Facebook Earnings Q3 2018: a reality check (follow up)
A story about the “success” of platform on the brink of demise
We had a solid quarter, and our community and business continue to grow quickly. 2.3 billion people now use Facebook every month, and 1.5 billion every day. Revenue grew 33% year-over-year to $13.7 billion.
That’s how Mark Zuckerberg, Facebook CEO, started his introduction to the Q3 2018 earnings call. As usual, highlighting the most important growth metrics marked the beginning of the call. This was however quickly followed by addressing the three main challenges — from Facebook’s POV:
- a shift to Messaging and Stories
- continuing growth in Video (but not FB Watch)
- continuing Safety and Security issues
This is important to highlight because it seems Facebook is at least trying to be more open and proactive when it comes to problems it sees.
Facebook’s user growth is slowing
The most important aspect is: Growth on Facebook is decelerating.
Yes, Facebook still adds new members. Yet if you look at the numbers you can see the decrease in new users added each quarter:
- USA has stagnated over the last four quarters, not adding users there in a whole year!
- Europe has only grown by 20 million users in over two years.
- Growth in APAC is also slowing.
That’s an interesting indicator for global saturation of Facebook. Adding to this is the DAU/MAU ratio, which has not changed in over two years straight! Facebook has added 483 million news users between Q3'16 and Q3'18 but was not able to convert more users to DAUs. That is another indicator for people trying to get off Facebook more and more.
Facebook’s still making money…but…
…take a look at the regions it is making the most money:
The USA is still the most valuable market, followed by Europe.
Competitor Snapchat has openly talked about a similar issue, which is: not being able to grow in other markets and slow down in saturated markets.
Looking at the ARPU (Average Revenue per User), which is still the most important metric from a financial perspective, Facebooks shows:
Especially Europe is a troubling market, if this trend continues. Growing by $0.06 in a single quarter is not really a sign of healthy growth but rather a sign of sinking ship. The same applies to the APAC area with a growth of $0.05 and the Rest of World area which actually shrank by $0.09 (not counting the obvious post holiday fall-off each Q4/Q1).
That shows that growth in “non-saturated markets” is actually not happening at all.
Facebook will stay, but it will struggle
My perspective on Facebook’s future can be summed by the headline above. I don’t think Facebook will go away anytime soon. I don’t even want to say if this is a good or bad thing. I only think that the company will continue to face hard times in the future.
Looking at the Q3 earnings the company doesn’t really show signs of a healthy and fast growing company. Obviously, this point was to be expected from the biggest platform in the world. That’s not too concerning, there are only so many people on the internet.
But what is concerning:
Facebook does a bad job in converting existing users into more valuable users (see: ARPU metric).