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The Facebook ARPU Explained

ARPU, or average revenue per user, is a crucial metric for attention merchants like Facebook. It assesses the ability of the platform to monetize its users. For instance, by the end of 2023, Meta’s ARPU worldwide was $13.12. In the US & Canada, it was $68.44; in Europe, it was $23.14; in Asia-Pacific, $5.52; and in the rest of the world, it was $4.50.

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Understanding Facebook’s ARPU and why it’s so important to its business model

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.

ARPU, or average revenue per user, is a critical measure to assess Facebook’s ability to monetize its users. ARPU is given by total revenue in given geography during a given quarter, divided by the average of the number of monthly active users in the geography at the beginning and end of the quarter.

As specified on Facebook financials: “this is calculated by computing revenue by user geography based on our estimate of the geography in which ad impressions are delivered.“

Important Note: It is important to notice that, as reported on Facebook financials, “ARPU includes all sources of revenue; the number of MAUs used in this calculation only includes users of Facebook and Messenger as described in the definition of MAU above.” That means the metric might be biased in favor of Facebook, as it comprises all the sources of revenues (comprising Instagram and WhatsApp). This implies that in part the monetization ability of Facebook might also be due to the increase in revenues from other platforms such as WhatsApp and Instagram. We can’t know for sure as this is not broken down in Facebook financials. 

  • Successful Types of Business Models You Need to Know

Why ARPU is a critical metric for Facebook’s financial success

The critical business metrics Facebook tracks comprise:

  • Daily active users (DAUs): daily active users are defined by Facebook “as a registered Facebook user who logged in and visited Facebook through the website or a mobile device, or used the Messenger application (and is also a registered Facebook user), on a given day.“
  • Monthly active users (MAUs): monthly active users are defined by Facebook “as a registered Facebook user who logged in and visited Facebook through the website or a mobile device, or used the Messenger application (and is also a registered Facebook user), in the last 30 days as of the date of measurement.“
  • And average revenue per user (ARPU).

As an attention merchant, Facebook has to make sure to have its users to go back to the platform.

Indeed, attention harvesting and the ability to sell it back to advertisers and marketers is Facebook’s primary business model.

That is also why it is critical to monitor the ARPU to understand how its business model is evolving.

In 2021, Facebook’s ARPU was primarily driven in the US and Canada.

This means that Facebook primarily needs to monetize its users in the US and Canada.

How? In several ways. For instance, an increase in ad spending, a larger market base, and better engagement rates of users all affect the ARPU.

Warning: ARPU is not how much your data is worth

It is critical to remark that what Facebook can make of users in terms of monetization doesn’t represent the real value.

In other words, the value of users’ data might be way higher than what Facebook can generate via advertising.

Therefore, it is important not to confuse average revenue per user with the real value of the data behind users, which is another story!

In fact, in recent years, privacy concerns have led to a complete rehaul of user experience across various platforms. 

This, in turn, affects the overall Facebook business model. 

To understand how effective is the Facebook advertising machine compared to other digital advertising players. 

See the Pinterest’s ARPU: 

Comparing it to Facebook ARPU, you get a full picture:

In North America and worldwide, Facebook ARPU is almost 10x compared to Pinterest. 

Related Visual Stories

Who Owns Facebook

Facebook, rebranded as Meta in 2021, is primarily owned by Mark Zuckerberg, founder and CEO. Zuckerberg keeps tight control over the ownership and decision-making of the company. Other large individual shareholders comprise former COO Sheryl Sandberg and co-founder Eduardo Saverin. Large institutional investors include BlackRock, Vanguard, and Fidelity.

Facebook Business Model

Facebook, the main product of Meta is an attention merchant. As such, its algorithms condense the attention of over 2.91 billion monthly active users as of June 2021. 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). 

Facebook Revenue Breakdown

Facebook Revenues

Facebook Employees

Facebook Revenue Per Employee

In 2022, post layoffs, Facebook generated $1,535,056 per employee, compared to $1,638,586 in 2021.

Facebook MAU

Facebook ARPU

ARPU, or average revenue per user, is a key metric for attention merchants like Facebook. It assesses the ability of the platform to monetize its users. 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.

Facebook ARPU 2010-2022

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.

Facebook Profitability

Reality Labs

As of September 2022, Facebook, rebranded as Meta, is a profitable company, generating $18.54B in net profits. Yet, if we look at its Reality Labs segment, which is in charge of building the Metaverse, it recorded a net loss of $9.44 billion in the first nine months of 2022.

Facebook Organizational Structure

Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).

Instagram Business Model

Instagram makes money via visual advertising. Acquired by Facebook for a billion-dollar in 2012, today, Instagram is integrated into the overall Facebook (now rebranded as Meta) business strategy. In 2018, Instagram founders Kevin Systrom and Mike Krieger left the company as Facebook pushed toward tighter integration of the two platforms. In 2022, Instagram is the most successful product still, in Meta’s portfolio.

WhatsApp Business Model

Founded in 2009 by Brian Acton, Jan Koum WhatsApp is a messaging app acquired by Facebook in 2014 for $19B. In 2018 WhatsApp rolled out customers’ interaction services, starting to make money on slow responses from companies. And Facebook also announced conversations on WhatsApp prompted by Facebook Ads.



This post first appeared on FourWeekMBA, please read the originial post: here

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The Facebook ARPU Explained

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