India Maybe The Second Largest Market For Facebook But It Still Has A Revenue Problem

Reuters reported that Facebook still earns 15 cents per user in India every quarter, compared to the $7 to $8 it makes on each U.S user.

Facebook had a positive quarter in Q2 2015. The company posted revenues of $4.04 billion and beat analyst consensus revenue estimates for the quarter by about $50 million. Facebook now has 1.49 billion monthly users, up 3.47 percent quarter over quarter, which was a bit slower than Q1’s 3.6 percent growth.

The company also stated that on average it made $2.61 in ad revenue on each user worldwide during the quarter. In the US and Canada, the figure was much higher: $8.63. Approximately 49% of revenue was generated in the US and Canada.

When it is about revenues developed markets are still not a concern but developing markets are. Facebook, which has 132 million users in India, second biggest market after US for the social network is still paying very little. Facebook earns 15 cents per user in India every quarter, compared to the $7 to $8 it makes on each U.S. user, reported Reuters.

Further, the article states that Facebook does not break out its revenues in India, but Neil Shah, an analyst at Counterpoint Research, a Hong Kong-based technology consulting firm, estimates it brings in $15 million a quarter, far behind the $350 million he estimates Google earns there per quarter.

This isn’t good news for Facebook and the marketers in the country who need a confidence boost and still prefer to go with TV.

Facebook has been focusing on emerging markets for quite some time with innovative ideas. But the challenge has been to spike up revenues from emerging countries. Last year ET reported that India market accounts for less than 0.1% of Facebook’s revenues.

One of the primary reasons why Facebook has performed badly on the revenues side is due to the country’s infrastructure. Although India has been an actively growing smartphone market in Asia, it is still dominated by feature phones, a market where Facebook’s targeted advanced advertising products fail to work.

In fact mid last year it was reported that the social network had witnessed a 63% rise in profits during the 2013 financial year. Facebook India reported profit after tax of about Rs 9.6 crore for the year ended March 2013, compared with Rs 5.9 crore the previous year. Though the social network made profits but they were really small in comparison to markets like US and Canada.

Earlier this year during the month of June, Reuters reported that overseas markets bring in more advertising revenue than the United States for Facebook Inc, amounting to 51 percent of global ad sales in the first quarter, with growth in Asia the fastest in the world at 57 percent, company executives told Reuters.

Total advertising revenue for the quarter increased 46 percent to $3.3 billion, the vast majority of Facebook’s $3.5 billion in quarterly revenue. Fifty-one percent of total ad revenue would be about $1.7 billion for international markets. International advertising revenue rose 36 percent from a year earlier, Facebook said.

Mobile advertising represented more than 70 percent of Facebook’s total ad revenue, and mobile is particularly strong and attractive to advertisers in emerging markets, Carolyn Everson, vice president, global marketing solutions at Facebook said.

However, it still looks like the social networking giant will have to invest more and be patient for few more years before it starts seeing revenues from the social network and the messaging apps. The good news here is that Facebook, Messenger and Whatsapp remain the actively used social network and messaging apps in the country.