Facebook's Problem in Two Numbers

By Alexis C. Madrigal

Facebook's growth in its most and least-developed markets is not fast enough to justify its still sky-high valuation.

FacebookARPU2.png

12.7 percent

That's the year over year growth in Facebook's average revenue per user in the United States and Canada. It's not the kind of breakneck growth investors expect from technology companies. That's why tech companies have higher P/E ratios than other types of businesses, right? Because investors expect them to generate more money down the line. But perhaps one could make the argument that Facebook's mature in the American market and that we can't expect growth there, even though the company enjoys 50 percent penetration and the world's richest customer base. OK.

15.8 percent

That's the year over year growth in Facebook's average revenue per user in the world outside of North America, Asia, and Europe. If you can't show wild ARPU growth in developing countries and you can't show wild ARPU growth in developed countries, how do you make the argument that you're going to show a ton of revenue growth overall?



This article available online at:

http://www.theatlantic.com/business/archive/2012/07/facebooks-problem-in-two-numbers/260391/