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Facebook Will Report Over 2 Billion Users With Its Second-Quarter Earnings

Mark Zuckerberg announced another milestone for Facebook (NASDAQ: FB) this week: 2 billion different users logged into Facebook in the last month. It shouldn't be too much of a surprise that Facebook reached 2 billion users; it reported 1.94 billion at the end of the first quarter. The fact that Facebook continues to grow at a steady pace despite its massive user base is still very impressive.

Interestingly, the announcement comes on the heels of YouTube's recent announcement that it has 1.5 billion monthly logins. Facebook has been stepping up efforts in video to compete with the Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) property. Compared to other social networks like Twitter (NYSE: TWTR) or Snap's (NYSE: SNAP) Snapchat, Facebook is absolutely massive.

Image source: Facebook.

Where are these new users coming from?

Facebook is still adding users in North America and Europe, but Asia-Pacific and its Rest of World region are by far the biggest contributing geographies to Facebook's user growth. As more and more people gain internet access, more and more of them are signing up for Facebook.

Facebook is helping, to some degree. It's pushed wireless carriers in emerging markets to offer free internet service to customers through its free basics app. Of course, one of the features of free basics is the option to sign up for a low-bandwidth version of the Facebook app.

It's also working on building out new infrastructure and experimenting with internet-beaming drones. Google is working on similar projects since its interests align with Facebook's in this regard. The more people using the internet, the better it is for any internet company.

70% of Facebook users now live in Asia-Pacific or the Rest of World region. That's up from 65% two years ago, when Facebook had 1.5 billion users. By comparison, just 79% of Twitter users live anywhere outside of the United States. Just 24% of Snapchat users live outside of North America and Europe.

Indeed, Facebook's ability to grow its user base outside of North America and Europe is impressive. But the concentration of new users coming from those regions means the company's revenue growth could come under pressure.

Lowering expectations

Last year, CFO Dave Wehner told analysts to temper their expectations for revenue growth because the flagship product was facing ad load saturation. In other words, the concentration of ads in the average users' news feeds is so high that any more would degrade the user experience and cause them to look elsewhere.

Of course, ad load isn't the only factor that drives revenue growth for Facebook. But without it, there's a lot more emphasis on other factors, like user growth. With most of Facebook's user growth coming from emerging markets, it will minimize the impact on revenue. That's to say, a 13% increase in users won't translate into a 13% increase in revenue.

A user in India, for example, doesn't generate nearly as much revenue as a user in the U.S. Facebook averaged $66.87 per user in the U.S. and Canada over the last 12 months. It averaged just $7.71 per user in Asia-Pacific during the same period. Indeed, the growth in global average for revenue per user has slowed meaningfully over the last year, from 33% in the first quarter 2016 to 27% last quarter.

To be sure, YouTube, Twitter, and Snapchat all face the same challenge as they saturate developed markets and expand internationally. With more users than anyone else -- by a wide margin, I might add -- Facebook is well positioned to attract advertisers both big and small from around the world, driving revenue growth for years to come.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Facebook, and Twitter. The Motley Fool has a disclosure policy.