Thursday, October 31, 2013

Facebook not cool any longer for teenagers

There is no doubt that Facebook is a very successful company. However, recent events may indicate troubles at the horizon as apparently Facebook has lost its coolness factor which has resulted in it being less popular among teenagers. This has already reflected itself on the Facebook shares which dropped by almost 20% following the last quarter report.

facebook cool fail young teenager juvenile
The last quarter report by Facebook revealed both positive and negative aspects of the company. On the positive side, the mobile ads appear to finally gain some traction and accounted for about half of the incomes. The turnover also increased by over 50% compared to the same quarter last year and the number of users had also increased by 25% reaching a total of 728 million active users. This resulted in the share prices jumping up by 15% and reaching a price of $57.98.Unfortunately, a few hours later, the increase was completely eradicated by a statement by the CFO, David Eberman who said:
"We did see a decrease in daily users specifically among younger teens."
This statement alone indicated to the market that teenagers may no longer look at Facebook as the social network and therefore will pay more attention to other social networks. As a consequence, these 12 words costed Facebook $18 billion of value, due to the Facebook shares immediately being penalized and dropped down to $47.25 (later recovered to $49.01). 

The above statement, however, has to be considered in light of what Mark Zuckerberg said in September, where he mentioned that the coolness factor for Facebook is gone. Therefore, the statement by Eberman just further emphasizes this resulting in a strong market reaction.

Today, the young teenagers besides Facebook also spend considerable time on other social networks such as Twitter, Snapchat, Tumblr and Instagram (owned by Facebook). In essence the market is more competitive and one really has to be innovative to continue to attract new users, especially young users. Considering that many parents for the current young users are on Facebook, this could also influence the decisions by the young users regarding the social network to use. Obviously, no-one wants to have their parents monitoring their Facebook activities.

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