Digital 2022: The Potential Future of Facebook
Facebook has topped our rankings of the world’s most used social media platforms ever since we started publishing them in our Global Digital Reports.
But as the platform approaches 3 billion monthly active users, what might the future hold for Facebook?
Context
Facebook first launched in 2003, but only became more broadly accessible – to anyone aged 13 and above with an email address – in September 2006.
But despite being widely accessible for more than 15 years, Facebook’s user base continues to grow at a steady rate as we start 2022.
Meta’s latest earnings announcement revealed that Facebook’s global monthly active users (MAU) had increased by 6.2 percent in the 12 months to October 2021.
So, with 170 million new users joining the platform in just the past year – at an average of 465,000 new users every day – it’s clear that Facebook still has plenty of momentum.
Can Facebook keep growing?
It’s unclear whether Meta’s recent corrections to Facebook’s ad reach figures will also affect the platform’s MAU figure.
However, it’s worth highlighting that Facebook has never published a drop in global MAU figures, even when the company made previous corrections to its advertising audience figures.
On the other hand, the most recent annual MAU growth figure is somewhat lower than the double-digit annual growth that the company has posted for much of the past decade.
But with nearly 6 in 10 (58.7 percent) people aged 13 and above outside of China already using Facebook every month, it’s perhaps no surprise to see these growth rates decelerate.
Indeed, as overall Facebook adoption continues to rise, the barriers to continued growth become harder and harder to overcome, principally because most people who can – and want to – use Facebook already do so.
So, I’d suggest that marketers and investors start to temper their expectations for future Facebook user and audience growth.
More representative metrics
For me, the key metric to focus on when it comes to assessing Facebook’s ‘growth’ is the platform’s average revenue per user (ARPU) – especially when it comes to users in the developing world.
Meta’s most recent investor earnings announcement revealed that the company earned an average of USD $10 per user in the third quarter of 2021, but that figure varied meaningfully by geography:
ARPU in the USA and Canada was USD $52.34;
ARPU in Europe was USD $16.50;
ARPU in Asia-Pacific was USD $4.30;
ARPU for the “Rest of the World” was USD $3.14.
Based on Skai’s latest figures for the global average cost of 1,000 social media ad impressions (CPMs) in Q4 2021, we should expect to see those ARPU figures rise again in the Meta’s next earnings announcement, especially thanks to recent holiday-related ad spending.
However, it’s the growth across APAC and “Rest of World” that will tell the most interesting story about Facebook’s future.
Beyond ads: an alternative to Meta’s current model?
Facebook’s ARPU figures also make for interesting reading if we were to consider alternatives to Meta’s current ad-funded model.
Based on current figures and growth trends, it’s not unreasonable to expect that Facebook’s ARPU might average out at around USD $12.50 per quarter in 2022, equating to an average annual value of USD $50 per user for the full year.
Allowing for geographic variation, that figure might be as high as USD $250 per user in the United States, but below USD $20 per user in many developing economies.
Could Facebook subscriptions work?
To put these numbers in context, if Facebook wanted to maintain the same levels of revenue through user subscriptions instead of ads, it would need to charge its US users roughly $20 per month in 2022 – the same monthly fee that Netflix now charges its US customers for its premium plan.
European users would probably need to stump up an average of $6 per month, although it’s likely that this figure would be meaningfully higher in countries like France and the UK.
Meanwhile, hypothetical Facebook subscription fees would probably fall below $2 per month in countries like Indonesia, Thailand, and the Philippines, all of which rank in Facebook’s top 10 countries by total audience size.
That’s considerably less than companies like Netflix and Spotify currently charge for their standard plans in those countries, but – absolute price considerations aside – history shows that it can be very difficult to persuade people to pay for something that they’ve previously enjoyed for free.
So, while subscription-funded social networks aren’t inconceivable, it seems unlikely that Meta would be able to implement a mass transition to an ad-free model without losing a significant portion of current revenues.
However, I’d be surprised if Meta didn’t embrace alternatives to advertising as central pillars for its revenue plans in the metaverse.
As a result, marketers will want to keep a close eye on Meta’s announcements in this regard, especially as they explore their own brand’s potential role in metaverse environments.
Social commerce and payments
Subscriptions aren’t the only alternative to ads either, and the rise of Facebook’s various social commerce offerings also offer compelling prospects for the company to diversify beyond ad revenues.
For context, Meta’s latest data reveal that more than 725 million users now see ads across its platforms’ dedicated social commerce offerings each month, including Facebook Marketplace and Instagram Shop.
Interestingly however, based on the audience numbers for each individual platform, this overall figure suggests very little duplication across the ad audiences of Facebook Marketplace and Instagram Shop.
However, the company also reports that more than a billion users visit Facebook Marketplace each month (as opposed to just seeing ads there), so the company’s social commerce opportunity may be much larger than these ad audience figures suggest.
Meta has also alluded to the fact that it wants to keep Facebook Marketplace and Instagram Shop activity within the platform, rather than relying on ads that would take people out of Meta’s platforms.
This may align with the company’s desire to become more active in the payments space, allowing the company to derive a share of the actual transaction value, rather than simply driving awareness and desire through ads.
It’s unclear exactly how many users are actually making purchases in environments like Facebook Marketplace and Instagram Shop, but either way, it’s clear that merchants have been quick to embrace social commerce, so I’d fully expect to see Meta become more active in this space.
In particular, given how excited Zuck and team seem to be about the metaverse, I wouldn’t be surprised to see virtual stores become a key feature in the company’s future plans.
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