beyondbrics

One of the big stories of the week was Facebook filing for a $5bn initial public offering, which values the social network at $80bn and will make various founders and investors very rich.

But given that the value of the company is based on the content created by its users, how much are Facebook’s users worth to the company? And specifically, those in emerging markets? Chart of the week delves into the data to find out…

First things first. Facebook has a LOT of users – over 800m. But not everywhere: China is a relatively-untouched market, with only approximately 500,000 people signed up. But the increase in Facebook users in emerging markets is fuelling a lot of the user growth. India and Brazil are adding millions by the month, with India now having the second highest number of total users. In fact, of the top 15 countries by Facebook users, eight are emerging economies, including four of the top five: India, Indonesia, Brazil, and Mexico.

Source: Facebook, Socialbakers

So how can we measure the value of Facebook users?

Beyondbrics has taken the breakdown of Facebook users per country, and weighted them using GDP per head (at purchasing power parity), and then used that weighting to see which country contributes most to the reported $80bn value of the company.

Clearly, emerging markets are going to lose out here: but it’s interesting by how much. Brazil, with nearly 5 per cent of Facebook users, on our weighted score contributes only 2.4 per cent of the Facebook valuation ($1.89bn). India, with nearly 5.7 per cent of users, contributes less than 1 per cent of the weighted value. The US has 20.4 per cent of Facebook users, but with it’s high GDP per head that works out at over 40 per cent of the current valuation ($32.7bn). Similarly the UK, Germany and France all contribute more in valuation than their place in the user ranking suggests.

Source: Facebook, Socialbakers

So on the face of it, Facebook will derive more revenue from developed markets because they are richer – for now. But isn’t it reaching saturation point? The growth and potential revenue is all in emerging markets, surely? It is easy to get excited by the low penetration rates of Facebook users in EMs, when places like Indonesia have only 17.7 per cent of the population online, compared to over 50 per cent in the US.

However, penetration rates are misleading – they are low for emerging markets when looking at the entire population, but are much closer to the rates in developed markets when looking at the proportion of the online population. Which means they are, in effect, closer to the same saturation point as they are in the US and Europe. In fact, in many EMs, they are way ahead: 53 per cent in India, 89 per cent in Turkey, 92 per cent in the Philippines, even over 100 per cent in Indonesia and Mexico (meaning many people must have more than one account, for some reason).

Source: Facebook, Socialbakers

What does this mean? Facebook may have a long way to go in emerging markets – but only in so far as people aren’t online yet. The site is constrained by the rollout and costs of fixed-line access or mobile internet connectivity. These are infrastructure issues, not a question of marketing or signup rates.

Facebook may well be the platform of choice for many emerging markets – but they have to get online first. And for company revenues, developed markets will still be the best bet for a while at least.

Related reading:
EMs following Brazil into Twitter, beyondbrics
Facebook serves notice on $5bn IPO, FT
Graphic: The Facebook richlist, FT
African twitter: mind the donkeys, beyondbrics
Facebook: bigger and bigger in LatAm, beyondbrics