Despite Facebook Inc.’s (FB, Financial) management warning investors about ad load nearing its saturation point and how that could affect the revenue growth rate, the social media company keeps notching up above-50% growth rates quarter after quarter. For the first quarter of the current fiscal, Facebook reported revenues of $7.857 billion, growing 51% from $5.201 billion last year.
The growth rate is quite high, but it cannot go on forever. Sooner or later, it must gradually come down to more sustainable levels. There are a few things working in the company's favor that will allow it to keep its growth momentum going for some time, not the least of which is its user base growth.
Despite nearing 2 billion monthly active users around the world, Facebook’s user base growth is showing no signs of weakness. The social media platform may have already saturated the developed markets, but the Asia-Pacific and the rest of the world provide plenty of opportunities for further growth.
United States and Canada
At the end of the first quarter, Facebook had 234 million users in North America, growing by 24 million users in two years. The population of the U.S. is around 320 million while Canada’s population is around 35 million. At 234 million, Facebook’s penetration is nearly 66% of the total population of North America. Clearly, there is not much room to go from there. At best, the user base will keep slowly ticking up, just the way it has been for the past year.
Asia-Pacific
The Asia-Pacific region is one of the most populous regions in the world. According to UNESCAP, the region is home to more than 4.5 billion people. With 716 million users in the region, Facebook’s penetration is a measly 15.8%. There is plenty of room for growth.
One of the major problems Facebook faces in this part of the world is internet penetration. As internet access increases, the company will be able to further expand its user base.
But a growing user base does not necessarily mean more money since high growth is now restricted to relatively low per capita countries. This is where another metric becomes important: average revenue per user, or ARPU.
Facebook's ARPU
Facebook had 716 million users in the Asia-Pacific region at the end of first-quarter 2017, up from 471 million users at the end of first-quarter 2016. The ARPU in this region was $1.98 in the first quarter, which means sales grew by approximately $485 million due to this increase alone.
Considering the current penetration level and population size, the Asia-Pacific region will help Facebook’s sales numbers climb steadily upward over the next several years.
Disclosure: I have no positions in the stock mentioned above, and no intention to initiate a position in the next 72 hours.
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