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U.S. Users on Facebook the Smallest Group, Not Good For Profits

Facebook posted quarterly earnings today and dumped a load of data into analysts’ laps.

User numbers hit a new high, with 955 million worldwide visiting the site at least once a month. And earning are slightly above estimates, coming in at $1.18 billion in revenue and 32 percent year-over-year growth. Over half a billion are coming from mobile devices.

One of the most interesting slides in the company’s quarterly earnings release, however, is this one:

Just two years ago, the United States and Canada made up 30 percent of Facebook’s users. Fast-forward to today, and the percentage is a little bit different: under 20.

Not only has the percentage changed, but the growth rate is almost negligible: only about 35 percent user growth over 24 months for the world’s social utility. That compares to 170 percent growth in Facebook’s “rest-of-the-world” category, which includes Africa, and 165 percent growth in Asia.

Even stodgy old Europe has 63 percent growth.

On the one hand, this is expected and normal. North America has a limited population, about 350 million, of which Facebook has about a 53 percent penetration rate. That’s slightly up from about 50 percent at the end of 2011.

On the other hand … why are those missing 164 million people not on Facebook? It’s a question the company should ponder … particularly because US and European internet users are worth more to advertisers than any others. Internet users are valued at perhaps $1,200 to advertisers, with Facebook making about an annualized $5 as of the first quarter of this year, and Google collecting $20 per user per year.

But not all internet users.

Zambia’s average annual income is $1,600. In the Phillipines, a college professor might make $500 dollars a month. I don’t think Barney’s New York is banging down their doors to sell $5,000 Gucci bags. Not too many iPhones being sold in Cambodia.

The point?

As Facebook’s growth has transitioned largely to the developing world: Asia, Africa, Oceania … the average value to advertisers per user is going down. Just check another slide from the Facebook deck:

The biggest chunk of Facebook users — “rest of world,” at 268 million — accounts for the smallest slice of Facebook’s revenue, $113 million. In fact, if you do that math, you can find the average value to Facebook, per quarter, of each user:

  • US/Canada: $3.20
  • Europe: $1.43
  • Asia: $0.55
  • Rest of world: $0.44

The good news is, if this quarter is any indication, Facebook could be bringing in about $12 per US and Canadian user per year. But there’s also bad news … and that’s everywhere else.

Europe can probably be fixed with more time and attention than the US-centric Facebook has given it so far. Starting an office in London may help with that. But Asia? And the rest of the world? Those per-capita incomes aren’t coming up to U.S. standards any time real soon.

Source: Venture Beat, John Koetsier

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  1. […] for Q2 2012, its first earnings release since its IPO in May, and they were pretty …US Users on Facebook the Smallest Group, Not Good For ProfitsStaugnewsFacebook Struggles With Monetizing Its Mobile UsersForbesAnalysts Take A Closer Look At […]

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