June 11, 2012

Is Facebook’s Member Growth Slowing?

It’s been a difficult month for Facebook, with their IPO flopping amid news that the likes of GM were ditching their advertising on the site.

With the IPO came inevitable focus on how they will make moneyand continue growing.  Whilst data published today revealed the scope of Facebook’s domination of social networking around the world, there are also concerns that many users are visiting the site via their phones rather than their computers.

News in the WSJ today however that their growth levels are slowing should add to concern around the sustainability of Facebooks sky high valuation.

They report that the growth of membership in America slowed dramatically in April this year, up just 5% from April 2011.  That is according to comScore data.  comScore caused a stir earlier this year after their data resulted in Google+ being labelled a ghost town.

Of course even with this relatively low level of growth, it still represents 158 million unique visitors from America in April, but it does nevertheless represent the lowest level of growth since comScore started tracking Facebook in 2008.

Of equal concern is the amount of time people spend on the site each time they visit.  In April Facebook users would spend an average of 6 hours a month on the site.  That figure is 16% up on April last year, which whilst still impressive is again considerably lower than growth in previous years.

Of course some slowdown is to be expected, as there has to come a point where everyone that wants to be on Facebook is a member already.  In America alone they can count on 71% of the 221 million Internet users amongst their membership, whilst the time on site is significantly higher than any other social media site.

With such a dominant presence and so much time already spent on the site, “declining growth rates are a natural part of the growth cycle,” said comScore analyst Andrew Lipsman.

Given that Facebook now has shareholders to pacify however they will want to show Wall Street that they can continue to grow, or at the very least show that they can generate more revenue per user than they currently do.

With raw membership growth difficult to achieve, unless they chase rather desperate means such as allowing under 13′s to join up, it would appear the most sensible option is to focus less on basic membership numbers and more on revenue per member, particularly on their mobile platform and in their overseas markets, both of which are relatively small contributors to their overall revenue figures.

Approximately 56% of Facebook’s 2011 ad revenue of $3.1 billion came from the U.S. alone, according to the company’s regulatory filings. “The U.S. is a dominant source of revenue for Facebook,” said eMarketer analyst Debra Aho Williamson, who estimates that this year the nation will account for 51% of Facebook’s revenue.

Originally published June 11, 2012 on Technorati by Adi Gaskell.

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