When Facebook mentioned a slight drop in young US teen engagement during Q3 2013 earnings, its share price fell 18%, disintegrating well over $10 billion in value. So last quarter it said “in terms of teens we don’t have any new data to report” and $FB climbed 13% the next day on strong mobile ad performance. Now the question is whether Facebook will keep punting on the teen usage issue.
[Update 4/24/14 Noon PST: Facebood did in fact dodge the issue. None of the executives mentioned teens. And even more disappointingly, none of the analysts asked about it. Perhaps they feared retribution in the form of losing access to management. But whatever the cause, Facebook escaped without discussing the issue, and thanks to strong financial and user growth stats from the earnings report, it's share price opened up several dollars this morning.]
Surely it’s monitoring whether teens are fleeing, but it doesn’t necessarily have to disclose its findings. Critics have claimed Facebook is dying a quick and painful death amongst western teenagers, but Facebook and Mark Zuckerberg denied this until it discussed the small decrease in October 2013.
The issue is that teens may be slipping to more mobile-first social networks like Snapchat. Facebook’s answer has been to buy these competing apps, starting with Instagram. This earnings call will be the first since it spent $16 billion in cash and stock plus additional bonuses to buy WhatsApp, which is thought to be popular with kids. So Facebook may be able to point to its newly purchased international messaging app to prove it still has a strong grasp on the youth.
If Facebook does report a drop in teen usage, it could outweigh anything else about its earnings and drag down the share price. Analysts should ask if Facebook doesn’t volunteer the info. And if it stays mum on teens, sources in the ad industry say Facebook’s performance has been strong this quarter with advertisers shifting more of their spend to mobile, which Wall Street seems to like.
We’ll have live coverage of the Facebook earnings release around 12:45pm PST, and the earnings call at 2pm.
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