Slim down

Facebook's profits are skinnier (not good), but the global "Zuck fee" is strong

Thursday, January 30, 2020 by Robinhood Snacks |

All those ads interrupting your Insta-scrolling?... They added up to $70B of revenue for Facebook in 2019. Although that sounds like Zuck & Co. should be celebrating their dominance in online ads sales, that was up only 27% from last year (and slower than the 35% revenue growth the year before). Shares fell almost 8% on word Facebook's profit got squeezed:

  • Revenue growth is slowing: 240M new people joined a member of the Facebook "Family" (Insta, FB, WhatsApp, Messenger) over the past year — that's a smaller number than years past. The Book's also losing people to TikTok and Snap (or you just put your phone down).
  • Cost growth is speeding up: Facebook's feeds are the #1 targets for bad people to manipulate and abuse others online. Humans and algorithms to police those online streets are expensive — and so are the fines Facebook's seemingly always paying.
  • The result is skinnier profits: In 2017, Facebook made 50 cents of operating profit for each dollar of ad sales. In 2019, that came down to 34 cents.
THE TAKEAWAY

The whole world pays a 7 cents per day "Zuck fee"... To show investors that Facebook is growing despite weakness in its core Facebook app, Zuck included Instagram for the first time in its "average revenue per user" category. Globally, Facebook made $25 off each user last year. That's 2.85B people with Facebook accounts, "paying" 7 cents per day in mid-scrolling attention to Facebook's ridiculously-targeted ads that know you like chocolate.