> Facebook's average revenue per user (ARPU) is ~$10/quarter[0], and 6x that in the US.
Can someone explain this to me? Why is it so high? Even if every single person on Facebook buys a product because of ads once per year, doesn't that mean companies are paying $240 to acquire a customer in the US? Is it worth that?
My first though was that maybe 1% of users buy something in a given year, but that's $24k to acquire a customer and is so far from reality that my perspective must be way off.
>> Facebook's average revenue per user (ARPU) is ~$10/quarter[0], and 6x that in the US.
> Can someone explain this to me? Why is it so high? Even if every single person on Facebook buys a product because of ads once per year, doesn't that mean companies are paying $240 to acquire a customer in the US? Is it worth that?
1. I wouldn't be surprised if lots of businesses lose money on their Facebook ads, but either don't realize it or Facebook has enough churn that it doesn't matter if the quit (e.g. a revolving door of unsophisticated local businesses spending money on Facebook because it's the biggest game in town).
2. A lot of advertising is broad "brand awareness," and I imagine it's actually very hard to determine if it's actually working in many cases.
Not quite $240, but Netflix apparently spends about $100 for customer acquisition [1] (data is a few years old). I imagine the other streaming sites have similar unit economics.
In consumer finance, CACs are even higher. For standard credit cards it’s around $200 but can be over $1000 for premium cards.
Our CAC is higher than $240. Lots of services are. When you start thinking about a customer being worth multiples of their revenue (not even profit) it makes a lot of sense.
Also, online advertising can lead to in store sales. When you look at those dollars people spend a couple orders of magnitude more than $240 on stuff every year.
Meta's reach is gigantic, their data is detailed and expansive. You're actually paying less on average when spending on Meta platforms than you are elsewhere, and likely getting more back. This is why companies are comfortable with throwing an ad campaign on Meta platforms just to get email signups, there was a blog on Shopify where a smaller company talked about spending $5000 for a newsletter ad, and per new subscriber they only spent $1.50 on the ad campaign. Even though technically they've really lost money on such a situation, they feel comfortable doing it again on calculations for future revenue.
The most successful marketing campaign of all time is the marketing team convincing everyone that marketing works.
Of course the money is all being spaffed for nothing. It doesn’t take a degree in applied ecosystem analysis from Aberyswyth Technical College to figure out that Coke spending 50m on a christmas campaign doesn’t sell anymore Coke.
A another way to estimate how many conversions is looking at the average price, at average conversion rates. Right now average cost for 1000 impressions is about $10 based on revealbot, for the US. If the conversion rate was 0.1%, $240 a year revenue per user means 24 conversions per year, that the average US facebook user is buying two products per month. 0.1% is on the low end
I would doubt it. There aren't going to be many companies publicly discussing their CACs, and if it did exist what would someone do with the information?
Can someone explain this to me? Why is it so high? Even if every single person on Facebook buys a product because of ads once per year, doesn't that mean companies are paying $240 to acquire a customer in the US? Is it worth that?
My first though was that maybe 1% of users buy something in a given year, but that's $24k to acquire a customer and is so far from reality that my perspective must be way off.