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The Disparity Between User Growth and Revenue in Emerging Markets

In addition to its earnings, Facebook provided details of its regional user base numbers, as well as average revenue per user (ARPU) by region. Predictably, Facebook claims that its highest user growth regions are Asia and rest of world. However, Facebook’s data also demonstrates a disparity between user growth and ARPU in these regions. While user growth continues to rise, outpacing its other regions, revenue in these regions remains low.

Over the past nine quarters, Facebook’s monthly active users in Asia has increased 166% from 96 million to 255 million in the second quarter 2012. Asia region daily active users increased 187% over the past nine quarters, from 45 million to 129 million. Rest of world region shows similar growth trends: monthly active users increased 173% (98 million to 268 million), while daily active users increased 231% (42 million to 139 million).1

While Facebook shows a consistent increase in user base in Asia and rest of world during the last nine quarters, ARPU has grown less consistently. During the second and third quarter 2010, Facebook generated $0.36 per user in Asia. At its height, the company earned $0.56 per user; however, during the first quarter 2012 Facebook earned only $0.53 per user, and during the second quarter 2012, that number increased only slightly to $0.55 per user.

Facebook's Asia region ARPU

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Facebook’s Advertising Revenue in Q2 2012

Facebook offers a four-pronged approach to advertising: it delivers to advertisers reach, relevance, social context, and engagement. The majority of Facebook’s revenue is derived from its advertising products; this trend continued in the second quarter 2012.

Facebook generates revenue primarily from advertising products on its desktop website. It leverages its 955 million monthly active users, and allows advertisers to target its user base by age, location, gender, or interests, which are shown either directly or through relationships with advertising agencies. Costs are measured by impressions delivered or the number of clicks by users.

In the second quarter 2012, Facebook reported $922 million in revenue. This represents 84% of Facebook’s total revenue for the quarter, and a 28% increase from the second quarter 2011.1 While Facebook’s revenue is down slightly from the September 2011 quarter, it is perhaps too early to predict advertising revenue growth.

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Continuance - Facebook Analysis by . @jonmilani. Copyright © 2017. All rights reserved. Hosted by (mt) Media Temple.