Business

These Charts Help Explain Facebook’s Advertising Dilemma

Most of Facebook’s new users come from emerging markets and don’t generate as much money for the social network. As a result, Facebook has to find ways to make more money off its current users.

Facebook just delivered a blowout quarter, beating earnings and revenue expectations by a metaphorical mile as its mobile advertising business improves.

Also included in Facebook’s earnings report is the above chart, which shows how much each user in various regions are worth. As is pretty self-evident, users in the U.S. and Canada are worth much more than the rest of the world — especially Asia and emerging markets, where sophisticated platforms like laptops and high-powered smartphones aren’t as widely available.

But, unfortunately for Facebook, that is where most of the growth of its new users is coming from.

That is why Facebook’s mobile advertising business — which now accounts for more than 41% of its advertising revenue — is so important. Even developed markets are shifting to mobile devices, but they are more important in developing markets where cheap access to the Internet is what’s most important.

If Facebook can find ways to sell ads that monetize mobile users well, then it has a huge business opportunity. And so far, it seems like Facebook’s mobile advertising business is growing at a decent clip — hence the stock being up more than 15% in extended trading on the earnings report.

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