Right on cue, social-networking giant Facebook
Here's how Facebook continues upon its journey toward world domination.
Facebooking the world
We'll start with a little bit of housekeeping. In June, the company discovered a problem with how it was identifying the geographical location of its users in the first quarter, so the breakdown by region was inaccurate. This glitch didn't affect the total monthly average user, or MAU, tally, but merely its geographical composition. Facebook has since updated its digits, and the adjustments weren't major.
That said, the home turf of U.S. and Canada continues to see MAU growth slow, adding just 3 million users in the second quarter (after accommodating the aforementioned adjustments) to 186 million. That represents approximately 53% penetration of the estimated total combined population of around 350 million for the U.S. and Canada.
MAU growth in Europe also slowed, adding just 7 million European Facebookers. Instead, MAU growth is increasingly being generated from Asia and the rest of the world. Those two segments combined comprised more than four out of every five MAUs added during the quarter. Here's how Facebook has been growing its MAU base sequentially by region.
Source: SEC filings.
That implies that MAU growth in the U.S., Canada, and Europe is plateauing and potentially approaching saturation, while Asia and the rest of the world are lands of opportunity. Facebook specifically cited Brazil, India, and Indonesia as large contributors to MAU growth in the second quarter. Indeed, if you look at those populous countries, you'll see there are still plenty of potential Facebookers to be tapped.
Population (2011 Estimate)
|Brazil||54 million||196.7 million|
|India||59 million||1.24 billion|
|Indonesia||55 million||242.3 million|
Sources: Facebook 10-Q, World Bank.
The percentage of the MAU base that is active on a daily base, or DAUs, remained relatively unchanged, pointing to relatively flat levels of engagement. The U.S. and Canada unsurprisingly rank highest in this department, with about 70% of users on the site daily, compared with only half in Asia.
Show me the money
All those user metrics sound fine and dandy, but what about the dollars?
Overall average revenue per user, or ARPU, inched higher sequentially to $1.28. I keep a close eye on ARPU broken down into the advertising and payments segments across the different regions to get a better idea of each business' monetization around the world. Facebook doesn't disclose these ARPU figures specifically, but instead reports its overall ARPU by geography.
Advertising ARPU rose both sequentially and year over year in every geography, with the U.S. and Canada continuing to lead the way.
Sources: SEC filings, author's calculations.
Domestic ARPU rose meaningfully to $2.60, matching a prior high set two quarters ago. All geographies improved monetization, but you can see that there's still plenty of additional upside to be captured in other parts of the world. For example, rest of world ad ARPU was just $0.41, less than a sixth of the U.S. and Canada, and that segment has 44% more MAUs.
Search-giant and ad rival Google
Payments monetization was less consistent, with some regions seeing ARPU tick higher sequentially, and others lower. All geographical segments increased over a year ago, so the payments business is showing some improvement.
Sources: SEC filings, author's calculations.
One of these days
Sadly, Facebook has stopped reporting its "likes" and comments as a proxy for engagement, so those can no longer be considered Wall Street's newest metric. This is probably for the best, since investors tend to only like metrics that go up, and while important to measure engagement, it could potentially distract investors if this figure decreases, which may not have a direct impact on the top and bottom lines.
The stage is now set for Facebook to dominate the world, if it can nail down its monetization model in a sustainable way. International users are the majority of the MAU base, but international ad and payment ARPUs are but a fraction of their domestic counterparts. I still think it's too premature to buy shares, considering the inchoate business and lofty valuation, but Facebook is maturing, and it seems like every week it sees a fresh low.
One of these days, Facebook might just be a buy, but not yet.
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