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June 29, 2017 10:00 pm

Facebook May Finally Have To Compromise Its User Experience In Order To Keep Growing

Tony Haile, writing for Recode: Facebook has a problem. What has driven its growth for the last five years won't drive its growth for the next five. However, the options in front of the company involve the kind of user experience compromises that have maimed platforms that preceded it. Facebook makes its money from the West. Some 30 percent of its users and 73 percent of its revenue is from North America and Europe. The monthly average revenue per user for Western users is $3.33 versus 53 cents for the rest of the world. Facebook is a global company, but a Western business. Facebook's user growth in the West is a little over 1 percent a quarter. In North America, Facebook's monthly active users represent 80 percent of the population above the age of 14. If Facebook wishes to grow its Western revenue at the rate its shareholders demand, a 1 percent user growth rate will not do it. Absent rapid user growth, the other lever for increasing advertising revenue is increasing the number or value of ads that are shown to existing users. However, the News Feed is close to saturation. Facebook believes that it cannot stick any more ads in the News Feed without adversely affecting user retention. This combination of slowing user growth and News Feed saturation has led Facebook to warn of a rapid deceleration in revenue growth over the next six months. For the first time in years, Facebook needs a new lever to pull.

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