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State of the Screens

How Much Would You Pay For Ad-Free Facebook?

By April 28, 2018No Comments

The big question: Could Facebook release an ad-free version of the service and if so, what would it cost?

In order to answer this question, we need to take a deeper dive into how Facebook makes money.

Facebook revenue per user in 2017:
1) U.S./Canada — $84
2) Non-U.S./Canada — $11

U.S./Canada has 11% of Facebook’s users but accounts for 49%of revenue.

The rest of the world has 89% of Facebook’s users but accounts for 51% of revenue.

Facebook revenue per user in U.S./Canada (% increase):
1)
2016 — $62
2)
2017 — $84 (↑ 35%)

Breakeven: If Facebook charged $7/month, then they would generate the same amount per user as they did in 2017.

Other networks monthly fee:
1) Hulu — $8
2) Spotify — $10
3) Netflix — $11

Our guess: We would not be surprised if Facebook posted a monster revenue number for Q1–2018 which would necessitate a higher $/month for this math to work.

Early indicator: 4C estimated that advertisers spent 62% more on Facebook in Q1–2018 versus Q1–2017.

Flashback #1: Facebook ad costs spiked higher after a big change to its News Feed algorithm

Facebook changes for January 2018:
1) Impressions — ↓ 3%
2) Ad prices — ↑ 122%

Flashback #2: Do Big Advertisers Even Matter to the Platforms?

Advertisers on Facebook by year (% growth):
1) 2016–3M
2) 2017–5M (↑ 67%)

More:
1)
Could Facebook Exist Without Ads?

2) How Much Could Facebook Charge For Non-Ad-Supported Version?

3) What Hearings? Advertisers Still Love Facebook

Michael Beach

Michael Beach

Michael Beach is the Chief Executive Officer of Cross Screen Media, a media analytics and software company that enables marketers to plan, activate, and measure CTV and linear TV at the local level. Michael is also the founder and editor of State of the Screens, a weekly newsletter focused on video advertising that is a must-read for thought leaders in the advertising industry. He has appeared in such publications as PBS Frontline, The Wall Street Journal, The New York Times, Axios, CNBC and Bloomberg, and on NPR’s Planet Money podcast.