Facebook 'Isn't Cool,' and That’s Actually OK

Facebook CEO Mark Zuckerberg.
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Facebook may not be cool anymore, but that could be a good thing.

In the earnings that Facebook reported after the bell Tuesday, the company reported that the number of users continues to grow. Facebook has more than 1.1 billion monthly active users, and 60 percent of them use the site every day—the highest percentage ever reported.

Facebook is still doing a good job of monetizing those users, too: It made $1.35 per user in the first quarter. Though that's a drop from the seasonally strong fourth quarter, worldwide revenue per user in the first quarter was up 14 cents year-over-year.

Overall, Facebook earned $0.12 per share in the first quarter, a penny shy of estimates, on $1.46 billion of revenue. The best news came from mobile, where ad revenue grew faster than expected, so that mobile now generates 30 percent of the company's advertising dollars.

(Read More: Facebook Makes Mobile Money, Though Earnings Miss by a Penny)

If people continue to sign up for Facebook, a higher proportion of overall users sign in every day and advertisers still pay to reach those users—doesn't that say something?

"Facebook isn't cool," said Lou Kerner, founder of the Social Internet Fund. "It's like that old Yogi Berra line about a restaurant, 'Nobody goes there anymore, it's too crowded.' "

But that doesn't trouble Kerner. "The water company isn't cool, but a lot of people I know get a lot of water from the water company," he said. "Not because it's cool but because it gives utility. And Facebook is the one place on the planet where everybody is connected."

Facebook users seem to talk about the social network not as something that lends cachet or that is particularly enjoyable, but as a necessary tool.

(Read More: Cramer: Facebook Has 'Figured Out' Mobile Advertising)

One Facebooker, who estimates that she was among "the first few hundred" on the site when it was confined to Harvard, said Facebook doesn't give her what it did in 2004. "Before, it was much more important to me, but it's become overexposed," she said. "Now the site is all about advertising."

But the user, now a graduate student at Yale, can't break away. "I've thought about deactivating, but I have family who live far away," she said. "It's the best way to stay in touch with people."

Though she has been using Facebook for a much shorter time, one 15-year-old said she viewed Facebook similarly.

"I personally use Facebook to look at what friends are up to that I don't talk to a lot, and to upload pictures," said Julie Schwartzberg, a sophomore at Scarsdale High School. "But I don't think Facebook is as cool as Twitter or Instagram."

Of course, given that Facebook bought Instagram for a billion dollars in April 2012, a shift by younger people to the photo-sharing site should not be too much of a worry.

"It was a really smart move for them to buy Instagram," said Gene Munster, who covers Facebook for Piper Jaffray. "You've got to be pretty nimble in this space, and you can't just buy the flavor of the day. They have to be disciplined in what they do."

Acquisitions of social networks with staying power will be important for Facebook, Munster said.

A study he did showed that while 42 percent of teens called Facebook their No. 1 website in September 2012, that had dropped to 33 percent six months later. "That's concerning," Munster said. "Even while their engagement numbers are up, the bigger theme is: How are they going to maintain their relevancy?"

But Facebook can remain relevant if it continues to do what it has been doing, including making smart deals, Munster said . He gives the company an overweight rating, with a $38 price target.

"Some care about cool, and others don't," said Jordan Rohan, who covers Facebook for Stifel Nicolaus and has a hold rating on stock.

"There are segments of the population that are more fashion-sensitive and have already moved on. ... They may still use Facebook, maybe even daily, but they might use other platforms as well," Rohan said. "But there are other segments of the population where Facebook is the only social vehicle. I think of my mother, who's almost 70. She's not using Snapchat, she's not even using LinkedIn. She's not using anything else but Facebook."

Kerner, who was Wall Street's first social media analyst, said Facebook has carved out a profitable role for itself that has nothing to do with any "cool factor."

"You can't be everything to everybody," he said. "You can't be the cool kid on the block forever, but you want to evolve from the cool kid to the utility. And Facebook has done that remarkably well."

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