What happened
Shares of Snap Inc. (SNAP -2.72%) rose on Tuesday, potentially driven higher by a report suggesting that Facebook (META -0.52%) is losing appeal among younger users, and that Snapchat could benefit. Volatility may also be a factor: Shares of Snap have plummeted since its IPO. At 2:35 p.m. EDT, Snap stock was up about 6%.
So what
eMarketer released its social-network usage forecast on Tuesday, predicting that Facebook will see its user growth slow in the U.S. and the U.K., with Facebook-owned Instagram and Snapchat expected to grow at a double-digit rate. eMarketer sees Facebook's total monthly users growing by 2.4% this year in the U.S., with Snapchat usage expected to grow by 25.8%.
Image source: Snap Inc.
The split is even more drastic among younger users. eMarketer predicts that Facebook's user base among those aged 12 to 17 years will decline by 3.4% this year, and that Snapchat will overtake both Facebook and Instagram for this age group as well as the 18 to 24 age group this year.
Snapchat has always appealed to younger users, so these forecasts aren't all that surprising. For Facebook, a slump in younger users could spell trouble down the road, although it will likely take many years for it to be clear whether this trend will have any negative impact on the company.
Now what
Snap's ability to attract young users hasn't translated into much of anything except massive, unrelenting losses. During the second quarter, the company generated revenue of $181.7 million, but posted a net loss of $443.1 million as it poured money into cloud infrastructure, research and development, and other expenses.
Snap will need to appeal to users outside of its core age group in order to be successful. This report bolsters the idea that kids like Snapchat -- but it doesn't change the story.
