Facebook Struggles to Monetize Emerging Market Users

When Facebook reported its latest results last week, it was all good news: The social network now has 1.39 billion users, of which almost 900 million use it every day. And thanks to its flourishing mobile advertising business, Facebook’s revenue soared past $12 billion in 2014, with profit almost doubling to $2.9 billion.

Looking through the results, there is just one little detail that may spell trouble for Facebook’s long-term growth prospects: the huge discrepancy in user monetization between North America and the rest of the world. In the latest quarter, Facebook generated $9 in revenue per user in North America, $3.45 per European user, just $1.27 per user from the Asia-Pacific region and even less from users located elsewhere in the world. As a consequence, Facebook currently generates 74 percent of its revenue in North America and Europe, where just 37 percent of its users are located. That wouldn’t be a problem, if it weren’t for the fact that Facebook’s user growth is now happening almost entirely outside of those wealthier regions: Of the 167 million users Facebook added in 2014, only 26 million were from North America or Europe.

For the moment, Facebook manages to maintain its revenue growth by squeezing more out of its users in North America and Europe, but at some point there’s going to be a limit to that growth. There’s only so much juice to be squeezed from an orange - at some point, Facebook will have to start squeezing another orange.