Archived entries for Product

Slowing Growth in Facebook’s Mature Regions

In our earlier analyses, we observed that Facebook’s user base growth in North America region was outpaced by Facebook’s other regions, especially its emerging market regions Asia and rest of world. In fact, Facebook’s S-1 filing revealed to an extent that this was occurring. Based on the latest quarterly data, we can see that Facebook’s emerging market regions continue to outgrow its established markets on a sequential basis.

Facebook provides data about monthly active users (MAUs) and daily active users (DAUs). MAU data show that Facebook’s growth in North America has slowed substantially relative to growth in its other markets. At a reported 195 million monthly active users, Facebook continues to edge closer to market saturation in North America. As we can see, the growth rate has slowed to between 1% and 2% for the past three quarters.1

Facebook's monthly active users per region

According to its 10-Q, Europe region includes all users from Russia and Turkey. Europe region is therefore larger than North America; however, it shows simliar user base growth deceleration. According to Facebook, Europe region accounted for 269 million monthly active users. The region is still growing slightly faster than North America, showing 3% sequential growth. However, Europe region shows a maturation trend simliar to North America.

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Assessing Facebook’s Advertising Business

As we have come to expect, advertising continues to comprise the majority of Facebook’s revenue. According to the company’s 10-Q filing, advertising accounted for about 86% of Facebook’s revenue in the quarter. Its filings also continue to illustrate the extent to which seasonality affects the company’s advertising revenue. We can also observed the effect of Facebook’s mobile monetization effort, which resulted in about 43% revenue growth over the year ago quarter.1

Facebook generates its advertising revenue from delivery of click-based advertisements on its website and mobile products. According to its 10-Q filing, Facebook’s advertising revenue increased from $872 million in Q1 2012 to $1.245 billion in Q1 2013, a 43% increase in revenue. As the company notes, this was due to a 39% increase in the number of ads delivered to users, and a 3% increase in the average price per ad paid by advertisers over the year ago quarter.

Facebook's quarterly advertising revenue

We can attribute these increases in ads delivered and price paid per ad primarily to the introduction of News Feed advertisements on Facebook’s desktop product, and later on its mobile products. Concurrently, increases in monthly and daily user engagement allowed the company to deliver more ads to users in the quarter. Finally, Facebook’s decision to lower the market reserve price increased the number of click-based advertisements hired on the network.

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Facebook’s Mobile Platform Race

As we previously discussed, in its fourth quarter earnings slides, Facebook for the first time provided color on mobile only user base growth since Q4 2011. Growth in mobile only monthly active users rose to 157 million in the fourth quarter. While the emphasis on mobile only users represents a shift in Facebook’s focus, it is important to remember that Facebook’s mobile only emphasis really started with its purchase of Instagram on April 12, 2012.

It is instructive to contrast the user base growth of both platforms. While Instagram has provided sporadic updates on its user base growth, and it is unclear whether Instagram has reported monthly active users or total registrations, the chart shows that Instagram has been growing quickly, notably without the benefit of Facebook’s network effect on Instagram’s user base growth until at least its acquisition by Facebook at month 18 in the chart.

Facebook (mobile only) and Instagram User Growth

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Facebook’s Mobile Growth in the Fourth Quarter

With the release of Q4 2012 earnings, Facebook opted to release more data to color its mobile user base growth. Not only did the company released its latest mobile monthly active users, but for the first time Facebook also provided metrics for mobile only monthly active users (mobile MAUs), indicating a shift in the company’s focus toward mobile.1

Facebook’s monthly mobile active user base has been growing steadily since the company began providing metrics. Facebook saw 680 million mobile monthly active users in the quarter, an increase of 57% from the year-ago quarter. Although Facebook does not share quarterly mobile daily active users, the company indicated that mobile DAUs exceeded web-based DAUs for the first time in the company’s history.

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