Facebook make more money per user than rivals ~ Faith and spirituality

Facebook make more money per user than rivals

Facebook make more money per user than rivals, but it's running out of growth options

This earnings season, most social media giants reported year-over-year increases for ARPU in the third quarter.

Facebook remains the clear leader in ARPU, but it will need to make up for a decline in users in the U.S. and Canada, which spooked investors.

Snap and Pinterest's ARPUs still lag Facebook's by a wide margin, but their advertising initiatives are starting to pay off.

Mark Zuckerberg wearing a suit and tie: Founder and CEO of Facebook Mark Zuckerberg speaks at the annual Munich Security Conference on February 15, 2020.© Provided by CNBC Founder and CEO of Facebook Mark Zuckerberg speaks at the annual Munich Security Conference on February 15, 2020.

One of the key metrics investors watch when evaluating a social media company, average revenue per user (ARPU), continues to show strength.

This earnings season, most major social media giants reported year-over-year increases for ARPU in the third quarter

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Facebook: $7.89, up 9% year over year

Snap: $2.73, up 28% year over year

Pinterest: $1.03, up 15% year over year

Investors care about ARPU, which is measured by dividing revenue by number of users in a quarter, because it shows how effectively companies monetize their users. These social networks are becoming victims of their own success — the pool of new potential users keeps shrinking.

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If user growth starts to go flat or decline for these companies, revenue growth must come from squeezing ever more value from existing users.

Facebook is now entering that stage. It remains the clear leader in ARPU, but investors were spooked last week when the social network announced its number of daily active users in the U.S. and Canada fell to 196 million from 198 million in the third quarter. Facebook said it expects its user base in that region to remain flat or decline in the next quarter, too. Its user base in Europe also remained flat at 305 million daily active users for the third consecutive quarter.

But there may be little space for ARPU improvements in the U.S. and Canada region, as Needham analysts pointed out in a note last week. ARPU there was already a whopping $39.63 last quarter, compared with $12.41 in Europe, $3.67 in Asia-Pacific and $2.22 in the rest of the world.

The key to growth may lie in Facebook's broader family of apps. On the company's earnings calls, executives discussed early efforts to integrate messaging apps with ads so that businesses can run ads in Facebook and Instagram and take users to a Messenger or WhatsApp thread. Facebook is also expanding its e-commerce business through Facebook and Instagram, and executives suggested last week ads could come to Instagram Reels, Facebook's TikTok competitor.

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These types of auxiliary services for Facebook are still in the "early innings of monetization," wrote KeyBanc analysts.

A hand holding a cellphone: The Twitter App loads on an iPhone in this illustration photograph taken in Los Angeles, California.© Provided by CNBC The Twitter App loads on an iPhone in this illustration photograph taken in Los Angeles, California.

Twitter looks to be on the same trajectory of slowing user growth, but investors have less confidence about its ability to monetize. The company doesn't report ARPU directly, but Raymond James analysts estimated it at $4.30 last quarter, down from its estimate of $4.84 for the year-ago quarter.