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Snapchat Still Teens' Favorite: Should Facebook (FB) Worry?

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Facebook Inc (FB - Free Report) has long been synonymous with social networking. However, there is one group of the demography that might threaten its coveted status.

As per Piper Jaffray’s semi-annual "Taking Stock with Teens" survey, teenagers’ most preferred social networking medium was Snapchat, followed by Instagram. Twitter Inc. (TWTR - Free Report) and Facebook finished at the third and fourth spots, respectively in the survey.

Reportedly, as many as 80% of the respondents (with average age of 16 years) said that they used Snapchat once in a month compared with 75% respondents in the Spring 2016 survey. In contrast, teenagers using Facebook once in a month fell from 60% surveyed in spring to 52% at present.

Further, 35% of the respondents called Snapchat as favorite networking medium compared with 24% in the Spring 2016 survey. Facebook was favorite networking medium for only 13% of the teenagers in the survey, down from 15% in the Spring survey.

However, Facebook’s subsidiary, Instagram remains popular with the teens. Instagram came a close second to Snapchat with 79% of teenagers in the survey logging in once a month and 24% calling it their most preferred social networking platform.

Netflix Inc (NFLX - Free Report) emerged as the most popular video service while Apple Inc.’s (AAPL - Free Report) iPhone was the most preferred phone among teenagers with 74% owing the device.

What’s Driving Teenagers to Snapchat?

Snapchat is one of the most popular and trendy messaging and social media apps in the U.S. Launched in 2012, its popularity, especially with teens and millennials stems primarily because of ephemerality. Photos/videos and text sent to friends via Snapchat disappear after sometime. Moreover, an interactive style of chat developed by the addition of stickers, doodling etc. has really caught the fancy of teens.

One of the main reasons behind the popularity of Snapchat is its “cool” quotient. It scores above all social media services in this respect as users aren’t going to bump into their parents or worse grandparents on the same network. It is dominated by teenagers/millennials and their most adored celebrities and brands.

Notably, this particular group of the demography, teenagers, is most attractive to social media companies for the ad dollars they bring in. Reportedly, Snapchat charges a staggering $750,000 and upward for an advertisement for a day, ditching the per click revenue model. Snapchat has daily average users of over 100 million. Such high daily activity is extremely attractive to advertisers. Snapchat is also directing considerable resources to capitalize on video viewing. Compared to Facebook’s 8 billion video views daily, Snapchat has over 10 billion daily video views.

Facebook’s Woes

Advertising forms the mainstay of Facebook’s revenues, contributing over 95%. To boost its top line, the company is trying to lure this coveted group to all its platforms. Notably, Facebook has a habit of snapping up apps that help it to diversify its business. For example, it acquired WhatsApp and made a big splash in the mobile messaging space. Similarly, it tried to acquire Snapchat in 2013 but founder and CEO Evan Spiegel turned down the offer.

Since then, Snapchat has been offering some serious competition in terms of attracting teenagers/young adults to its platform. Consequently, Facebook and its subsidiary platforms have started to emulate Snapchat features to boost user growth and engagement levels. Per analysts, Facebook can take a chance by unveiling features that are similar to other social media services. This is because if these “inspired” features do not work, it can easily roll them back like it had done previously with Poke, Slingshot and Bolt. After all, platforms like Facebook, Instagram, WhatsApp and Messenger have their own inherent features that will keep their users hooked.

On the other hand, if the features become successful like Facebook Live, inspired heavily by Twitter’s Periscope, it can boost revenues considerably.

At present, Facebook carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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