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> 8% YoY user growth and 46% YoY revenue growth Curious how well understood the mechanics are of this. I've been fascinated by how clever the whole model works
by jjmorrison 5y ago
> 8% YoY user growth and 46% YoY revenue growth
Curious how well understood the mechanics are of this. I've been fascinated by how clever the whole model works. They know revenue growth needs to outpace their ability to increase available ad space (so user growth or attention growth). So they are heavily reliant on data to improve ad targeting so they can drive more conversion per ad impression.
The power of the ad auction model is that 100% of the improved efficiency of ad targeting is translated to revenue for Facebook. Advertisers will pay $X for a conversion in their ROI calculations - so Facebook will get the maximum amount the market will pay a certain for a given conversion. Advertisers are actually a little worst off as targeting gets better - the conversion cost stays the same and the number of impressions goes down.
To keep growing revenue at this pace, Facebook needs to continually feed the beast with better and better data so they can squeeze more and more conversions out of their existing ad space.
The only other two ways to grow revenue is more users and more time from users. Which is getting tougher and tougher. That's why this Apple fight is so important to Facebook - it's really their lifeblood right now.
- cm2012 5y agoExactly this. FB ad targeting is revolutionary for companies to match with prospective users. I've managed 50m+ in FB spend, getting start-ups in front of some really niche audiences, and nothing compares to the FB algo.
- ah88 5y agoThey have been focusing on selling other products besides ads so curious how much of that revenue growth is from ads vs other products.
- jjmorrison 5y agoNot sure if the breakdown is exact but financials say $25B in ads, and $700M in "other"
- sanxiyn 5y agoIt's all there in financial statement. It's all ads.
- bigzyg33k 5y agoThey mention this in the earnings report Advertising accounted for $25.4 Billion of their revenue, up from $17.4 Billion in the same quarter last year, an increase of 46% Revenue from other sources was $732 Million, up from $297 million in the same quarter last year, an increase of 146%
- wsetchell 5y agoIncreased signal (e.g. more or different data) is one of the many levers to increase ad value. Without changing signals you can still make meaningful long term progress through ranking, delivery, and format improvements.
- jjmorrison 5y agoTrue. They do seem quite obsessed with slurping more data. i wonder how much it would hurt them in the long term if they couldn't get more.
- ethbr0 5y agoBecause they'll push for regulations to only regulate data collection, grandfathering in possession of existing sets.
- randomsearch 5y agoIt’s odd that their DAU are increasing, because at least in the western countries I’m aware of, young people don’t use Facebook much. So I’d expect a gentle decline over time. Where is the growth coming from?
- nerfhammer 5y agoyoung people use instagram constantly
- randomsearch 5y agoI thought those stats were for Facebook, no?
- babelfish 5y agoThe majority of humans do not live in western countries
- randomsearch 5y agoAre you saying young people in non-western countries think facebook is cool?
- babelfish 5y agoYes, check out this report: https://www.statista.com/statistics/268136/top-15-countries-based-on-number-of-facebook-users/#:~:text=There%20are%20over%20290%20million,terms%20of%20largest%20population%20worldwide https://www.statista.com/statistics/268136/top-15-countries-....
- randomsearch 5y agoI don't see any data by age there. I searched around the site a bit. What we need is facebook use by age for western and other countries, e.g. USA vs India. I can't see that. I don't debate that countries like India have large Facebook usage, but the question I asked was - is there growth coming from the young users in countries like India? Because that goes against my experience, albeit limited to Western countries. If it's coming from young users in India and similar countries, that's really interesting to me because it shows that teenage trends are not as universal as I'd expect. If that's not the case, then where is the growth coming from? Genuine question (unsure why downvoted) and want to get to the bottom of it.