If Snap (NYSE:SNAP) has one thing going for it, it's the young teens that spend over 30 minutes on average every day using the app. But that audience is under attack as Instagram copies many of Snapchat's best features.
Still, more teens in the U.S. say they use Snapchat than those that say they use Instagram. Eighty-one percent of teens surveyed in the semiannual Piper Jaffray "Taking Stock With Teens" survey say they use Snapchat at least once a month compared to 79% using Instagram. What's more, 39% say Snapchat is the most important social network, while just 23% prefer Instagram. Twitter (NYSE:TWTR) and Facebook (NASDAQ:FB) are each favored by 11% of teens.
It's worth noting both Snapchat and Instagram saw increased engagement among teenagers. In fact, they're the only two social networks to see an increase in the percentage of respondents saying they use the social apps at least once a month. Smaller social networks saw much larger engagement declines compared to Facebook and Twitter, which have considerably more staying power.
Overall, the trends bode well for the three big social networks.
Snapchat vs. Instagram
Snapchat surpassed Instagram's engagement in Piper Jaffray's Sprint 2016 survey a year ago when 75% of teens said they used Snapchat versus just 74% using Instagram. While the engagement lead hasn't widened by much, Snapchat has risen in importance among teenagers. Last year, just 28% of teens considered Snapchat the most important social network and 27% preferred Instagram. Snapchat is now the favorite of 39% of teens and Instagram fell to 23%.
Those numbers imply teens are spending more time in Snapchat today than they were a year ago. That may give Snap more opportunities to show ads to the valuable audience, but it's not clear if that's actually the case. One of the biggest engagement drivers among teens are "streaks," which encourage users to send each other a photo or video message every day. Snap doesn't have a great way of monetizing those interactions -- its main source of ad revenue comes from interstitial video ads placed between Stories.
On the other hand, teens said Instagram is their preferred way to interact with brands and retailers followed by Facebook, Twitter, and then Snapchat. As such, Instagram will have a much easier time monetizing its audience compared to Snapchat, where users prefer to interact with their friends.
Another point worth mentioning is the Piper Jaffray survey only covers the U.S. Internationally, Instagram may be well ahead of Snapchat. Snapchat's growth in the rest of the world and Europe regions slowed considerably after the release of Instagram Stories, a Snapchat clone. On the other side of the equation, Instagram's growth accelerated. The survey results might look very different if Piper Jaffray could reach teens all over the world.
Concentrating on a few social networks
Another big takeaway from the survey is American teens' attention is heavily concentrated among Snapchat, Instagram, Twitter, and Facebook. No other social network was favored by more than 1% of respondents.
Social media ad spend is expected to increase 20% per year over the next few years, according to ad agency Zenith. The concentration of audiences into just four apps means those companies have an opportunity to see revenue growth even higher than that rate as social ad spend shifts from the apps falling out of favor to the apps retaining or growing their audiences.
Considering Facebook owns Instagram, it's in the best position of the three companies. Meanwhile, both Snapchat and Twitter have a lot left to prove for advertisers. Considering the early stages of Snapchat's monetization efforts, advertisers seems to have a lot of patience with the app.
But Twitter is struggling to grow ad revenue, as it's been unable to provide the return on investment marketers are looking for. The fact that it hasn't lost its core U.S. teen audience is one of the few things working in Twitter's favor with advertisers right now.
While Instagram's copycat efforts haven't had too much impact on Snapchat's popularity with U.S. teens, the lack of growth around the rest of the world shouldn't be ignored. Additionally, Snapchat's monetization potential is severely limited by how those teens use Snapchat. Engagement is an important metric for investors to pay attention to, but it's not the only one worth considering.