“We did see a decrease in daily users specifically among younger teens.”
Twelve words from Facebook CFO David Ebersman that provided a Halloween fright night for Facebook’s senior management yesterday.
Despite turning in stellar quarterly results that overall blew Wall Street expectations away, the implications of that comment, plus a similar statement that the firm reckons it’s reached saturation point with older teenagers, proceeded to wipe $18 billion from Facebook’s value in after hours trading.
Ebsersman tried to contain the damage with some important provisos when he said of user engagement:
“This is a hard issue for us to measure, because self-reported age data is unreliable for younger users. So we have developed other analytical methods to help us estimate usage by age.
“Our best synopsis on youth engagement in the US reveals that usage of Facebook among US teens overall was stable from Q2 to Q3. So we did see a decrease in daily users specifically among younger teens.
“We won't typically call out such granular data, especially when it's of questionable statistical significance given the lack of precision of our age estimates for younger users.”
But he did call it out.
So on this occasion it was very much a definite Not Like! for the social media giant, which learned a tough lesson about how dangerous words can be for a public company on a jittery stock market.
Why this matters can be seen in the results of the recent Taking Stock With Teens collaborative consumer insights project conducted by Piper Jaffray & Co. which is a semi-annual research project comprised of gathering input from approximately 8,650 teens with an average age of 16.2 years.
The latest results published earlier this month noted:
Actually there was another comment made that struck me as just as alarming - if not more so - when talking about ad revenues. First came the treat:
Teens have cited "friends" as the strongest influence over their purchase decisions for the duration of our survey history, but "Internet" is quickly rising in profile.
More than half of teens indicate that social media impacts their purchases with Twitter being the most important, eclipsing Facebook, followed closely by Instagram.
But the popularity of Facebook is waning among teens with 23% citing it as the most important, down from 33% six months ago and 42% a year ago.
“Overall ad impressions were up 16% and the average price per ad was up 42% compared to last year.
“The growth in ad impressions was primarily due to market where using our service combined with the impact of a price floor reduction late in the third quarter last year. The growth in price per ad was primarily due to the increase in news feed ads.”
Then came the trick:
“Ad revenue from web usage decreased both sequentially and year-over-year. Web ad revenue includes both news feed ads on web and right hand column ads on web.
“As we think about the future, we do not expect to significantly increase ads as a percentage of news feed stories beyond where we were at the end of Q3.
“This is important because increasing ads in news feed has been a meaningful driver of our revenue growth in 2013, so this should be factored into your expectations for next year.”
That apart, there were goodies on offer. Mobile ad revenue in Q3 was approximately 49% of total ad revenue, up from 41% in Q2, a rise that was attributed to an increase in the average price per mobile ad, an increase in the number of mobile users and an increase in ads shown per mobile user.
According to Facebook’s numbers, 48% of people who Facebook in any given day are now only accessing it from mobile devices.
Mobile as the driver for growth combined with a shift towards digital viewing habits was picked up by COO Sheryl Sandberg who makes the case that in 2013, for the very first time, people will spend more time with digital media than watching TV.
“Emarketer estimates more than 5.25 hours a day on digital services including mobile compared with 4.5 hours watching TV in the U.S.
“Facebook is well-positioned to benefit from this shift. In the United States, Facebook including Instagram, just one in eight minutes people spend on the desktop, but one in five minutes on mobile.
“According to comScore, Facebook and Instagram have more mobile time spent than many of the next largest services including YouTube, Pandora, Yahoo, Twitter, Pinterest, Tumblr, AOL, Snapchat and LinkedIn combined.
“Along with this engagement, we believe that we have the best mobile ad product with ads that are integrated unit into newsfeed for people who spend the most of their time on Facebook.”
This leads inevitably to the notion that where the eyeballs go the CMOs will follow - and the advertisers, says Sandberg:
“Today, mobile represents 12% of consumer media time, but it's still only 3% of ad budget. The second driver of our performance is an increasing number of marketers spending their ad dollars on Facebook.
“From brand to direct response, to local businesses to developers, more marketers are advertising on Facebook, because they recognize that our ads work to drive sales. This growth is taking place globally.”
A new area being explored now is advertising on Instagram via a pilot test with 10 advertisers to show ads in the Instagram feed. Sandberg explains:
“The Instagram ads right now are the pictures and videos which are exactly what people post on Instagram.
“If you look at the progress we have made with our news feed ads, those ads, those in the size, the shape. You know they got larger when they moved over from the right hand side, right hand column but they are also meant to be as exciting, as engaging as the content.
“We want our ads to be as good as the user shared content. Some of them are, a lot of them aren't. We have a lot of room to grow in improving that quality.”
Nice numbers overall. The mobile advertising numbers are encouraging as that’s the platform that needs cracking - and one that might enable the firm to hold on to the fickle teen audience that much longer.
But that teen demographic is guaranteed to be a talking point in the months to come, so by next quarter Facebook needs to get its messaging together on that to reassure Wall Street that the future isn’t MySpace…