In the third quarter of 2012, then-Facebook (NASDAQ:FB) CFO David Ebersman noted that the company was seeing a decline in the amount teenagers used the social network. The comment caused panic throughout the investing community, as advertisers covet the teenage audience.
By January of 2014, the number of Facebook users in the U.S. aged 13 to 17 had declined more than 25% from the beginning of 2011, according to iStrategyLabs. The decline continued through 2014, with a recent poll by Frank N. Magid Associates finding just 88% of U.S. teens use Facebook, compared to 94% in 2013.
Teenagers haven't completely abandoned Facebook's ecosystem, though, and that 88% of self-reported teenage users becomes higher if you include all of Facebook's properties.
Wait, you're not on Facebook?
One problem with this latest poll is that it does not account for users who create Facebook accounts to take advantage of properties such as Facebook Messenger or Groups. Teens are largely turned off by Facebook's cluttered Newsfeed, but still use it to find and connect with new acquaintances via Messenger -- because, you know, asking for phone numbers is awkward.
Forty percent of teens polled said Facebook Messenger was their preferred messaging app, beating Apple's iMessage and Google Hangouts. Another 9% said they prefer WhatsApp, which Facebook bought last year, giving the social-media giant nearly half of the booming messaging market among teens.
So Facebook is still widely used by teens. Even if they're not "liking" items in their Newsfeed, they're still providing plenty of data for Facebook to eventually monetize across its constellation of apps. In fact, Facebook still owns the most popular social network among teens.
All the cool kids are on Instagram
The most recent installment of Piper Jaffray's semiannual Taking Stock With Teens survey showed that 76% of the U.S. teens polled use Facebook's photo- and video-sharing service Instagram. That's more than any other social network.
Instagram is attractive to teens because it has yet to become ubiquitous -- i.e., their parents aren't on it -- and there's less clutter in users feeds. There are no links to viral-type news items, and liking a picture doesn't cause it to pop up in all of your followers' feeds. All in all, Instagram provides a higher-quality feed of pictures than Facebook.
Perhaps that's why Facebook has struggled with monetizing Instagram. Quality and relevance are important to its popularity. Inserting advertisements without disrupting what makes it attractive is a difficult balancing act. The company is making progress, however, recently introducing video ads.
The one that got away
A little over a year ago, Facebook tried to acquire photo messaging app Snapchat for a whopping $3 billion. Snapchat's popularity among teens has exploded since then, and Facebook CEO Mark Zuckerberg might be regretting not offering the founders more money since the company was recently funded at a $10 billion valuation.
The Frank N. Magid survey found that 18% of participating teens use Snapchat as their primary messaging app. Even more use it to share their daily activities more privately with friends. Snapchat encourages users to post a lot of content they would never think of sharing on other social networks because the "snaps" they send expire.
While Facebook missed out on Snapchat, it points to Zuckerberg's expertise at identifying the next big thing. Many believed $3 billion was way too much to offer for Snapchat. Many also believed $1 billion for Instagram was too much. And $19 billion was too much for Facebook to pay for WhatsApp.
Zuckerberg has already built quite a track record in identifying businesses with the potential to reach 1 billion users. I'm confident he can continue to find or create businesses with the potential to reach massive audiences.
The company's challenge is figuring out how to monetize all of its users, no matter which app they use. But Facebook's track record when it comes to monetization isn't too bad, either.