Facebook Inc (FB) stock has been humming along nicely in 2016, with shares up about 13% on the year. Considering the S&P 500 is up just 3.5% in that same time, I’d say that’s a pretty solid return.
But over the last year, FB stock’s performance is even more impressive, with shares roaring 45% higher while the S&P only gained a little over 1%.
Those gains come on the back of strong user growth, Facebook Video’s popularity and of course, soaring advertising and mobile revenues.
However, since much of FB’s rise is due to its status as the king of mobile, investors should be more than a little concerned that the time spent in Facebook’s app is declining across the globe.
FB Stock: Less Valuable With Fewer Eyeballs
The numbers come from a recent study by SimilarWeb, which compared app usage data from Q1 2015 to Q1 2016. It’s worth noting that the data only reflects Alphabet Inc‘s (GOOG, GOOGL) Android users, and not Apple Inc.‘s (AAPL) iOS users. But there’s no reason to think the data for iOS would be dramatically different.
The obvious problem for FB stock owners is that if users are spending less time on its app, they’re seeing fewer ad impressions, and, all things being equal, clicking through those ads less as well. The ability to hyper-focus ads is Facebook’s competitive advantage — but it only holds weight if users are actually seeing them.
The chart above offers a glance at what has some FB stock commentators wondering whether we’ve reached “Peak Facebook.” (By the way, it’s not clear by looking at the chart what the units on the y-axis are — they’re minutes per day of usage.)
When I first saw this chart, I thought the explanation would probably be pretty straightforward, and even wondered to myself whether it would have any effect on FB stock at all.
Users, I assumed, were probably flocking to other social media apps. I knew it wasn’t going to be Twitter Inc (TWTR), since Twitter’s anemic user growth has become the laughing stock of the industry and its stock price has cratered.
Snapchat and Instagram were the more likely culprits. And while Facebook shareholders wouldn’t want to see Snapchat taking away eyeballs, it wouldn’t be too much of a problem if Instagram were to blame, since FB actually owns Instagram.
It turns out, though, that all four of the leading social media apps — Facebook, Snapchat, Twitter and Instagram — saw a decline in time spent on their apps.
So Facebook isn’t alone … I guess that’s somewhat reassuring for FB stock owners. Also, Facebook’s use in the U.S. fell the least of all four apps, with Instagram use falling 36.2%, Twitter use falling 27.9%, Snapchat use off 19.2% and Facebook use stumbling just 6.7%.
At the end of the day, it’s tough to say what’s causing this secular decline, but I’d encourage FB stock owners not to get too caught up in these data. After all, Facebook’s first-quarter earnings were stupendous, so it says a lot that the company is still able to deliver such tremendous growth in an environment like this.
Rumors of Facebook’s death have been greatly exaggerated before, and until these rumors start materializing in quarterly results, I wouldn’t panic sell the 1.65 billion-user social network.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
