Image source: Getty Images.
Social media has become an important part of modern life. Consumers around the world are sharing content across social networks in staggering volumes, and most of this activity is taking place on mobile devices. Anytime you have a minute to spare, it's easy to pull that smartphone out of your pocket and enjoy a few moments of chatting or video entertainment on your favorite platform.
A recent analysis by social-media marketing firm Mediakix showed that the average American spends more than two hours per day on the five largest social-media networks. That's 50% more than the time we spend eating and drinking, and only 30% less than the time invested in watching TV. It's also up from 73 daily minutes per user just five years ago. That works out to an average annual increase of more than 10% over the past five years.
This is the stuff that legends are made of. Let's have a closer look at five of the most popular social-media names today, how they got there, and how much money the companies behind them are making.
Image source: YouTube.
1. YouTube
According to official stats from Alphabet (GOOG 0.58%) (GOOGL 0.42%), YouTube's 1.5 billion users consume about 1 billion hours of short-form video content every day. That works out to 40 minutes per user on a global level, and the local figure for U.S. YouTube viewers is probably higher. Alphabet's notoriously tight-lipped management isn't sharing that kind of detail, so let's just stick with the worldwide average. It's still the internet's biggest time consumer by a wide margin.
The same reluctance to share detailed results also means that we don't quite know how much money YouTube is making. The site sells ad time for many of its videos, sharing revenue with video producers. The company keeps a 45% share of those ad sales and passes the remaining 55% on to video makers. On top of that, Alphabet is selling a premium access package known as YouTube Red, which removes ads from the platform and provides access to a portfolio of premium shows, all for a subscription fee of $9.99 per month.
Again, it's unclear how many users have opted into this paid subscription platform or how much money YouTube is making as a whole. But it's obvious that the site serves as a market-leading eyeball magnet and is pulling its weight for Alphabet. YouTube paid out more than $1 billion of ad revenue to the music industry alone in 2016.
If YouTube looked like a ridiculously expensive buyout target in 2006, the video platform has earned its $1.65 billion price tag many times over by now.
Image source: Snapchat.
2. Snapchat
Six years after launching as a message-sharing app, Snap (SNAP 1.61%) has grown its Snapchat platform into a monster with 173 million daily users. More than 25% of all smartphone users in important markets such as France, the U.K., and the U.S. have installed the Snapchat app, and they spend an average of 25 minutes per day on it.
Since Snap joined the public stock market in early 2017, investors have been hoping for a solid money-making strategy. So far, the combination of digital camera filter sales and budding advertising revenues isn't enough to keep the light on. In the second quarter of 2017, the company reported a $449 million loss from operations based on $182 million in top-line sales.
Fellow Fool Evan Niu doesn't think that there's a real business idea here. Instead, he sees Snap's stock offering as a blatant attempt to reward insiders and early investors while Snapchat's star is scalding hot. For now, the service is commanding plenty of user attention -- but it's going to be difficult to persuade Snapchat's users to pay anything for their instant-messaging habits.
Image source: Facebook.
3. Facebook
This towering giant of the social-media space boasts more than 2 billion active users and continues to grow -- 1.5 billion of them use mobile Facebook (FB 3.77%) apps, and nearly 900 million will only use Facebook on a mobile device. Each user spends roughly 20 minutes per day on the main platform, though the company's sprawling reach increases even further if you include its Instagram operations.
Facebook's trailing sales stand at $33.2 billion today, a 50% increase from the $22.2 billion tally a year ago. The company is also fabulously profitable, converting an impressive 43% of its revenue into free cash flow. The management team has mastered the art of monetizing a popular social media service without pushing its users away to the next big platform.
Image source: Instagram.
4. Instagram
When Facebook bought Instagram for a cool $1 billion, the photo-sharing service sported 30 million users. Five years later, the tally has grown to more than 700 million monthly and 400 million daily users. On average, each Instagram user spends 15 minutes per day on the app, either sending or viewing pictures with fancy effect filters.
Last year, Facebook added a Snapchat-like feature known as Instagram Stories. That brand new service has already amassed 250 million daily users, dwarfing the Snapchat Stories feature that served as its inspiration. In Instagram, Facebook bought an effective insurance against becoming obsolete, because this is what the cool kids use nowadays.
Image source: Twitter.
5. Twitter
Finally, Mediakix found the average Twitter (TWTR +0.00%) user spending just a single minute per day on that platform. This makes sense when you consider Twitter's history as a purveyor of ultra-short messages to a large potential audience, but it's not good news for Twitter's investors.
Twitter revenue relies on advertising sales, but the company has failed to copy Facebook's masterful balance between ad volumes and user-friendly content. As a result, Twitter's user base is stalling out at roughly 330 million. The number of average monthly users increased by 5% year-over-year in the second quarter of 2017. Three years ago, the same comparison showed a 24% annual growth rate.
At the same time, Twitter's second-quarter revenue was 5% lower than in the year-ago period. In other words, the average ad sales per user have been shrinking, while user growth hits a brick wall. The company needs to come up with a new monetizing strategy quick and without compressing that precious minute of average user engagement any further, or it will risk becoming a footnote in the history of social networks.
