Facebook: Internet.org Will Increase MAUs At The Cost Of ARPU

Source: Facebook

In Q4, 2014, Facebook (NASDAQ: FB) beat estimates with $3.85 billion in revenue, while user base grew 3.18% Q/Q to 1.39 billion. Facebook’s user growth in Europe and North America is saturated. However, there is enough potential for user growth in emerging markets. The Internet.org project will help in adding more users in these markets.

India
Facebook has more than 99 million mobile users in India. By 2017, Facebook’s mobile user base in India will touch 145.9 million, making it the largest mobile user base after the U.S.
Recently, Facebook partnered with Reliance Communications Limited (NSE:RLCM) (or RCom) to bring Internet.org project to India. Rcom subscribers in six Indian states will get free internet access to Facebook Messenger, Facebook Lite and a list of 33 websites. The service will be available on 2G & 3G platforms through internet.org Android app. Facebook Lite will enable users to connect to the internet on slower 2G networks.

Rcom’s market share in Indian telecom market is 11.26%, while Bharti Airtel Ltd. (NSE:BRTI), Vodafone (NASDAQ:VOD), Idea have 23.01%, 18.93%, and 15.95% market share. It is likely that Facebook is testing this service before expanding partnership with other Indian telecom players. India contributes only 0.1% to Facebook’s revenue and this move will enable to add users along with revenue. However, the Indian online advertising market is small and expected to grow from $444.7 million in 2014 to $1 billion in 2016. Thus user additions may not lead to improvement in advertising revenue.

Other countries

Facebook provides three basic internet services to 6 million people in Zambia, Tanzania, Ghana, Kenya, and Columbia through Internet.org project. Nearly 150 million people living in these countries can be connected to the internet. However, there is high poverty in these countries. Adding new users will increase user base but revenue generation may not be significant.

Final Thoughts

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Source: Facebook

Facebook’s ARPU from North America and Europe is higher than Asia-Pacific and Rest of World. The Internet.org project will affect Worldwide ARPU as it will increase MAUs from regions having low ARPU.