No signs of slowing down for social media giant Facebook

  • Asia is now "officially" the largest region, but this is not surprising
  • Spent a whopping US$4.49 billion on capital investment

No signs of slowing down for social media giant FacebookANALYSIS ON Feb 1, 2017, social media giant Facebook Inc recorded strong growth for its 2016 financial results. The numbers were astounding -- with revenue jumping 54% to US$27.64 billion, and net profit almost tripling to US$10.22 billion. 

On top of that, its operating margin - which is a measure of profitability (it indicates how much of each dollar of revenue is left over after both costs of goods sold and operating expenses are considered) - has improved to 45%, from 35% a year ago. 

At the group level, its daily active users (DAUs) and monthly active users (MAUs) continue to be on the uptrend -- as it ended the year with 1.23 billion DAUs and 1.86 billion MAUs. A year ago, it had 1.04 billion DAUs and 1.59 billion MAUs, respectively.

While the overall numbers were impressive, there were three main highlights and most of it were related to Asia.

1. Asia is now "officially" the largest region

 

No signs of slowing down for social media giant Facebook

 

Facebook groups its active users into four "regions". US & Canada, Europe, Asia Pacific, and Rest of the World. 

For several years, the number of Facebook users in Asia Pacific has far exceeded those in Europe and the US & Canada. During those years, it had always been closely behind the Rest of the World (which comprises regions like Latin America and Africa).  

Should Facebook separate its active users into their respective geographical regions -- North America, Latin America, Africa, Europe and Asia Pacific, I believe that the Asia Pacific would have taken the throne in June 30, 2012. (see page 44 of Facebook's 2012 annual report

2. Plenty of potential still, especially in Asia

 

No signs of slowing down for social media giant Facebook

 

There were many signs that indicate Facebook has a lot of growth potential, and is not going to slow down anytime soon. 

First, is its Asia operations. Today, Facebook's largest user base comes from Asia. However, the region only contributed US$4.39 billion in revenue for the whole of 2016. In contrast, revenue in the US & Canada was US$4.56 billion in Q4 2016 alone. 

 

No signs of slowing down for social media giant Facebook

 

The good news is that Facebook's Asia Pacific average revenue per user (ARPU) has been steadily growing for three consecutive quarters (it suffered a minor quarter-on-quarter decline in Q1 2016), and has surpassed the US$2.00 mark for the first time.

With the increasing digital marketing trends by various brands in Asia, it is only a matter of time before Asia's ARPU reaches almost the same level as Europe.

Also an important point to note is that, these growth numbers were achieved without the contribution of one major market -- China. Over the recent years, the company has been trying to make inroads into China, but they were unsuccessful.

"Our mission is to connect everyone in the world and it is hard to do that over the long term if we don't find a way to serve the more than a billion people who live in China. So, that's certainly a thing that we are going to look out -- at over the long term," said Facebook's cofounder and CEO Mark Zuckerberg in a conference call.

3. Big, big jump in capex

 

No signs of slowing down for social media giant Facebook

 

In 2016, Facebook spent US$4.49 billion in capital investment. This is believe to be the largest amount ever spent by Facebook in recent years.

A check on CSIMarket.com showed that the company has been investing between US$606 million and US$1.83 billion from 2011 to 2014.

 

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