Social networking giant Facebook reported growing quarterly earnings after the close of trading today, initially causing the company's stock to soar in strong after hours buying. At one point, the stock had climbed more than 15%.
Facebook's reported revenue was $2.02 billion (up 60% over last year) versus expectations of $1.91 billion. However, during the conference call the company's CFO, David Ebersman, admitted that Facebook usage among teenagers had begun to fall off. That news spooked investors and the stock erased all gains and actually fell slighting into the negative.
Why the harsh reaction? Well, teenagers are the canary in the coal mine for social networking sites. They are the most connected group of individuals and their tastes shape the direction of the larger market.
There was a time, not long ago, that MySpace dominated the globe. However, teenagers and college students began rapidly dumping the site in favor of rival Facebook. It didn't take long for MySpace to become an also-ran in the industry and a punchline for anyone trying to reference a suddenly "uncool" website.
A Piper Jaffray report on the evolving tastes of teenagers that released last week confirmed the trend. For the first time in the survey's relatively short 18-month history, Facebook was no longer the top choice for teenagers when asked what their most important social network was. In fact, the site had not only fallen behind Twitter, but it was tied with rapidly growing photo-sharing site Instagram.
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