Conquest over?
Facebook’s growth on the stock market since it went public in 2012 has been impressive (shares have quadrupled in a little over five years), as it repeatedly defied expectations that its membership expansion must slow down. Analysts are almost universally gushing about the company’s prospects – 43 of 48 polled by Thomson Reuters recommend buying shares.
Yet Facebook’s run does have to end at some point. The laws of large numbers can be delayed but not ignored. Globally, Facebook has two-thirds of internet users outside of China. That is approaching the proportions of markets like the UK, where people have had the option to sign up to Facebook for years and decided against it.
No worlds left to conquer
Zuckerberg cannot rely on more of the world merely coming online for growth. That number is rising, but more slowly than the rate at which Facebook itself is growing, even with the company’s focus on making the app work on cheap phones and spotty internet connections.
Facebook is well aware of this and has embarked on deals with mobile operators to provide subsidised data services and made investments in developing its own infrastructure (last week, Facebook announced it had completed the first successful test flight of Aquila, a solar-powered drone it expects will help provide coverage to rural areas).
The company has inconsistently provided investors with other indicators of how hooked its users really are. In April last year it said people spend 50 minutes a day across Facebook itself, its Messenger app and the Instagram photo network, but has been silent on the matter since.
Research from eMarketer suggests the time spent on Facebook itself – the most lucrative of the three properties – will stall this year. It has not updated investors on other crucial metrics, such as how much time its users spend watching videos, in over a year, a further indication that engagement may be flatlining.
Facebook still has a lot going for it. It bought Instagram for a bargain $1bn and it is growing spectacularly. It is succeeding in earning more from each of its users, as advertisers siphon money away from traditional media and into the company’s targeted ad network.
In the last year average revenue per user has risen from $3.32 to $4.23. In the US, where digital advertising is more mature, it is $17. But already being part of a digital advertising duopoly with Google, there is a limit to how much this can continue.
Facebook is running out of internet to conquer. When it does, it will need a new growth story to tell.
But in the meantime, would the real Steemit please stand up.
Steem on!