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Could the News Feed Revamp Slow Facebook’s ARPU Growth?

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Spending less time on Facebook

Following the recent News Feed changes, Facebook’s (FB) CEO, Mark Zuckerberg, reached out to users and investors in a blog post. “Now, I want to be clear: by making these changes, I expect the time people spend on Facebook and some measures of engagement will go down.”

Zuckerberg’s warning about people spending less time on Facebook as a result of the News Feed overhaul quickly turned the focus on how this might impact the financial value the company garners from each user, also known as ARPU (average revenue per user).

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ARPU grew over 26%

Facebook’s worldwide ARPU was $5.07 in 3Q17, representing an increase of 26.4% YoY (year-over-year). Snap’s (SNAP) worldwide ARPU was $1.17 in 3Q17, an increase of 39.3% YoY.

Platform time matters in video ads

For social media companies like Facebook, the time users spend on a platform and the number of ads they choose to view affects its ARPU. This is particularly important when it comes to video advertising, an area in which Facebook has recently stepped up its campaigns.

Since Facebook announced the News Feed changes in early January, the upcoming 4Q17 report is not expected to reflect the impact of the move on ARPU. However, we’ll pay attention to what its management says about the impact on its future ARPU.

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