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Straight Talk Consumer and Entertainment Services

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Facebook is facing a slowing of take-up in developed countries, with Mark Zuckerberg acknowledging that the platform "may be close to saturated" and that revenues might slow in the future as a result, despite the 33% growth in revenue announced at the company's latest earnings call. When a social networking powerhouse such as Facebook says that it is reaching saturation point among its most lucrative users, it must surely send rivals into fits of both glee and concern.

While there is growth outside of its core regions of Europe and North America, these users bring in more value per person per quarter than users outside of these regions; North American users bring in $25.91 per user and European users nearly $8.76, while users in Asia-Pacific generate $2.62 and users in the rest of the world just $1.91. With such differences between regions, it is clear to see how saturation in the North American segment will have serious consequences for future Facebook revenues.

Facebook is not likely to be the only platform that rubs up against this issue. Social networks will understandably attune their platforms to their core users, resulting in higher revenues among the users the platform knows best. Expanding to less-known regions will require a lot of work to make the platform as targeted to new users as it was to the old.

Saturation isn't the only problem. Facebook data shows that advertising ARPU among its core regions – and worldwide as a result – has fallen in the last six months, which makes it more important that Facebook diversifies its monetization of users. Content sale would seem like the ideal way to grow revenues, particularly as Facebook expands into premium content.

This, however, is easier said than done. Data from Ovum's recently published Digital Consumer Insights 2018: Communications and Media shows that consumers are highly averse to paying for any kind of content on social media or chat/messaging apps. Consumers even say that they would not pay for premium entertainment such as live-streamed sporting events on social and messaging apps, and this is a content type which would command a high price on traditional platforms such as pay-TV.

 

Figure 1: Less than half of consumers in the US would be prepared to pay anything for content on social networks

Less than half of consumers in the US would be prepared to pay anything

Source: Ovum

 

It's not all bad news though as clearly some consumers will pay for content, with 35.7% of US consumers willing to pay for live-streamed sporting events and 29.5% willing to pay for exclusive video clips. However, the greater the price, the less willing consumers are to pay. The key for Facebook – for every social and messaging platform – will be to identify those users who will pay for content and to woo them into paying as much as possible, as frequently as possible.

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