Facebook business model is based on hooking users on its feed, which is a highly personalised page, with an infinite scroll, where users find whatever kind of entertainment or connection they are looking for and companies can segment their markets, thus targeting potential customers for their products and services.
From ARPU to ARPP
The average revenue per user is a key metric that Facebook continuously monitors on all its products. This coupled with the monthly active users on the platforms help assess the level of engagement coupled with the ability of the company to monetise that engagement through it advertising machine.
However, Facebook has the so-called power users (those who engage more like super-fans or produce higher quality content like influencers) that drive the business.
In 2020, Facebook renamed its ARPU into ARPP (the user is finally called person to make it more human):
Mobile advertising turned in a cash cow
Facebook started to transition to mobile-first a few years back and that paid off. Today mobile advertising is Facebook‘s cash cow.
Most of its revenues come from there. What else? There is a specific product that turned the most successful so far.
Instagram is the core product
The successful transition to mobile-first for Facebook, as a company, was also successful thanks to a product that Facebook owns (Instagram) that is a native mobile players (Instagram was born as an App).
Therefore, most of the advertising revenues sold on the Facebook platform (comprising all its products) goes through Instagram.
North America is still the most important market
The most profitable advertising market for Facebook is North America. While Facebook expanded globally and Europe also represents a good chunk of its revenues, the average revenue per user in the US and Canada is much much higher compared to any other countries.
Of course, going forward, countries in the Asia and Pacific Area might also turn out to be extremely profitable in the next few years.
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