Launched 11 years ago, Facebook has rapidly become the largest social media platform in the world. In 2014, 1.39 billion people logged in each month, and close to a billion people log in every day to connect with friends and share content. If the social network were its own country, its size would be comparable to the population of China or India.

 

Launched 11 years ago, Facebook has rapidly become the largest social media platform in the world. In 2014, 1.39 billion people logged in each month, and close to a billion people log in every day to connect with friends and share content. If the social network were its own country, its size would be comparable to the population of China or India.

Even at its massive size, Facebook continues to grow. The social network’s daily active user base grew by 18% over the past year, while revenue grew even more quickly by 58% to $12.5 billion. The firm has effectively maintained its status as the platform with the broadest reach, while simultaneously proving that its monetization strategies are working.

The theoretical addressable market of a social media platform is the entire population of individuals with access to the internet. As more and more existing internet users connect to Facebook, the firm will soon depend on new internet users for continued growth. A key question for Facebook then, is where this future growth will come from.

We developed the below interactive visualization that plots Facebook penetration vs. internet penetration by country to facilitate an understanding of Facebook’s geographic opportunity. Each country is sized by its population, and we divided the market into three different segments that each have unique growth considerations for Facebook.

> Click to interact on mobile: Facebook Penetration vs Internet Penetration by Country

Core Markets

Facebook currently has an established presence in most countries with above-median internet penetration rates, reaching anywhere between 25-60% of the population in these more developed markets. These countries are in the top right quadrant, and generally have above-average income levels, which is critical for Facebook’s current mobile-focused and ad-based monetization strategy. Consequently, Facebook’s growth efforts, both in revenue and users, in the short to medium term is likely to focus on these countries where the market sizes remain large and there is continued opportunity to grow revenue per user.

However, growth from these markets will eventually slow as they reach saturation. For countries such as the US, most internet users are already on Facebook, and at some point the revenue per user growth potential will diminish. To maintain its long-run growth, Facebook will need to rely on other markets where there is opportunity to grow Facebook’s addressable market size.

Challenging Markets

Countries in the bottom right quadrant – those with high internet penetration, but low Facebook adoption – offer upside potential, but likely at a very high cost. These markets have barriers to Facebook adoption that have proven challenging to overcome. One example is Japan’s Mixi, which is a strong local competitor platform that has already become a dominant force in the country’s social media culture. Another challenge is China. Despite its large population, Facebook remains blocked by the great firewall for many users, providing a market opportunity for Chinese firms such as Tencent’s Qzone (also known as QQ) or Sino’s Weibo to gain scale and develop strong network effects that will be difficult to challenge.

Emerging Opportunities

Perhaps Facebook’s greatest long-run opportunity is in the bottom left quadrant, where both Facebook and internet penetration is low. These emerging markets are likely to offer the greatest potential growth as the more developed markets become fully monetized. The key constraint in these markets is access to the internet. However, it appears that Facebook already has a plan in place to overcome this challenge.

Internet.org, Facebook’s recent initiative aimed at increasing internet penetration by partnering with local operators in low-income countries, is present in 12 countries across Africa, Asia, and South America. These are the countries with the highest growth potential over the coming decades, driven by economic growth, increases in working populations, and greater adoption of consumer technologies. The opportunity is sizable: the UN estimates that close to 4 billion people worldwide lack access to an internet connection. Facebook’s strategy is to speed up investment to connect these markets quickly, and then when they finally do gain internet access, the social network hopes to attain rapid adoption to secure a first-mover advantage.

Looking Forward

The fight for users won’t come easily, as advertisers begin to focus on the next generation of consumers, there is no doubt that Facebook’s competitors have similar aspirations towards these developing markets. The battleground between social media and tech giants may gradually shift from developed Western economies towards emerging markets located in Africa and Southeast Asia.

Despite holding a dominant position in the industry, Facebook’s future is anything but certain. Initiatives such as Internet.org has been criticized for violating the principles of net neutrality (as it offers selected internet services, including Facebook, for free). Google’s Project Loon is being developed as an alternative to speed up internet adoption in emerging countries. China’s own social network ecosystem is developing rapidly and shielded from foreign competition. Amidst these competitive challenges, coupled with increasingly skeptical regulatory environments, Facebook’s path to continued long-run growth remains challenging and unpredictable.