Market Overview

Could Hollywood be the Death of Facebook?

Facebook (NASDAQ: FB) is easily the world's largest social network. With more than one billion users, it trounces Twitter by more than a few hundred million.

Nonetheless, the company has not had an easy road to profitability. While shares are up nearly two percent this afternoon, Facebook is still trading 25 percent lower than its debut price. The company continued to plummet after announcing its fourth quarter results, surprising some analysts.

Facebook has increased profitability while demonstrating that it has a long-term plan for the future. It may not be everything investors wanted, but it ensures the company will survive.

However, there are a few unexpected forces at work that could present some challenges going forward.

"Celebrities are increasingly using Twitter and moving away from Facebook," Trip Chowdhry, Managing Director of Equity Research at Global Equities Research, said in a note to investors today.

Actors and athletes may not be the only ones who have abandoned Facebook (or reduced their Facebook usage) for Twitter. According to the Associated Press, teens are slowly migrating to the 140-character format.

"Twitter is like a backstage pass to a concert," Jason Hennessey, CEO of marketing agency Everspark Interactive, told AP. "You could send a tweet to Justin Bieber 10 minutes before the concert, and there's a chance he might tweet you back."

If Twitter had come before Facebook, it might be the dominant social media site. While it may have to settle for second place, studies show that Twitter is doing very well. According to a September 2012 report by Statistic Brain, Twitter has already amassed 500 million users. Based on that figure, one could estimate that one out of every two Facebook users also have a Twitter account.

This is a significant jump from March 2011. Back then Twitter had just 175 million registered users, while Facebook had 600 million MAUs (monthly active users). Thus, Twitter appears to be growing at a faster rate than Facebook. It also seems to be encroaching on Facebook's territory by quickly closing the gap between users.

That said, it is wholly possible for both social networks to exist side-by-side. Unlike MySpace, which was overtaken by a superior social network, Twitter and Facebook do not have to be enemies. They are two drastically different versions of the same beast. More often than not, consumers want access to both.

In addition to the celebrity switch, Chowdhry said that WhatsApp is "gaining traction against Facebook."

"Social monetization is still in a very gradual progress mode," he added.

Follow me @LouisBedigianBZ

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