VERIZON (INCLUDES YAHOO STARTING 2017)
0
10
20
30
40
50
60
70
80%
2008 2010 2012 2014 2016 2018 2020
REVENUE SHARE FROM DIGITAL ADS IN THE U.S.
SOURCE: EMARKETER
51
FORTUNE.COM // APR.1.19
ous business model. What began as Facebook
.com, the original Facebook, has become
positively becalmed. “The majority of growth
is coming from Instagram, with core Face-
book revenue growth likely to hit high single
digits sometime next year,” Stifel analyst Scott
Devitt writes to clients. He says other Internet
companies make for better investments.I
IN 2012, USAMA FAY YAD enlisted two French
Ph.D.s in an ambitious project. Their task was
to figure out just how accurately Facebook
could determine an individual user’s purchas-
ing behavior, based on the data available to
the growing Silicon Valley company, which
had about a billion users at the time. He made
himself the subject of the study.
Fayyad was no random sample. Nearly a
decade earlier, he had been Yahoo’s first chief
data officer after the then-booming Internet
company acquired his data-mining startup,
DMX Group. Yahoo grew its ad business from
$20 million to $500 million during Fayyad’s
time there, pioneering the use of behavioral
targeting of users. Now, as the chief technol-
ogy officer of Blue Kangaroo, a personalized
shopping app for mobile devices, he was
trying to assess the effectiveness of Facebook’s
ads. (Spoiler alert: They were, and are, ex-
tremely effective.)
Because of his insider’s wariness of sharing
too much personal data online, Fayyad’s own
digital footprint on Facebook was limited.
He had created a Facebook account soon
after non–college students were allowed to,
in 2006, but he had very few defining details
on his page. Fayyad hadn’t joined any groups
and didn’t comment on other people’s posts.
And while he had accrued several thousand
“friends,” the vast majority weren’t people he
regularly interacted with. As it turned out,
Facebook’s knowledge of the habits of Fayyad’s
acquaintances was more than enough to guess
the kinds of purchasing decisions he was
likely to make. “The shopping ‘signal’ for me
was pretty strong,” he says. “Your friends are
very likely to like what you like.”
In the years since Fayyad’s study, Facebook’s
ability to target customers has only improved
as its data sources have grown. Much of thattimes what it collects in the Asia Pacific region.
From a financial perspective, at least, the
growth is in the wrong part of the world. “We
expect that user growth in the future will be
primarily concentrated in those regions where
[average per-user revenue] is relatively lower,”
the company said in its 10-K annual report,
filed in January. Sandberg professes to be
unconcerned about the trend. “We don’t really
prioritize countries and user growth based on
monetization opportunities,” she says. “We
want to connect everyone.”
The geographic mix is just one macro issue
buffeting Facebook’s business. Its newer en-
terprises, including Instagram (purchased in
2012 for $1 billion) and WhatsApp (acquired
for $22 billion in 2014) haven’t yet trans-
lated into big revenue opportunities, though
Instagram has been growing rapidly. Whats-
App, in particular, has huge global reach—it
has 1.5 billion users worldwide—but no obvi-