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Facebook's average revenue per user (ARPU) is ~$10/quarter[0], and 6x that in the US. Which is honestly kind of stunning. Reddit is presumably much less than th

by yojo 3y ago

Facebook's average revenue per user (ARPU) is ~$10/quarter[0], and 6x that in the US. Which is honestly kind of stunning. Reddit is presumably much less than that, but they might be reasonably gunning for a number better than Pinterest, with an ARPU of ~$1.50[1]. To put the pricing post into the same context, we're talking $7.50 per Apollo user/quarter, which is closer to what Facebook makes per user than Pinterest. That said, presumably 3rd party client users are especially active and would skew higher ARPU than the average Redditor, and it wouldn't surprise me if they were more likely to live in developed countries. I dunno. I started running the numbers expecting to be outraged, but the cost doesn't seem crazy far from what Reddit could conceivably hope to earn off these users. I doubt Reddit is monetizing anywhere near that well right now, but if they're pricing the API in a forward-looking way, rather than planning to ratchet it up every quarter inline with monetization efforts, it could make sense. 0: https://www.statista.com/statistics/251328/facebooks-average-revenue-per-user-by-region/ https://www.statista.com/statistics/251328/facebooks-average... 1: https://www.statista.com/statistics/995251/pinterest-quarterly-revenue-per-user-arpu-region/ https://www.statista.com/statistics/995251/pinterest-quarter...

donmcronald 3y ago
> Facebook's average revenue per user (ARPU) is ~$10/quarter[0], and 6x that in the US. Can someone explain this to me? Why is it so high? Even if every single person on Facebook buys a product because of ads once per year, doesn't that mean companies are paying $240 to acquire a customer in the US? Is it worth that? My first though was that maybe 1% of users buy something in a given year, but that's $24k to acquire a customer and is so far from reality that my perspective must be way off.
- treis 3y ago
  Our CAC is higher than $240. Lots of services are. When you start thinking about a customer being worth multiples of their revenue (not even profit) it makes a lot of sense. Also, online advertising can lead to in store sales. When you look at those dollars people spend a couple orders of magnitude more than $240 on stuff every year.
- tivert 3y ago
  >> Facebook's average revenue per user (ARPU) is ~$10/quarter[0], and 6x that in the US. > Can someone explain this to me? Why is it so high? Even if every single person on Facebook buys a product because of ads once per year, doesn't that mean companies are paying $240 to acquire a customer in the US? Is it worth that? 1. I wouldn't be surprised if lots of businesses lose money on their Facebook ads, but either don't realize it or Facebook has enough churn that it doesn't matter if the quit (e.g. a revolving door of unsophisticated local businesses spending money on Facebook because it's the biggest game in town). 2. A lot of advertising is broad "brand awareness," and I imagine it's actually very hard to determine if it's actually working in many cases.
- waboremo 3y ago
  Meta's reach is gigantic, their data is detailed and expansive. You're actually paying less on average when spending on Meta platforms than you are elsewhere, and likely getting more back. This is why companies are comfortable with throwing an ad campaign on Meta platforms just to get email signups, there was a blog on Shopify where a smaller company talked about spending $5000 for a newsletter ad, and per new subscriber they only spent $1.50 on the ad campaign. Even though technically they've really lost money on such a situation, they feel comfortable doing it again on calculations for future revenue.
- spacebanana7 3y ago
  Not quite $240, but Netflix apparently spends about $100 for customer acquisition [1] (data is a few years old). I imagine the other streaming sites have similar unit economics. In consumer finance, CACs are even higher. For standard credit cards it’s around $200 but can be over $1000 for premium cards. [1] https://www.fool.com/investing/2018/01/23/netflixs-83-million-new-subscribers-didnt-come-che.aspx https://www.fool.com/investing/2018/01/23/netflixs-83-millio... [2]https://www.unifimoney.com/blog/changing-the-vicious-cycle-of-push-to-pull-in-customer-acquisition https://www.unifimoney.com/blog/changing-the-vicious-cycle-o...
  - moneywoes 3y ago
    Interesting wonder if there is a list of CaCs by industry somewhere
- importantbrian 3y ago
  There are tons of businesses where $240+ is a great CAC.
  - moneywoes 3y ago
    Is there a directory of these somewhere
    - importantbrian 3y ago
      I would doubt it. There aren't going to be many companies publicly discussing their CACs, and if it did exist what would someone do with the information?
- deleted 3y ago
  [deleted]
- gnopgnip 3y ago
  A another way to estimate how many conversions is looking at the average price, at average conversion rates. Right now average cost for 1000 impressions is about $10 based on revealbot, for the US. If the conversion rate was 0.1%, $240 a year revenue per user means 24 conversions per year, that the average US facebook user is buying two products per month. 0.1% is on the low end
- MagicMoonlight 3y ago
  The most successful marketing campaign of all time is the marketing team convincing everyone that marketing works. Of course the money is all being spaffed for nothing. It doesn’t take a degree in applied ecosystem analysis from Aberyswyth Technical College to figure out that Coke spending 50m on a christmas campaign doesn’t sell anymore Coke.
paxys 3y ago
My thoughts exactly. People ask for paid options in lieu of ads and tracking, but when sites like YouTube and Reddit offer paid plans at reasonable prices ($3-$10/mo) there is an equal amount of outrage. You will never be able to please users who simply want to pay nothing.
- _dan 3y ago
  The outrage is usually because those sites deliberately go out of their way to compromise the experience for those that don’t pay.
- Firmwarrior 3y ago
  Reddit doesn't supply a valuable service. They basically just ran and squatted on the concept of "internet forum" and used VC/network effects to bully almost all the normal forums into (temporary) nonexistence. Anyone reading this can make their own Reddit-esque forum on a VPS and serve a few thousand people for a few bucks a month. And if Reddit ever kicks out all the polished app users/old.reddit users, you'll see that start happening a hell of a lot more
  - _hypx 3y ago
    Which is funny because Internet forums used to be a software package you acquire and run on your own servers. No one really asked for a centralized system where you didn't have any control. It seems pretty straight-forward to go back to that original idea.
  - SSLy 3y ago
    Anyone reading this can spin a discord namespace ("guild"/"server") and that's what reddit is competing with, even if they don't realize that.
    - nonethewiser 3y ago
      I think youre right. People are always trying to imagine the next reddit and its not going to be some clone like voat or whatever. Hackernews is actually a lot like reddit used to be but its not going to scale to reddits size without subreddits, or the like. I dont know if anything will overtake Reddit for a very long time because of network effects. But discord is probably the best guess. Although I actually think people do want centralization. They want 1 login to 1 website that has everything.
annexrichmond 3y ago
I had the same thoughts, that Reddit's reasons must stem from opportunity cost. The Apollo developer does however address this in his post and he claims that Reddit's ARPU is only $0.36/quarter. Reddit has likely been doubling down their efforts on Ad Targeting, etc and perhaps forecasts much higher. Christian's reddit post only addresses ads though, but Reddit has been trying to diversify and create multiple products and revenue streams. They have gold for purchase and if I recall they were trying to launch some Clubhouse-esque product. Point is, it's hard to push any of these things if so many users are on 3rd party clients that don't support such features.
chillfox 3y ago
Cool, that assumes those users will continue to use Reddit after the third party apps have been killed. For me, I don’t think that will be the case. I almost exclusively use Reddit on mobile though Apollo and Reddit’s own app is absolutely garbage (unpleasant to use and heating up my phone burning through the battery). I used to pay for Reddit premium, but I stopped after realising that Reddit wasn’t providing me a better experience for it.

by yojo 3y ago

donmcronald 3y ago

> Facebook's average revenue per user (ARPU) is ~$10/quarter[0], and 6x that in the US. Can someone explain this to me? Why is it so high? Even if every single person on Facebook buys a product because of ads once per year, doesn't that mean companies are paying $240 to acquire a customer in the US? Is it worth that? My first though was that maybe 1% of users buy something in a given year, but that's $24k to acquire a customer and is so far from reality that my perspective must be way off.

treis 3y ago
Our CAC is higher than $240. Lots of services are. When you start thinking about a customer being worth multiples of their revenue (not even profit) it makes a lot of sense. Also, online advertising can lead to in store sales. When you look at those dollars people spend a couple orders of magnitude more than $240 on stuff every year.
tivert 3y ago
>> Facebook's average revenue per user (ARPU) is ~$10/quarter[0], and 6x that in the US. > Can someone explain this to me? Why is it so high? Even if every single person on Facebook buys a product because of ads once per year, doesn't that mean companies are paying $240 to acquire a customer in the US? Is it worth that? 1. I wouldn't be surprised if lots of businesses lose money on their Facebook ads, but either don't realize it or Facebook has enough churn that it doesn't matter if the quit (e.g. a revolving door of unsophisticated local businesses spending money on Facebook because it's the biggest game in town). 2. A lot of advertising is broad "brand awareness," and I imagine it's actually very hard to determine if it's actually working in many cases.
waboremo 3y ago
Meta's reach is gigantic, their data is detailed and expansive. You're actually paying less on average when spending on Meta platforms than you are elsewhere, and likely getting more back. This is why companies are comfortable with throwing an ad campaign on Meta platforms just to get email signups, there was a blog on Shopify where a smaller company talked about spending $5000 for a newsletter ad, and per new subscriber they only spent $1.50 on the ad campaign. Even though technically they've really lost money on such a situation, they feel comfortable doing it again on calculations for future revenue.
spacebanana7 3y ago
Not quite $240, but Netflix apparently spends about $100 for customer acquisition [1] (data is a few years old). I imagine the other streaming sites have similar unit economics. In consumer finance, CACs are even higher. For standard credit cards it’s around $200 but can be over $1000 for premium cards. [1] https://www.fool.com/investing/2018/01/23/netflixs-83-million-new-subscribers-didnt-come-che.aspx https://www.fool.com/investing/2018/01/23/netflixs-83-millio... [2]https://www.unifimoney.com/blog/changing-the-vicious-cycle-of-push-to-pull-in-customer-acquisition https://www.unifimoney.com/blog/changing-the-vicious-cycle-o...
- moneywoes 3y ago
  Interesting wonder if there is a list of CaCs by industry somewhere
importantbrian 3y ago
There are tons of businesses where $240+ is a great CAC.
- moneywoes 3y ago
  Is there a directory of these somewhere
  - importantbrian 3y ago
    I would doubt it. There aren't going to be many companies publicly discussing their CACs, and if it did exist what would someone do with the information?
deleted 3y ago
[deleted]
gnopgnip 3y ago
A another way to estimate how many conversions is looking at the average price, at average conversion rates. Right now average cost for 1000 impressions is about $10 based on revealbot, for the US. If the conversion rate was 0.1%, $240 a year revenue per user means 24 conversions per year, that the average US facebook user is buying two products per month. 0.1% is on the low end
MagicMoonlight 3y ago
The most successful marketing campaign of all time is the marketing team convincing everyone that marketing works. Of course the money is all being spaffed for nothing. It doesn’t take a degree in applied ecosystem analysis from Aberyswyth Technical College to figure out that Coke spending 50m on a christmas campaign doesn’t sell anymore Coke.

paxys 3y ago

My thoughts exactly. People ask for paid options in lieu of ads and tracking, but when sites like YouTube and Reddit offer paid plans at reasonable prices ($3-$10/mo) there is an equal amount of outrage. You will never be able to please users who simply want to pay nothing.

_dan 3y ago
The outrage is usually because those sites deliberately go out of their way to compromise the experience for those that don’t pay.
Firmwarrior 3y ago
Reddit doesn't supply a valuable service. They basically just ran and squatted on the concept of "internet forum" and used VC/network effects to bully almost all the normal forums into (temporary) nonexistence. Anyone reading this can make their own Reddit-esque forum on a VPS and serve a few thousand people for a few bucks a month. And if Reddit ever kicks out all the polished app users/old.reddit users, you'll see that start happening a hell of a lot more
- _hypx 3y ago
  Which is funny because Internet forums used to be a software package you acquire and run on your own servers. No one really asked for a centralized system where you didn't have any control. It seems pretty straight-forward to go back to that original idea.
- SSLy 3y ago
  Anyone reading this can spin a discord namespace ("guild"/"server") and that's what reddit is competing with, even if they don't realize that.
  - nonethewiser 3y ago
    I think youre right. People are always trying to imagine the next reddit and its not going to be some clone like voat or whatever. Hackernews is actually a lot like reddit used to be but its not going to scale to reddits size without subreddits, or the like. I dont know if anything will overtake Reddit for a very long time because of network effects. But discord is probably the best guess. Although I actually think people do want centralization. They want 1 login to 1 website that has everything.

annexrichmond 3y ago

I had the same thoughts, that Reddit's reasons must stem from opportunity cost. The Apollo developer does however address this in his post and he claims that Reddit's ARPU is only $0.36/quarter. Reddit has likely been doubling down their efforts on Ad Targeting, etc and perhaps forecasts much higher. Christian's reddit post only addresses ads though, but Reddit has been trying to diversify and create multiple products and revenue streams. They have gold for purchase and if I recall they were trying to launch some Clubhouse-esque product. Point is, it's hard to push any of these things if so many users are on 3rd party clients that don't support such features.

chillfox 3y ago

Cool, that assumes those users will continue to use Reddit after the third party apps have been killed. For me, I don’t think that will be the case. I almost exclusively use Reddit on mobile though Apollo and Reddit’s own app is absolutely garbage (unpleasant to use and heating up my phone burning through the battery). I used to pay for Reddit premium, but I stopped after realising that Reddit wasn’t providing me a better experience for it.