Facebook makes more money per user than rivals, but it’s running out of growth options
Snap and Pinterest, whose blowout financial results led to large stock spikes last week, both managed double digit year-over-year growth in users, revenue and ARPU. Though there is still lots of room to grow, given how far their ARPUs lag Facebook’s, they are heading in the right direction with their new advertising strategies.
Snap grew ARPU to $2.73 last quarter, up 28% year over year. Its daily active users reached 249 million, up 18% year over year, and revenue increased to $679 million, up 52% year over year.
In prepared remarks about earnings, CFO Derek Andersen cited Snap’s investment in original content as a factor in its ability to grow ARPU. Snap has invested in original shows, as well as content developed in partnership with other media companies.
In advertising more generally, Snap noted recent releases such as Dynamic Ads, which allows ads to update in real time after advertisers upload their product catalog, and augmented reality capabilities such as virtual “try-ons.”
Pinterest saw similarly big numbers last quarter, when it grew ARPU to $1.03, up 15% year over year. Monthly active users reached 442 million, up 37%, and revenue grew to $443 million, up 58%.
The company highlighted recent releases such as automated bidding for ads, which helps advertisers optimize engagement for a given budget, and a suite of merchant tools such as storefront profiles and product tags, which aim to deliver more value.
Pinterest reported an increase in ARPU, more so than a rise in users, drove both U.S. and international revenue growth, but noted geographic expansion presented a “headwind to global ARPU growth.” Pinterest’s international users grew faster than U.S. users in the last quarter, but it is in earlier stages of developing an ad strategy overseas. Pinterest’s international ARPU was just 21 cents last quarter.
Lower international ARPU holds true for all these companies, and monetizing the rest of the world will be a challenge as they rely more on overseas user growth.