users looks more than within reach, but don't look for What's App to upend its core principles -- which includes no ads. For now, Zuckerberg is allowing the founders to operate independently and stick to their fast, cheap, ad-free messaging. But, even so, at a dollar a pop for a one-year subscription, What's App can bring in $1 billion a year in revenue via its subscriber-based model.

Facebook plans to use Google-like ad targeting to bolster its ad sales 
Facebook is also set to improve its advertising and sell more ads by gathering more data on users. It announced it will now track users' web- and app-browsing habits to better help its advertisers target potential customers.

Facebook currently presents ads based on shares, post likes, and page likes that take place on Facebook's network. However, now Facebook will also use its users' browsing history through third-party apps and other sites to improve targeting of ads to users' feeds. Even though privacy advocates are raging against the new policy, don't look for many users to opt out, even though they can. Google (NASDAQ:GOOG) (NASDAQ:GOOGL) already does this type of targeting and has proven that it's effective, even with hardcore opposition from a small segment of users.  

A Fool has his reasons
While Facebook is a polarizing company for investors, if you weigh all the facts and data, it is a solid buy at the moment. Its upside potential outweigh concern over its demise with young users.  There is no guarantee it will avoid hitting a snag or being toppled from its social media throne, but for now and the foreseeable future, it looks to be the king of social media revenue generators. 

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

 

Chris Brantley has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, Google (A shares), Google (C shares), and Twitter. The Motley Fool owns shares of Apple, Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers