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Surprise! Millennials Still Love Facebook

Facebook (NASDAQ: FB) reportedly lost teen and millennial users in the U.S. over the past two years. Pew Research claimed that 44% of 18-to-29-year-olds had deleted Facebook's app in 2018, and Edison Research claimed that the percentage of 12-to-34-year-olds logging into Facebook dropped from 79% in 2017 to 62% in 2019.

Three factors supposedly sparked that exodus: First, younger users fled Facebook as their parents joined the platform. Second, Facebook's own subsidiary Instagram, Snap's (NYSE: SNAP) Snapchat, and ByteDance's TikTok all pulled away younger users. Lastly, a series of privacy, security, and fake news controversies caused many users to reevaluate the amount of personal data they stored on Facebook.

Image source: Facebook.

However, a recent survey from 5W Public Relations suggests that lull was temporary. The PR firm claims that 77% of 18-to-34-year-olds still use Facebook on a daily basis, compared to 70% on Instagram, 66% on YouTube, 54% on Twitter, and 47% on Snapchat.

The study also found that 67% of 18-to-34-year-olds made purchases based on people they followed on Facebook, compared to 72% and 64% who made purchases based on Instagram and YouTube accounts, respectively. Those figures suggest that fears about millennials abandoning Facebook were overblown and that the world's largest social network will likely remain a top advertising platform to target younger consumers.

What does this mean for Facebook?

Investors should always take third-party studies with a grain of salt, but 5W's findings suggest that Facebook's growth in the U.S. and Canada -- its two most profitable markets -- will remain robust.

Facebook's growth in monthly active users (MAU) and daily active users (DAUs) in the U.S. and Canada has been sluggish in recent quarters due to its high penetration of both markets. Yet the region's average revenue per user (ARPU) continues to grow sequentially and annually, and remains much higher than its ARPU in other markets.

U.S. and Canada (Q4 2019)

MAU

DAU

ARPU

Total

248 million

190 million

$41.41

Sequential growth

0.4%

0.5%

19.9%

Year-over-year growth

2.5%

2.2%

18.8%

Source: Facebook Q4 earnings report.

Its ARPU growth in the U.S. and Canada also outpaced its global ARPU, which rose 17.4% sequentially and 15.6% annually during the quarter. Facebook's second most profitable market, Europe, only generated ARPU of $13.21, followed by $3.57 for the Asia-Pacific region and $2.48 for the rest of the world.

Therefore, Facebook's user growth might be sputtering out in North America, but advertisers are still scooping up its targeted ads. That's likely because Facebook and Alphabet still hold a treasure trove of data and a near-duopoly in the U.S. digital advertising market.

eMarketer estimates that Facebook and Google will still control a combined 60.7% of the U.S. digital advertising market this year. Amazon is expected to rank a distant third with an 8.6% share.

Privacy concerns aren't sparking a mass exodus of users

Facebook's growth rates and 5W's findings suggest that the alarming figures from Pew and Edison only marked a temporary trend and that most millennials aren't deleting Facebook. Instead, these users still turn to Facebook to stay connected with their friends and family as they pursue their careers and start their own families.

Image source: Getty Images.

That could be bad news for Snapchat, which has been aggressively courting slightly older users with its redesigned app and expanded lineup of Discover videos. It could also spell trouble for Match's Tinder, which Facebook is targeting with new opt-in dating features.

The key takeaways

Facebook is massive, but it's still growing: Its total MAUs rose 8% year over year to 2.5 billion last quarter as its total advertising revenue surged 25% to $20.7 billion. It might have lost the confidence of some users after the various scandals and bad publicity, but it's still deeply entrenched in the lives of most Americans, including millennials, making it an essential platform for advertisers.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon, Facebook, and Snap Inc. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, Match Group, and Twitter. The Motley Fool has a disclosure policy.


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