How Facebook makes its money, in one chart - Axios
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How Facebook makes its money, in one chart

Facebook is making the majority of its revenue off U.S. users, and it's not because of scale.

While the number of monthly active users in the U.S. is relatively low compared to other countries, the average revenue per user in the U.S. is 1314% higher. See the dark purple boxes below compared to the light purple.

Data: Facebook; Chart: Lazaro Gamio / Axios

Why is the U.S. such a cash cow?: The U.S. advertising market, by spend, and particularly by mobile spend, is by far the largest and most concentrated advertising market in the world. The U.S. ad market is worth around $191 billion dollars. By comparison, the next biggest ad market, China (which blocks Facebook), is worth around $80 billion USD. The third largest ad market, Japan, is worth around $37 billion USD.

What this means: The number of Facebook's monthly active users (MAU) has grown steadily over the past year, while the amount of average revenue per user has grown at a more irregular pace, with an expected surge during the holiday season in Q4. These growth patterns suggest that Facebook's revenue strategy relies on competitive ad pricing, mostly through their programmatic auction, not necessarily the expansion of their user base, which in major markets — like the U.S. — is largely saturated.

What to watch: Because Facebook already has a large penetration into the U.S. market (nearly 80% of all U.S. internet users and over 90% of U.S. millennials), they will need to focus on increasing the average revenue per user (ARPU) in the U.S. The obvious way to do this is through video advertising opportunities, but Facebook hasn't quite solidified its video revenue strategy. In the short-term, they will focus on two key metrics to expand their ARPU:

  1. Migration of monthly active users (MAUs) to daily active users (DAUs): Facebook has continually rolled out new personalization techniques to ensure their percentage of DAU's increases, which will in turn allow Facebook to raise its advertising rates. (Higher engagement with the platform warrants a higher premium on ads they can sell.)
  2. Maintaining a competitive ad auction: Currently, Facebook sells ad units in a variety of formats (cost per click, cost per 1000 impressions, etc.) through their automated bidding system -- an ad auction. While the company continues to test their video advertising strategy, a key focus for growth will be maintaining competitive pricing within their auction.
Why it matters: Mark Zuckerberg warned investors last week that Facebook's ad revenue would "come down meaningfully" in 2017 as the company continues to work through a decline in newsfeed inventory without a solidified video revenue strategy.
Ad buyers can expect: Facebook's ad auction will become increasingly competitive to offset revenue losses the company anticipates.
Users can expect: Facebook to continue to optimize personalization features and push notifications, like memories in news feeds, birthday reminders, and event suggestions, to push monthly active users to become daily active users.
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WATCH: McConnell and Schumer speak after failure of Republican health care bill

Mitch McConnell after John McCain's vote sunk the Senate health care bill: "I imagine many of our colleagues on the other side are celebrating — probably pretty happy about all this. But the American people are hurting and they need relief."

Chuck Schumer: "We are not celebrating. We are relieved — that millions and millions of people who would have been so drastically hurt by the three proposals put forward will at least retain their health care."

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Meg Whitman says she won't be Uber's CEO

Richard Drew / AP

Meg Whitman officially took herself out of the running to be the next CEO at Uber, saying in a series of tweets that she is committed to her current job as CEO of Hewlett-Packard Enterprise.

"We have a lot of work still to do at HPE and I am not going anywhere," Whitman said Thursday night. "Uber's CEO will not be Meg Whitman."

Who is in the running?: GE CEO Jeff Immelt is said to be on Uber's shortlist.

The backstory: Whitman stepped down earlier this week from the board of the PC spin-off HP Inc., adding fuel to speculation she was considering the Uber job. Axios' Dan Primack reported earlier that although Whitman was the frontrunner, Uber's board wasn't yet sold on Whitman.

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Here’s the Senate’s “skinny” health care bill

Andrew Harnik / AP

Senate Republicans have finally released their latest health care bill — a "skinny" measure that would only repeal a few provisions of the Affordable Care Act, without attempting to replace any of them.

The bill would:

  • Repeal the individual mandate
  • Repeal the employer mandate
  • Delay the ACA's tax on medical devices
  • Cut off federal funding to Planned Parenthood
  • Expand an ACA waiver program so that states could roll back some of the law's regulations and benefit mandates.
  • Repeal the ACA's fund for public health programs
  • Provide more funding for community health centers

What happens next: The Senate is still expected to enter a prolonged "vote-a-rama" later tonight, which will likely last well into Friday morning. Several Senate Republicans have said they do not want this bill to become law, but might vote for it anyway to open up a new round of negotiations with the House.


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Scaramucci: "I made a mistake in trusting a reporter"

Anthony Scaramucci has taken to Twitter amid the fallout from an explosive interview he did with the New Yorker's Ryan Lizza:

"I sometimes use colorful language. I will refrain in this arena but not give up the passionate fight for @realDonaldTrump's agenda.... I made a mistake in trusting in a reporter. It won't happen again."

Worth noting: Lizza said on CNN that he went back to Scaramucci this afternoon to ensure that both were on the same page about the interview having been on the record. Lizza also said he recorded the conversation.

Scaramucci's point seems to be that he didn't think Lizza would print it. Time WH reporter Zeke Miller asks, "how is that different than a leak?"

Press Secretary Sarah Sanders told Fox News, "Sometimes when you have the best people from around the country coming in with a variety of backgrounds... you might not agree on everything."

Meanwhile Breitbart News, apparently taking exception to Scaramucci's quotes about Steve Bannon "trying to build his own brand" rather than serve Trump (among other activities) has gone after Scaramucci aggressively.

But Axios' Jonathan Swan points out, "Zero chance Trump will punish Mooch. The people Trump loves most are those who stuck by him after Access Hollywood broke. He still remembers."

Read our full report on the interview here

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Tomorrow's New York Post...

Friday's front page from Trump's hometown paper following Communications Director Anthony Scaramucci's attacks on Chief of Staff Reince Priebus and Chief Strategist Steve Bannon...

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Russia sanctions heading to Trump's desk

Evan Vucci / AP

The Senate passed new sanctions on Russia, Iran and North Korea by a 98-2 margin on Thursday. The bill had already passed the House 419-3, and is now headed to President Trump's desk.
White House Communications Director Anthony Scaramucci has said Trump might veto the sanctions, which limit his ability to dial back sanctions on Moscow in the future. The administration has said Trump wants flexibility to deal with Russia as he sees fit.
But the wide margins by which the bill passed both houses of Congress mean Trump would be risking an override of his veto should he decline to sign the sanctions into law.
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Facebook will give publishers 100% of revenue from new subscription feature

Noah Berger / AP

Facebook will give publishers 100% of the revenue it brings in from a new subscription feature within Instant articles, Axios has learned. Facebook will also give publishers full control over the conversion, pricing and payment process for the feature, which it plans to test with a small group of publishers later this year. The company will also give publishers access to all of their subscriber data on the platform, per a source familiar with the model.

Why it matters: This is Facebook's latest step toward creating better relationships with its publishing partners. Facebook and Google's digital ad dominance has made it increasingly difficult for publishers to make digital ad revenue. As a result, many premium publishers, like The New York Times and Washington Post, are increasingly focusing efforts on subscription revenues.

The latest news about the subscription product aligns with the asks of the News Media Alliance, a large newspaper trade group, which told Axios a few weeks ago that they want more access to data about their subscribers on Facebook's platform and a higher cut of revenue from subscriptions and advertising partnerships.

Our thought bubble: Some publishers worry that almost no one will ever hit the paywall with the way it's set up. It would give consumers access to at least 10 free articles on Facebook, on top of the 10 free articles they get from most publishers off of the platform. Thus, publishers won't really get much revenue from the new feature.

About the subscription feature: The metered paywall will likely support 10 or more free articles a month before readers are prompted to pay, and publishers will have control over which articles are locked and unlocked. The feature will support both freemium (ad-supported and subscription) and metered models. It will enable authentication for existing subscribers.

About the paywall: When people hit a paywall in Instant Articles, they will be prompted to subscribe in order to read more. The link will click through to the publisher's website where they can sign up directly via the individual publisher. Facebook has been working with publishers for months on the new subscription feature and has been briefing news publishers on their plans.

"Quality journalism costs money to produce, and we want to make sure it can thrive on Facebook," says Campbell Brown, Head of News Partnerships. "As part of our test to allow publishers in Instant Articles to implement a paywall, they will link to their own websites to process subscriptions and keep 100% of the revenue."

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In vulgar interview, Scaramucci calls Reince "paranoid schizophrenic"

AP

The New Yorker's Ryan Lizza just posted an account of a conversation that he had last night with White House Communications Director Anthony Scaramucci, wherein Mooch tried to convince Lizza to reveal the source who told him about Sean Hannity and Bill Shine dining at the White House.

Scaramucci apparently believed it to be President Trump's Chief of Staff Reince Priebus, whom he attacked (along with Axios) in a series of tweets last night just after his discussion with Lizza.

On Reince: "I fired one guy the other day. I have three to four people I'll fire tomorrow. I'll get to the person who leaked that to you. Reince Priebus — if you want to leak something — he'll be asked to resign very shortly… Reince is a fucking paranoid schizophrenic, a paranoiac."

More from Scaramucci:

  • Pleading for the source: "You're an American citizen, this is a major catastrophe for the American country. So I'm asking you as an American patriot to give me a sense of who leaked it."
  • His financial disclosures: "[The swamp is] trying to resist me, but it's not going to work. I've done nothing wrong on my financial disclosures, so they're going to have to go fuck themselves."
  • On Steve Bannon: "I'm not Steve Bannon, I'm not trying to suck my own cock. I'm not trying to build my own brand off the fucking strength of the President. I'm here to serve the country."
  • A promise: "Okay, the Mooch showed up a week ago. This is going to get cleaned up very shortly, okay?"
  • His parting words, just before his tweets: "Yeah, let me go, though, because I've gotta start tweeting some shit to make this guy crazy."
Update, Scaramucci tweets: "I sometimes use colorful language. I will refrain in this arena but not give up the passionate fight for @realDonaldTrump's agenda."
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GOP senators put the pressure on the House

Rob Groulx / Axios

Three Republican senators — John McCain, Lindsey Graham and Ron Johnson — put the Senate's "skinny repeal" of the Affordable Care Act in danger Thursday evening, saying they won't vote for it unless Speaker Paul Ryan and his team assure them the bill will go to conference with the House.

"The skinny bill as policy is a disaster," Graham told reporters at a press conference. "I need assurance from the Speaker of the House and his team that if I vote for the skinny bill, it will not become the final product…If I don't get those assurance, I am a no."

But so far, the House has said no such thing. Ryan spokeswoman AshLee Strong said only that a conference committee is "one option under consideration." House leadership aides are very concerned about whether there's anything that can come from a House-Senate conference committee that could pass through the Senate. Why put their members — which have already taken an extremely tough vote — through all of this again, just to get nothing done?

Bottom line: The skinny repeal is actually in mortal danger, and its fate seems to rest, yet again, with Ryan.

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Sessions: Trump's comments were "kind of hurtful"

Pablo Martinez Monsivais / AP

Fox News Channel's Tucker Carlson Tonight will air an exclusive interview with beleaguered Attorney General Jeff Sessions, who checked in from a gang violence discussion in El Salvador to discuss his place in the White House's palace intrigue.

The key quote on Trump's criticism: "It's kind of hurtful but the President of the United States is a strong leader… he wants us all to do our job and that's what I intend to do."

Why it matters: At least for the time being, Sessions is indicating that he's not planning on going anywhere — meaning Trump will have to fire him in order to oust him. Should Trump decide to go down that path, he'll open himself up to actual, sustained criticism from Republican lawmakers, who have begun to circle their wagons around Sessions.