Who said there was no such thing as a money tree? Facebook has 2.3 billion of them. While it’s no secret Facebook makes a lot of money, the staggering growth of Facebook’s revenue doesn’t get the attention it deserves. Especially when Facebook’s user base only grew in the single-digits this year.
In 2018, Facebook’s monthly and daily active users both grew by 9%. Facebook’s revenue on the other hand grew by 37%, which is 311% faster growth than their active user base. To fully appreciate Facebook’s revenue growth, it helps to look at Facebook from a new perspective.
Facebook Average Revenue Per User
Check out this chart I made of Facebook’s ARPU growth over the last 8 years:
The first obvious note is that Facebook’s S-Curve is showing no signs of slowing down. Every single geographic segment Facebook reports has grown in revenue each of the last 8 years. Facebook’s ARPU globally is $25 per year, while companies like Twitter and Snap have ARPU figures of $9 and $6 respectively*.
But that’s not the most interesting part to me. Look at the blue line, which shows Facebook’s North American ARPU.
Facebook is making $112 per year on the average North American monthly active user.
That’s nuts, and based on past growth, their North American ARPU could approach $150 per year in 2019. Many avid Facebook users are contributing far more revenue than the chart above shows, keep in mind that it depicts averages among monthly active users.
Pay for Facebook? You Couldn’t Afford It
In 2018, Facebook made as much money from each North American user as Amazon did from Amazon Prime memberships – and Prime users actually had to fork over $100+. Facebook makes all their money off you without you even opening up your wallet. For better or for worse, that’s incredibly powerful.
Even Netflix’s ARPU was eclipsed by Facebook in Q4 2018. Netflix makes $30 per user every quarter (since their subscriptions are ~$10 per month), while each Facebook user in North America made the company $35.
While Netflix price hikes are bounded by the amount of money its users can afford to pay, Facebook’s revenue per user continues to grow by leaps and bounds. There is no arbitrary limit to what advertisers can afford to pay Facebook.
Advertisers aren’t limited by ad budgets if their ad budgets continue to generate positive ROI. They keep buying ads until returns dry up. As long as Facebook delivers more relevant ads, advertisers will deliver more money for exposure.
While $112 per user seems like a lot of revenue for Facebook, there’s no reason Facebook couldn’t 10x their ARPU in a few more years. Better ad targeting = more revenue per user. That’s Facebook’s equation for success.
* Snap actually reports ARPU based on Daily Active Users, while Facebook and Twitter have both used Monthly Active Users, so Snap’s ARPU based on monthly active users was much lower than $6 in 2018.