The social network isn't as hip with the cool kids as it would like to be. Thank goodness Facebook has a lifeline in Instagram.
Facebook's teen users are switching their attention to other applications, the company warned in the risks section of its 10-K annual report, which was filed today with the Securities and Exchange Commission. The legal disclosure, included below, marks the first time Facebook has felt the need to share the youths-are-fleeing message with the public.
We believe that some of our users, particularly our younger users, are aware of and actively engaging with other products and services similar to, or as a substitute for, Facebook. For example, we believe that some of our users have reduced their engagement with Facebook in favor of increased engagement with other products and services such as Instagram.Facebook declined to define the exact age range of the "younger users" group it identified in the 10-K document.
The new disclosure is a reversal from statements the company made in its prospectus prior to going public. At the time, the social network was extremely optimistic about its Generation-Y appeal.
On May 16, Facebook said: "We also believe that younger users have higher levels of engagement with the web and mobile devices in general and with Facebook specifically."
Before you conclude that Facebook is dead, do keep in mind that risk factors identified in these types of documents are meant to cover every potential threat under the sun. Still, the first-time disclosure is disconcerting. Facebook needs Gen Y users to stay hip as it approaches senior status in social-networking land. Should the company witness an exodus of teen users and attention, Facebook will most certainly lose relevance as up-and-comping services -- Snapchat perhaps -- steal its thunder.
Thankfully, Facebook has an immediate lifeline in its Instagram service, which was identified in the 10-K as one of the places where today's youth are spending more of their time.