It was about this time last year that Facebook (NASDAQ:FB) let the cat out of the bag: daily usage was slowing, "specifically among teens." That was all Facebook naysayers needed to hear to fuel their "end of days" scuttlebutt. Of course, since that time Facebook has continued to grow its total base of monthly average users, or MAUs, to today's whopping 1.35 billion.
And with CEO Mark Zuckerberg's focus on mobile usage combined with his Internet.org initiative to bring connectivity to the masses, it's not likely overall MAU growth will slow anytime soon. But what about the all-important teen demographic -- a favorite target of Facebook's advertisers? Turns out, Facebook is still a social media destination of choice among the Gen Y group, and it has another card up its sleeve to woo advertising partners interested in targeting the world's youngsters.
What teen angst?
It may come as a surprise to some, but the Gen Y group, according to a recent study, not only live large portions of their lives online , they also complete more Internet purchases than any other demographic, despite having lower average incomes than folks that have been around a while. On average, Gen Y'ers spend just shy of $2,000 annually shopping online, much of which is done via a mobile device.
You can be sure Facebook's marketing partners know who's completing online purchases, so it's no wonder there were concerns when Facebook fessed up last year that teen usage was ebbing. But as we fast-forward to today, turns out the notion that youngsters were leaving Facebook in droves was much ado about nothing, and better still, even if it were the case, Zuckerberg's got a backstop: Instagram.
Instagram is already a social media phenomenon and considering its objective to reach 1 billion MAUs, you can bet it will continue to grow in popularity. Though it currently has a "paltry" 200 million MAUs, Instagram's usage already compares favorably to wannabe competitor Twitter (NYSE:TWTR) and its 284 million users, and teens in particular are moving to Instagram in droves.
Instagram outpaces both Twitter and its parent Facebook in "prestige" among younger users, a fact that will certainly not be lost on advertisers as Facebook ramps up the monetization of Instagram. To Twitter's credit, at least in terms of a young user base, about half its MAUs are in the later stages of the Gen Y demographic. And as noted earlier, this is the group more apt to shop, and buy, online. But before Twitter fans get too excited, Facebook's Instagram also boasts a young demographic. In fact, over 90% of Instagram users are under the age of 35.
Instagram is a nice ace in the hole for retaining the Gen Y demographic, but don't discount Facebook: it's still the top social media site among U.S. teens, which should be expected given its sheer size. What may come as a bit of a surprise is about half of the teens included in the aforementioned survey said they're using Facebook more than last year. That, combined with Instagram's popularity with younger MAUs, should alleviate investor concerns over "declining" teen usage.
What's it all mean?
Male, female; young, or old MAUs; what's the big deal you ask? In addition to the data regarding who's spending online, the more widespread the demographic the more opportunities to woo advertisers. Facebook, because of its MAU count spread across multiple demographics, including Gen Y'ers, is able to support the advertising needs of all its 1.5 million marketing partners. The smaller, less diverse user group of a Twitter, for example, simply can't provide the same breadth or scale.
Facebook's diversification via its multiple acquisitions the past couple of years, particularly Instagram for the Gen Y crowd, let alone mobile messaging king WhatsApp and fast-growing Messenger, not only positions it for future revenue growth, its distinct properties provides a measure of security. Turns out teens aren't leaving Facebook in droves, but even they did, they're likely to end up on Instagram. Not a bad Plan B.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of Facebook and Twitter. 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.