Forrester: Facebook Still Popular Among Teenagers

It seems that Facebook FB has still not lost its popularity among teenagers as supported by the results of a survey recently conducted by Forrester Research FORR.
    
The research firm had surveyed about 4,517 U.S. teenagers regarding their social media usage. Facebook emerged the winner with around 28.0% of the youth admitting to using its services all the time. Instagram came second followed by Snapchat, Twitter TWTR, Vine and Whatsapp.

Per the research report, an increase in smartphone usage in the near future will lead to more teenagers using the social network, since Facebook's mobile app happens to be one of the most popular globally.

Lack of privacy has been blamed for teenage fatigue issues related to Facebook. The company's CFO, David Ebersman publicly accepted that young people were abandoning the social media platform. A Ivy League report forecast that the services of Facebook would be extinct by 2017.  Even U.S. President Obama recently declared that Facebook was no longer popular with the younger generation.

In an effort to win back teenagers, Facebook has lowered the age restrictions, which prevented them from making their posts public. Additionally, the company acquired short-messaging app, Whatsapp, which is immensely popular among teenagers. Most recently, Facebook launched Slingshot app, which strongly resembles Snapchat, another popular app among teenagers.

We believe that these initiatives had a positive effect on teenagers who were abandoning Facebook for other social apps and the research report aptly reflects that. However, these surveys are based on samples and hence cannot be deemed conclusive. Further, we believe that the headwinds still persist, as the company's privacy policy continues to remain under public scrutiny.

Nonetheless, improving teenage user base is a positive for Facebook in the long run. We believe that the company's growing mobile user base (more than 1 billion), Instagram's increasing popularity (200 million users) and the new initiatives such as Internet.org will continue to boost share prices in 2014 and beyond.

However, as Facebook's ad business matures, top-line growth is expected to suffer. Facebook's rapid pace of acquisitions is also expected to weigh down on profitability and cash balance in the near term. Intensifying competition from the likes of Google (GOOGL) and Twitter remains a major concern.

Currently, Facebook has a Zacks Rank # 3 (Hold).