The ARPU, or average revenue per user, is a key metric to track the success of Facebook – now Meta – family of products. For instance, by the end of 2022, Meta’s ARPU worldwide was $10.86. While in US & Canada, it was $58.77; in Europe, it was $17.29; in Asia, $4.61 and in the rest of the world, it was $3.52.
Quick takeaways from Meta’s ARPU rates
While the family of products, part of Meta has a massive user base, which in 2021 reached over 2.91 monthly active users worldwide. When it comes to monetization and the advertising machine, it’s mostly skewed toward users from US & Canada.
Indeed, a user from US & Canada is monetized at an average of $60.57, compared say, an user in Asia, which rate is $4.89.
This is why it’s very important to keep looking at the growth and ability of Meta to monetize users in US & Canada.
While users across the world might be more important in the future (if the company is able to increase its monetization per user) its business model is still skewed toward North America.
Understanding the Meta business model
In the infographic above you can appreciate Facebook growth in ARPU over the years. ARPU or average revenue per user is a critical metric to understand how Facebook monetizes and has monetized its users over the years.
In fact, rather than becoming less relevant, advertising revenues in proportion to other monetization strategies have stayed stable, at over 97.4% of its total revenues.
In fact, Facebook, now called Meta generated $117.9 billion in revenues, in 2021, of which $114.9 billion from advertising (97.4% of the total revenues) and over $2.2 billion from Reality Labs (the augmented and virtual reality products arm).
Revenues from advertising, at least in 2021, seemed to be driven by mobile advertising, which contributed to most of Facebook revenues.
I took a long-term perspective on how the company has grown its monetization strategy over the years.
After an inflection in the first quarters of 2018 in the US & Canada, Facebook seems to be growing again by 2021, primarily in US/Canada and Europe, where indeed, Facebook might be simply monetizing its users by prompting more ads.
What, if any, can we notice from those numbers?
Facebook (shacky) business model
As Apple announced important privacy changes to the way users opt-in to advertising through their smartphones, this hasn’t shown yet on Meta financial statements of 2021. However, the company expect a large negative impact on revenues, in 2022.
This made the company change direction, and get restructured (see Meta Business Model).
In fact, where Apple and Google runs their own mobile marketplaces, Facebook doesn’t. And this is now affecting its whole business model. Going forward, Facebook will try to build its own supply chain of data (from hardware, to software, operating system and marketplace on top of which the brand is experienced by users).
Facebook acquired users by acquiring companies
In general, companies can execute several business strategies to keep growing their users’ base. In particular, Facebook has been acquiring other companies, when they were still in a startup mode; and paid them at a relatively low price (at hindsight) compared to what those companies have meant in terms of monetization strategy in these days.
For instance, Facebook owns several companies and products, some of them are:
Each of those companies has been critical in terms of Facebook ability to keep monetizing the data from its users.
In accordance with their respective terms of service and privacy policies. We may share information about you within our family of companies to facilitate, support and integrate their activities and improve our services.
Which means Facebook can better sell targeted ads to users, and monetize those ads by having marketers and companies pay for eyeballs.
For instance, when Facebook acquired Instagram for a billion dollars, it might have seemed too expensive, for a company that didn’t turn a dime.
While we don’t know for sure the breakdown of revenues coming from advertising on Instagram (Facebook doesn’t officially report it) it might be possible that Instagram has driven a good chunk of the revenue growth in the last years.
Facebook so far has made just the right acquisition at the right time to move to the next stage of the web.
That is also why it acquired Oculus (a VR device) and Masquerade (face tracking app that offers three-dimensional animations to users’ faces). We’ll see if those moves will turn out to be successful for the coming years.
Beware of power users
ARPU doesn’t capture what I would define power users (those that are worth the most to the platform based on how much they use it and engage with it). In short, Facebook might be described as a marketplace for attention, some users are just average, while a very few are power users and they do make a difference to the overall company’s strategy.
While Facebook doesn’t disclose the demographic of users that are worth the most, they might have internal metrics that help them navigate through their long-term strategy and how to keep those power users engaged.
Not all users are born equal
When you look at Facebook ARPU, one thing is clear; not all users are born equal. Users’ monetization primarily depends on ads budgets in each country.
It is clear that countries like the US and Canada have way higher ads budget, also given their higher GDP per capita, compared to other countries from Asia or Eastern Europe.
That is also why the ARPU for other geographical areas is way lower.
This brings us to the next point.
US & Canada are still the ones worth the most to Facebook yet its penetration might be well over
Facebook users for US & Canada have fluctuated around 241-242 monthly active users in 2018, a 1.2% increase compared to 2017. Yet its revenues have increased by 33% in the third quarter of 2018, compared to the third quarter of 2017.
That might be driven by increased budget in mobile advertising.
As of 2021, indeed, the monthy active users, in the main regions that make the core of Meta’s recenues mostly stagnated. With the US & Canada which between 2020-2021 stuck around 259-262 monthly active users.
For some context, annual worldwide ARPU in 2021 was $40.96 (increase of 28% from 2020). For 2021, ARPU increased by 40% in Rest of World, 35% in Europe, 31% in the United States & Canada, and 26% in Asia‑Pacific, as compared with 2020.
While the growth stalled in the main geographies, user growth was more rapid in geographies with relatively lower ARPU, such as Asia‑Pacific and Rest of World. This is where the future users’ growth will be substantial in the coming years, as western markets have reached almost saturation.
Data has a value in its own sake
Besides the $ value in terms of monetization, analyzing the data based only on the ARPU is quite limited.
Indeed, even though Facebook doesn’t yet make much money with its users outside US, Canada, and Western Europe, it still collects data, that makes the platform grow and become better and stronger over time.
While Facebook still faces operating costs of running its servers and platform in those countries, this cost is financed by other countries (like the US) that bring in revenues at a substantial margin for Facebook.
Facebook move into the Metaverse
Read: Facebook Metaverse Move.
- How Does Facebook Make Money?
- ARPU: This Is How Much You’re Worth To Facebook
- How Mobile Advertising Is Driving Facebook Growth
- How Much Is Facebook Really Worth To Users?
- The Advertising Economy: Inside Facebook Money-Making Machine
- Who Owns Facebook? Mark Zuckerberg Tech Empire
Resources for your business:
- Successful Types of Business Models You Need to Know
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
- How to Write a One-Page Business Plan
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- Amazon Business Model
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