Facebook Inc (FB) Is For ‘Old-Folks’ – Losing ‘Friends’ to The Younger, Cooler Snapchat (SNAP)

Leading research firm eMarketer has just released the results of its latest study confirming that Facebook, Inc. (NASDAQ:FB) is for old folks. This may come as no surprise, but apparently kids don’t think it’s cool to hang out on the same social network as their parents and grandparents. This year, less than half of Americans between the ages of 12 and 17 will log on to Facebook even once during any given month. What’s worse, is that for the first time eMarketer predicts that the 18-24-year-old demographic will also see an estimated 5% drop.

Facebook has known about their ‘teen-trouble’ for a while and has worked hard to keep current by continuously offering new products and platforms that might appeal to younger users. Back in the spring of 2012 Facebook purchased Instagram when it was only a 13-person startup for $1 billion. That purchase has proven to be a sound investment. Instagram has served as a sort of safety net catching the younger users who were leaving Facebook looking for an alternative social platform.

Bill Fisher, the senior UK analyst for eMarketer is now warning that Instagram is also beginning to lose its grip with the 12-24-year-old gang. “[Facebook has] been able to rely on platform shifters being hoovered up by Instagram, there are now some early signs that younger social networkers are being swayed by Snapchat.” Snapchat’s parent company, Snap Inc. (NYSE:SNAP), went public last March with a valuation of more than $24 billion.

Those “early signs” come in the form of some dire data. Of the 2 million US users under 25 that eMarketer estimates Facebook will drop this year, it sees Instagram catching only 1.6 million, while Snapchat is likely to scoop up 1.9 million. But the news isn’t all bad. While Snapchat may be the cool kid in class, winning the battle for users among the youngest demographics, Instagram is still expected to see more total growth. eMarketer predicts Instagram will add 13% taking it to 104.7 million users. Snapchat isn’t far behind, expected to add 9.3% bringing it up to 86.5 million users overall.

According to the research firm, Facebook’s grip on younger users will continue to slip. Indeed 71% of the total social media users in the highly desirable demographic of 12 to 17 will be using Facebook in 2018 down from the 90% charted back in 2014. eMarketer predicts that the 12 to 17-yearold’s will continue to jump ship with the total percentage dropping as low as 66% by 2022.

But while the younger crowd disembarks in droves their middle-aged counterparts are flocking to Facebook as if they were giving away free cruises. In fact, the over-55 set are expected to add 400,000 new users to Facebook’s social platform passenger list, bringing the total number to an estimated 6.3 million. That would make the over 55 crowd the second largest demographic after 25 to 34-year-olds.

Overall, the study serves to reinforce the perceptions that Facebook is losing younger ‘friends.’ While there is certainly value in the ad revenue that the growing number of older users bring, Facebook will need to find a solution to attract the next generation of social media users if it hopes to hold onto the advertisers that target them.

Nonetheless, from a Street perspective, Facebook still remains king of the social platforms. TipRanks’ analyst consensus rating for FB is a Strong Buy with an average analyst price target of $227.79 giving it an impressive upside potential of over 29%.


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