The network effect can provide a business with one of its most significant competitive advantages, and social media is the very essence of that effect -- the more users a site has, the more value it presents to new users, creating a virtuous cycle. According to We Are Social, there are 2.8 billion social-media users in 2017, with a global penetration rate of 37%. That's a 22% increase over last year.
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Two companies dominate this field. Facebook, Inc. (NASDAQ: FB) boasts four of the top 10 sites, while China's Tencent (NASDAQOTH: TCEHY) claims three spots. Here's a list of the most popular social-media networks in terms of monthly active users (MAUs) and in descending order.
10. Twitter: 328 million
Twitter, Inc. (NYSE: TWTR), the microblogging site known for its ubiquitous "tweets" and 140-character limit, has attempted to evolve beyond its humble beginnings. Twitter faced a number of challenges, including user harassment, falling revenue, and an overreliance on stock based compensation. Investors initially lost faith in the fledgling company, but it has come flying back over the past several months. Twitter used its deal with the NFL as a catalyst to highlight its push into live video, while working to eliminate abusive posts. User engagement is flourishing, and the company's daily active user count has increased in the each of the past four quarters, rising 7%, 11%, 14%, and up 12% in the most recent quarter. While revenue growth has been more elusive, it should eventually catch up as Twitter introduces new ad formats to entice advertisers.
9. Weibo: 340 million
SINA Corporation's (NASDAQ: SINA) Weibo is China's largest microblogging network and third largest social-media site. It was originally modeled after Twitter but has evolved into a more comprehensive platform, recently adding video and live streaming, which resonated with core users, moves that Twitter itself is making. In its most recent quarter, advertising revenue on Weibo grew 71% year over year, as advertisers flocked to the site. Small to medium enterprises and key accounts grew 86% and 79%, respectively. Short videos drove higher user engagement, as time spent per user increased. The platform has outgrown its inspiration, as Weibo saw user growth of 30% over the prior-year quarter.
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8. Qzone: 632 million
Chinese tech guru Tencent's Qzone is China's largest traditional social network. Users can post updates, store and send photos, watch videos, and listen to music. The platform makes money through in-platform purchases, subscriptions, and games. Members can customize their page with a variety of digital accessories for an additional cost. Premium "Canary Yellow Diamond" users have access to every service for no additional fee or at a discounted rate. There are many free and low-cost third-party games and apps available to members. However, its membership is declining, as users fell 3% year over year in the first quarter of 2017 and its user base has largely stagnated since 2013. Tencent's multiple social networks accounted for $1.8 billion of the company's $7.1 billion in revenue.
7. Instagram: 700 million
Instagram is a free online platform to capture, edit, and share photos and is one of a quartet of social-media sites belonging to Facebook. The service recently added a feature that allows users to augment photos with realistic digital enhancements. Instagram Stories, which lets users share photos and video that disappear after 24 hours, is a hit with users, sporting 250 million users per day. It is also a hit with advertisers -- with over 1 million thus far. While the company doesn't provide quarterly updates, the site added about 100 million new users, a 67% increase, just between January and April 2017. There is a clear opportunity here, as revealed in Piper Jaffray's spring 2017 "Taking Stock with Teens Report." More than 50% of U.S. teens surveyed revealed that Instagram was the preferred way for retailers and brands to communicate with them regarding new products or promotions.
6. QQ: 861 million
Text messaging via cell phones is still an expensive proposition in many countries outside the U.S., and short message service apps are the substitute of choice. Tencent's QQ made its debut in 1999 as a desktop messaging app and, until recently, was China's most popular instant-messaging service. It added online blogging and music functions as well as a variety of apps, online social games, and virtual products that gradually evolved into an ecosystem. For a monthly fee, users can subscribe to its prestigious VIP account and opt out of its ad-supported model. The service maintains a loyal but dwindling following. In the most recent quarter, QQ's users fell 2% over the prior-year quarter. Online advertising from all sources for the most recent quarter was $998 million of the company's total $7.1 billion in revenue.
5. WeChat (Weixin): 938 million
Tencent's WeChat is China's most popular mobile messaging app, having taken QQ's crown. Modeled after WhatsApp, WeChat can be used to send text, voice, and photos, as well as offering a curated news feed. The service is monetized through ads and online games. WeChat and Weixin are two versions of the same app, though Weixin -- which translates to "micro letter" -- can only be used by consumers in China. This censored version also contains access to much integrated, location-specific functionality not available on the users outside China, such as ride hailing, flight check-in, and food delivery. Its user base grew 23% year over year in its most recent quarter, and Tencent's online games segment contributed $3.3 billion of the company's total $7.1 billion in revenue.
4. Facebook Messenger: 1.2 billion
Facebook created Messenger, its organic messaging app, in response to WhatsApp before ultimately acquiring WhatsApp in 2014. While both can send messages, photos, and video, Messenger is integrated into the main Facebook account, so private chats with your Facebook friends is a breeze. Facebook will also tag all your friends in those group photos using its built-in AI-based facial recognition and offers more innovative photo-editing features allowing you to add text, filters, and stickers to the photos you send with Messenger. While the company doesn't provide regular user updates, you should have no problem finding people you know there, as the app passed 1.2 billion MAUs in April 2017.
3. WhatsApp: 1.3 billion
WhatsApp, now owned by Facebook, is the world's most popular instant messaging app, which also makes it the most popular smartphone app of any kind worldwide. In its early days, texting was extremely popular, but it also came with expensive data charges. WhatsApp's was the inexpensive alternative, providing low-cost annual subscriptions for as little as a dollar. It also provided end-to-end encryption, so any messages between users remained private. When it was acquired in February 2014, the service already had 450 million MAUs, but that number has grown to 1.3 billion monthly and 1 billion daily active users. Those users sent 55 billion messages and shared 4.5 billion photos and 1 billion videos each day. Facebook has only just begun to monetize the platform, which should provide significant upside in the future.
2. YouTube: 1.5 billion
You may think of Alphabet Inc.'s (NASDAQ: GOOGL) (NASDAQ: GOOG) YouTube as more of a place to find awesome cat videos, but it also features many of the same elements that characterize social-media networks -- user-generated content, messaging, and community-based comments and sharing. At this year's VidCon, YouTube revealed that its 1.5 billion logged-in users are watching on average an hour of YouTube videos every day, making it the most popular destination for online video globally. YouTube is particularly popular among teens and young millennials. Piper Jaffray's spring 2017 "Taking Stock with Teens Report" indicated that 26% of U.S. teens surveyed reported using the site daily.
1. Facebook: 2.01 billion
You can't talk social media without a nod the 800-pound gorilla in the room -- Facebook, the undisputed king of social networks in terms of sheer numbers. In its most recent quarter, Facebook had 2.01 billion MAUs, a 17% year-over-year increase, with 1.32 billion using the site daily. Facebook is the definition of the network effect -- the more people join, the more value it has to users. It has parlayed that advantage into $9.16 billion in advertising revenue from its multiple sites in the most recent quarter, up 47% over the prior year quarter.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares) and Facebook. Danny Vena has the following options: long January 2018 $640 calls on Alphabet (C shares) and short January 2018 $650 calls on Alphabet (C shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, and Twitter. The Motley Fool recommends Sina. The Motley Fool has a disclosure policy.