Facebook (FB) is still the most important social network for U.S. teens, but watch out, Twitter is quickly gaining share according to Piper Jaffray’s semi-annual teen survey. Among U.S. teens, 33% rank Facebook number one, with Twitter coming in a close second place with 30%. Most notable is the change from the previous Fall 2012 survey showing Facebook at 42% and Twitter at 27%. Instagram rounded out the top three with 17%, compared to 12% in the Fall.
“It is ultimately a long-term problem for Facebook,” says Gene Munster, senior analyst at Piper Jaffray, before reminding us that Facebook owns Instagram, so the two can be viewed collectively. It was last April that Facebook announced its $1 billion acquisition of the photo-sharing app company.
From that perspective, Facebook & Instagram combined lost 4% share to Twitter from the Fall 2012 to Spring 2013 (see chart below).
“Ultimately, near term there is still a big opportunity for Facebook to continue to add new ways to monetize the existing base; they’re under-monetized today,” says Munster. “This isn’t something you’re going to see in the numbers in the next couple quarters, but I’m sure if you’re Facebook and you’re looking at these trends, you’re probably taking notice and trying to figure out how you can navigate this brand amongst teens.”
Munster has an “overweight” rating on Facebook with a $38 price target. Interestingly, $38.00 is the price shares debuted at in the IPO last May. The stock is down over 30% since then.
But this analyst sees upside based on his belief the company will monetize its user base, likely through acquisitions.
“The good news for Facebook is they realize that there are going to be some important, competitive companies like Instragram, and they’re probably going to have to pay up for them,” he says. “Ultimately, the reality of the business model in social is they’re going to continue to have to buy these kind of fast-moving competitors that are gaining share.”
Further, he estimates that the average user spends 5 to 7 hours per month on Facebook, but only 1 to 2 hours are monetized. Munster believes moving that needle just a little can go a long way to support the share price.
Stay tuned. Facebook is due to report second-quarter earnings results on Wednesday, May 1 after the market close.
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