Why the youth market matters for Snapchat and Facebook, despite what the WSJ thinks

Ever since the Wall Street Journal wrote about the rumors that Snapchat turned down a $3-billion acquisition offer from Facebook (s fb), technology and media pundits of all stripes have been busy trying to argue that the offer was a) totally justified or b) completely insane. In both arguments, the desires of teen and twenty-something users play a big role — either because they are seen as hugely valuable or because they are seen as being over-valued.

Journal tech writer Farhad Manjoo appears to fall directly into the latter camp, judging by a piece he wrote on the weekend about the alleged Snapchat deal, under the headline “Snap Out of It: Kids Aren’t Reliable Tech Predictors.” Manjoo, who recently joined the Journal from Slate, argues that younger users are a poor barometer for value in technology, because they are often wrong about what is going to be “the next big thing.” As he puts it in his piece:

“I believe the children aren’t our future. Teach them well, but when it comes to determining the next big thing in tech, let’s not fall victim to the ridiculous idea that they lead the way.”

Younger users get the overall trends right

Man with two mobile phones smartphones

Is the idea that younger users lead the way in tech really ridiculous? I don’t think so. Just the opposite, in fact. While Manjoo may be trying hard to be deliberately contrarian, in order to counter what he feels is an overwhelming orientation towards younger users in the technology sector, in the process I think he misses the point. And by doing so, he misses out on why appealing to teens and twenty-somethings is so important to companies like Facebook or Twitter (s twtr), and will continue to be.

Manjoo argues that young users don’t always discover — or aren’t that important to — the beginnings of new technology developments, and to prove it he lists everything from the iPhone (s aapl), iPod and Kindle (s amzn) to YouTube (s goog), Twitter and LinkedIn (s lnkd). And he argues that some of the things they do adopt in large numbers turn out to not be all that important in the longer term, such as MySpace (s nws).

In making his argument, Manjoo conflates a number of things and confuses others. For one thing, the reason young users weren’t among the early adopters of the iPhone likely had more to do with money than a lack of desire or interest in the technology — and the same goes for the Kindle and other things on Manjoo’s list (the criticism that young users weren’t among the early adopters of LinkedIn is so ridiculous it’s not even worth addressing here).

As for MySpace, blogging and Twitter, while it may be true that MySpace flamed out in spectacular fashion, that’s not because younger users somehow “got it wrong” when they adopted the platform in large numbers. In the end, MySpace’s decline was a decline at the corporate level, not a signal that the technology or the market need wasn’t there — in fact, it was there, as Facebook’s massive early success with teens and twenty-somethings demonstrated in spades.

Facebook is right to be worried


If it was true that teens and twenty-somethings aren’t reliable tech predictors and/or aren’t that valuable as users, then Facebook’s share price wouldn’t have plummeted like a rock when a senior executive admitted recently that the social network had seen a decline in usage by younger users. And the reason why all of this matters to the company and to investors was aptly summed by by Amazon CEO Jeff Bezos in a comment originally directed at newspaper companies, after he bought the Washington Post:

“All businesses need to be young forever. If your customer base ages with you, you’re Woolworth’s.”

In a way, critics like Manjoo are conflating two separate questions. One is whether Snapchat is worth more than $3 billion — to Facebook or anyone else — and the other is whether young users are a reliable barometer of what is important in technology. I wouldn’t claim to have an answer to the first of those questions, because predicting tech valuations is a lot like predicting the weather: even the best are wrong almost as often as they are right.

But I would argue that the answer to the second question is clearly yes: teens and twenty-somethings are good predictors of technology’s future, even if the services or apps or hardware they prefer at a specific point in time don’t become a “winner” in market terms. And that’s why companies like Facebook — and investors who hold shares in them — should be concerned when they see younger users dropping off or adopting other services.

Post and thumbnail photos courtesy of Shutterstock / Stanislav Komogorov, as well as Albert Chau