One of the questions we often get asked is how much is spent on ads in political campaigns.
In the UK, political parties must report a breakdown of their expenditure. It’s therefore possible to work out how much they spent on Facebook ads in total during a campaign. However, they don’t share their ad analytics (if they did, we’d have ad transparency, which is what we’re calling for!), so we don’t know exactly what they pay per ad, or per person who sees their ad.
For an individual ad or user the spending is hard to calculate, let alone relate to. Marketers typically describe the numbers in terms of CPMs, CPCs, impressions and so on and the prices themselves fluctuate dramatically, depending on many criteria.
So is there a simpler question that would help people understand the value (to Facebook) and cost (to the advertiser)?
Take a typical visit.
You go to Facebook. Spend a few minutes. Read a few posts. Like a couple. Post a comment. Scroll past an ad or three and leave.
How much revenue did Facebook generate from your visit?
In this post, we try and approximate this from a few pieces of publicly available information. (This is very back of the envelope stuff and shouldn’t be considered authoritative. If you have suggestions about how to refine and improve the calculation, please let us know).
Facebook’s revenue per user: $26 a quarter
Let’s start by looking at Facebook’s Q4 2017 investor report, which provides information about the Average Revenue Per User (ARPU) of Facebook by global region. This is the income from advertising that Facebook makes per person, in each three month period.
In the US, it was $26.26 for the quarter. For Europe, it was less – only $8.71. In Asia Pacific, it was $2.52 and in the Rest of the World, it was just $1.85. These numbers have increased in each region for four successive quarters in a row. They’ll probably continue to increase in Q1 2018 and beyond, but for now, let’s use them as our starting point.
Time spent on Facebook: 30 minutes a day
How much time do people spend on Facebook per quarter? This is a more contested figure, and it’s somewhat difficult to get a specific breakdown of the time people spend on Facebook vs. the time people spend on Facebook products (i.e. including Whatsapp, Messenger and Instagram).
In 2016, the company reported that the average user was spending 50 minutes per day using their products.
eMarketer suggests the number for Facebook alone was 41 minutes per US adult per day in 2017. Data for other regions was not available.
In their most recent earnings call, Facebook suggested that use had fallen by 50 million hours a day, or 5%, which suggests about a billion hours are spent on the site per day, equivalent to about 30 minutes per user per day (based on a little over 2 billion users).
It’s unlikely that Facebook’s revenue is solely a function of time spent on site (in other words $26.26 ARPU for the US is not a result of US users being on the platform three times longer per day than European users, although it’s likely there is a difference), so let’s take 30 minutes as a good ballpark figure for average use per day.
The calculation: Facebook revenue per user per minute on the platform
And now we have what we need:
- 30 minutes per day is around 2,750 minutes per quarter.
- $26.26 / 2,750 = Approximately 1¢/minute spent on Facebook for a US user.
If you’re in Europe, the number is 0.3¢ a minute. (The figure is probably higher in some countries – likely closer to the US number).
If you’re in Asia Pacific, the number is 0.2¢ a minute.
And in the rest of the world it’s 0.07¢ a minute.
Each of those minutes adds up to $12.7bn in revenue for the company, in just the last three months of 2017.
A few further thoughts, in no particular order:
- Facebook ad costs vary enormously, and depend on many factors, with the benchmark CPM (cost per thousand impressions) being between $5 and $10 (equating to 0.5¢ to 1¢ per impression). Very well optimised ads (e.g. promoting highly relevant and viral content) seem to get much lower CPMs than this. If you know how many ads per minute people see, you could work out revenue per minute of use by multiplying it by one of these CPM benchmarks. We might try and do that, and see if the numbers add up.
- Do political ads cost more or less than other ads? Or is it totally dependent on context, content and the audience segments targeted? It’s certainly possible that ads are very expensive (i.e. from competitive auctions) in the days before an election.
- Someone out there probably knows how this compares with TV ad rates and revenues/minute.
- We hope to be able to incorporate this calculation into Who Targets Me in a forthcoming (and quite large) update to the software to give you a personalised figure.
Also published on Medium.