Despite numerous reports that have documented in detail how the younger generation continues to leave the leading social network, Facebook Inc (NASDAQ:FB) continues to deny losing that user base. Even with the questions regarding losing the most coveted crowd in social network land, the biggest risk to a negative investment thesis has been the company’s ability to increasingly monetize its existing and slowly growing user base around the world.
Even though Facebook Inc (NASDAQ:FB) remains in denial over losing the attention of the valuable teen crowd, the stock might be destined for higher levels as investors continue buying it. The real concern for investors should be whether the declining interest by teens will actually impact the company’s results.
While Facebook Inc (NASDAQ:FB) is still gaining users around the world, the main benefit has been from adding to the monetization of existing users. Part of the gain is from better monetizing mobile, but the focus on better advertising tools has naturally led to higher ad levels. The question, though, is whether or not this increased focus will push away users, similar to what helped cause the demise of MySpace. This CNBC interview suggests that the teen crowd is already moving toward Twitter or other services due to more advertising on Facebook Inc (NASDAQ:FB).
As long as Facebook Inc (NASDAQ:FB) can continue squeezing more money out of existing users, revenue should continue increasing, even if the young users leave. As the slide from the Q2 earnings presentation below shows, the average revenue per user (ARPU) in Q2 2013 increased to $1.60 from $1.35 in the previous quarter and slightly topped the $1.54 record in Q4 2012.
Zuckerberg in denial?
For whatever reason, the data doesn’t back up the continued claims of Facebook Inc (NASDAQ:FB). Mark Zuckerberg made the following statements on the recent earnings call regarding the teen population that isn’t backed up by all other research studies:
One specific demographic I want to address is U.S. teens. There has been a lot of speculation reporting that fewer teens are using Facebook. But based on our data, that just isn’t true. It’s difficult to measure this perfectly, since some young people lied of their age. But based on the best data we have, we believe that we’re close to fully penetrated in the U.S. teen demographic for a while and the number of teens using Facebook on both a daily and monthly basis has been steady over the past year and half.