Facebook (NASDAQ: FB) is having a problem holding the attention of younger users in the United States.
Snap's (NYSE: SNAP) Snapchat is generally perceived as the main app capturing more time from younger millennials and the Gen Z set. CEO Evan Spiegel said users 25 and younger spent an average of more than 40 minutes per day on his company's app in the second quarter.
But in Pew's most recent survey on social media use, it found that the percentage of people between the ages of 18 and 24 who use Snapchat is actually slightly less than those who use Facebook. The only social app with more users in that demographic was YouTube, a subsidiary of Google, which is an Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) company.
In fact, YouTube is the most popular social app overall and across every age demographic.
YouTube may be more popular than television among the 18-to-25 cohort
Pew found that 94% of U.S. adults under 25 use YouTube. YouTube is often used as a substitute for television among younger users, who have ditched TV at a much more rapid pace than older viewers. Since 2011, the time Americans ages 18 to 24 spent watching television per week fell from 26.5 hours to 12.7 hours.
Meanwhile, the average YouTube viewer spends over an hour per day streaming video on mobile devices, and that number likely skews higher in younger demographics. On computers, viewership trends higher among younger Americans, with those aged 18 to 34 spent an average of 42 minutes per day on YouTube compared to 23 minutes for the entire adult population, according to data from comScore (NASDAQOTH: SCOR).
Not to mention the increasing amount of time people spend watching YouTube on television screens using streaming video players and game consoles. On Alphabet's fourth-quarter earnings call, Google CEO Sundar Pichai said, "We are seeing [YouTube] now grow well beyond mobile, especially in the living room."
The trend of young people in the U.S. spending more time watching YouTube is notable especially for advertisers who are increasingly looking for new outlets as television viewership and cable subscriptions decline.
YouTube presents one of the best digital substitutes, offering similar content and ad formats but with the benefits of digital targeting. The younger audiences that favor it are also coveted by brand advertisers, which means YouTube is poised to win a significant share of the $70 billion U.S. television ad market. One analyst believes it's already a $15 billion business.
Facebook and Snap are playing catch-up
Despite the large amount of time users spend with its app, Facebook's flagship platform is actually seeing a decline in monthly usage among 18- to 24-year-olds. The company is making several changes to its News Feed, which may also negatively impact use time. Instagram, however, continues to see strong and growing engagement among young adults, who use the app an average of 32 minutes per day.
Facebook's latest initiative to increase time spent on its platform and attract video ad dollars is its Watch platform. While it got off to a slow start, engagement is starting to increase: Over 40% of users in the U.S. click on the video tab on at least a weekly basis, according to a survey conducted by Morgan Stanley analysts.
Snapchat has recently seen engagement moderate. Leaked data revealed that the average time spent on the platform declined between August and September of last year. Additionally, Snap's quarterly reports showed that time spent on the app by users under 25 fell to over 30 minutes per day, down from over 40 minutes per day.
The company recently rolled out its redesigned app. In testing, management says it saw a 40% increase in users engaged with Discover -- the section of the app featuring professional publisher content. It also saw an increase in ad engagements. Snap's first-quarter results may provide a better idea of how the general public responds to the redesign.
Fighting for ad dollars
The broad appeal of YouTube, Facebook, and Snapchat among young Americans make them all likely to capture shares of the TV ad market going forward.
With a bigger audience than either Facebook or Snapchat among all age demographics, YouTube is best-positioned to win an advertiser's first dollar in their move from television to digital. What's more, as engagement of young people on YouTube climbs while it falls on Facebook, it stands to win an even larger share of ad budgets.
YouTube has a clear advantage over the competition with its bigger, more engaged audience and excellent targeting data. As such, it stands to win an outsize portion of new ad dollars coming to digital.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Levy owns shares of Alphabet (C shares) and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has the following options: short March 2018 $200 calls on Facebook and long March 2018 $170 puts on Facebook. The Motley Fool has a disclosure policy.