Facebook Vs Twitter : Which Is The Better Investment?

  • Facebook is ahead of Twitter on most financial parameters.
  • Facebook's user base and mobile adoption is better than that of Twitter's.
  • Profitability and better valuations make Facebook the out and out winner.

Given that social networks promise to be the future of digital media and personal communication, it’s no wonder they attract such a great amount of interest from investors. Today, Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) are arguably two of the biggest social media networks globally, but which one makes for a better investment? In this post, we’ll compare the two social media biggies on the basis of their market share of global ad spends, their user growth, mobile adoption rates and user monetization. You can see our Facebook stock analysis and Twitter stock analysis videos for a quick roundup of their fundamentals post their latest earnings.

Facebook and Twitter are different in more ways than one. While Facebook is a private network which focuses more on personal communication and sharing, Twitter, with its mobile friendly platform, is a more public platform which serves as window to instant updates and the opportunity to follow your favorite influencers.

However, a look at how Facebook and Twitter generate revenue shows you how similar their revenue models are. Both social networks earn bulk of their revenue from advertising, and compete for the same advertising Dollars. So, let’s begin this comparison by looking at their shares of global Advertising spends.

Trivia: Facebook is gaining on Google in the online advertising space. While Google is still way ahead of Facebook in terms of total share of digital ad spends, Facebook's share is growing, while Google's share is estimated to be falling. See our latest Google Facebook comparison to see which stock we like better.

Facebook vs Twitter : Share of Global Ad Spends

eMarketer estimates that net revenues from digital advertising totaled to $146 billion in 2014. Of this, the research company reckons, Facebook pocketed 7.75%, representing the second highest grab after Google’s towering share of over 30%.

Twitter on the other hand is estimated to have accounted for only 0.84% of global ad spends during the year.

On mobile platforms, Facebook maintains its no. 2 position with 18.4% share of global ad spends. Twitter moves up a few notches to occupy the 5th position with 2.6% of digital ad spends globally.

Facebook certainly attracts a much bigger chunk of digital ad spends globally, and here’s why. The answer lies in the vastly different user base and engagement on the two platforms.

Facebook vs Twitter : User Base & Adoption on Mobile

At the close of 2014, Facebook had a Monthly Active User (MAU) base of 1.39 billion users as opposed to Twitter’s 288 million users.

As the shift from desktop to mobile internet usage hastens, adoption of platforms among mobile users has become more critical than ever before.

Facebook not only has a larger user base but also has a greater adoption rate on mobile. In the last quarter of 2014, 86% of Facebook’s monthly active users accessed the social media site on mobile devices. During the same period, about 80% of Twitter users accessed the microblogging site on mobile.

Clearly, Facebook is way ahead of Twitter, both in terms of its user base, as well as its mobile adoption rate. This is of course, not taking into account Facebook’s large eco system of mobile properties like Whatsapp and Instagram. Now, to see how both these companies actually leverage their user base to earn revenue.

Facebook vs Twitter : User Monetization

Based on the latest quarterly numbers for both social media companies, Facebook generated $2.8 in revenue per user, as against Twitter’s $1.7. The difference might not seem to be very large at first, but consider Facebook’s humongous user base and it becomes apparent why there’s such a huge difference between the two platforms, in terms of their money making abilities.

When it comes to monetization of users on mobile devices, Twitter does a better job, driven also by the intrinsic nature of microblogging sites which make them easier to use on smaller screens.

In the last quarter of 2014, about 88% of Twitter’s ad revenue was generated on mobile, in contrast to Facebook’s 69%. Twitter evidently has an edge over Facebook on this metric. However, being saddled with a much smaller user base, it is unable to leverage this advantage, at the moment at least.

Facebook vs Twitter : Summing It Up

Twitter has often been billed as a budding Facebook. There are of course voices that dispute such a possibility, and those voices have grown stronger as Twitter’s user growth has failed to appease investors.

As is evident form the comparison of financial and non-financial metrics, Facebook is well ahead of Twitter on most counts. A detailed Facebook stock analysis highlights its significantly better profitability and comparatively more attractive valuations, making it worth considering over Twitter as an investment option.

Some of the world’s wealthiest and most influential personalities like Warren Buffett, Bill Gates and even president Obama use Twitter, but that doesn’t necessarily make it a great stock to invest in.

Vikram Nagarkar Vikram Nagarkar   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

Buying and selling of securities carries the risk of monetary losses.Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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