The Average American Has This Many Facebook Friends: How Do You Compare?

By Markets Fool.com

Source: Facebook.

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Facebook is the leading social network in the world by a large margin. This is a crucial strategic advantage in an industry dominated by the network effect, meaning that a larger size makes the platform more valuable. In addition, management is doing a great job at monetizing the business. Let's take a look at a few important statistics and what they mean for investors in Facebook stock.

Facebook has a lot of friends
According to data from the Infinite Dial 2014 report by Edison Research and Triton Digital, 58% of Americans are on Facebook. The average American has 350 Facebook friends. Unsurprisingly, younger users generally have more connections. Those aged between 18-24 are the friendliest group when it comes to Facebook, with an average of 649 Facebook friends.

Americans are increasingly using different social networks, but Facebook is the dominant player by a wide margin. The report estimates that 19% of Americans over 12 years old have a LinkedIn account, 17% are on Google's Google+, and 16% use Twitter . Instagram, owned by Facebook, is another leading player in the sector, as 19% of Americans aged 12 and above have an Instagram account.

The network effect is a crucial source of competitive strength in the business. The platform becomes more valuable as it grows in size over time, since it provides the opportunity to interact with more users. Different networks have their own target audience and specific strengths, and some teenagers are reportedly turning away from Facebook because too many parents are using the platform. However, the general rule still applies for most users: The more, the merrier.

The social network created by Mark Zuckerberg has 1.39 billion monthly active users, growing 13% annually during the last quarter. If it were a country, Facebook would be as big as China. Also, engagement trends are quite encouraging -- the company has 890 million daily active users as of December 2014, a year-over-year increase of 18%. Daily users are growing at a faster rate than monthly ones, so engagement is trending in the right direction.

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By comparison, LinkedIn has 347 million members globally, and Twitter reported 288 monthly active users as of the end of 2014. Google has stopped providing statistics about the number of Google+ users, it had more than 300 million in October 2013, and it has been quite successful with Hangouts and other specific uses, but it has never really produced a lot of traction as a typical social network.

More friends and more money
Facebook may not be the trendiest social network around, but it's certainly the biggest. Not only that, but it is still growing at a respectable rate. This is a crucial competitive advantage in an industry in which size matters very much.

In addition, the company is doing a great job at monetizing the user base. Sales grew 49% year over year to $3.85 billion in the fourth quarter of 2014. Revenues are clearly outgrowing users, which is a great reflection on the company's ability to make more money per user.

Mobile advertising revenue accounted for 69% of total advertising revenue in the fourth quarter of 2014, versus only 53% of advertising revenue coming from mobile in the same quarter of 2013, so Facebook is firing on all cylinders in the much important mobile segment. Monthly mobile users jumped 26% year over year, to 1.19 billion as of Dec. 31, 2014.

Importantly, the average price per ad increased 335% in the last quarter, while total ad impressions declined 65%. Facebook is delivering growing sales and monetization by creating more valuable ads and reducing impressions. This is a big positive in terms of maximizing revenues while taking care of the user experience.

The business is remarkably profitable. Facebook produced an adjusted operating margin of 58% of revenues in the last quarter. Reinvestment needs should level-off as the company matures over time, so it wouldn't be a big surprise to see margins rising even more in the years ahead.

Facebook is the biggest and strongest social network around, which says a lot about the company's competitive strength and staying power. Management is also proving its ability to translate its opportunities into growing revenues and profits for investors, so investors have strong reasons to "like" the way things are going.

The article The Average American Has This Many Facebook Friends: How Do You Compare? originally appeared on Fool.com.

Andrs Cardenal owns shares of Google (A shares), Google (C shares), and LinkedIn. The Motley Fool recommends Facebook, Google (A shares), Google (C shares), LinkedIn, and Twitter. The Motley Fool owns shares of Facebook, Google (A shares), Google (C shares), LinkedIn, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.