Facebook Wants All Two Billion Internet Users, But Growth Rates Are Slowing

Make no mistake about Facebook’s ambitions. “There are more than two billion global Internet users,” its S-1 filing states, “…and we aim to connect all of them.” As evidence of its ability to reach this goal, the company says that it already has some countries with above 80% penetration rates among users.

The problem, as the filing also notes, is that “our rates of user and revenue growth will decline over time.” A quick analysis of the worldwide monthly and daily active user counts in the document shows this phenomenon is already in full effect. From quarterly gains of above 20% for much of 2009, both monthly and daily increases fell to above 10% in 2010, and then to the single digits in 2011.

The good news for Facebook is that the numerical gains don’t show as clear of a decline. While the last quarter of 2011 ended a little lower than many previous ones, at 45 million new MAU and 26 million new DAU, that has yet to be a trend. Growth rates inherently decline as size increases, so Facebook could eventually get much bigger than its current 845 million MAU and 483 million DAU if it continues to grow month over month, even if the rate of growth declines further.

Facebook’s filing, meanwhile, shares a little more about how it’s going to get bigger — basically, by continuing to grow in populated countries where it is still small, as you can read between the lines here:

We have achieved varying levels of penetration within the population of Internet users in different countries. For example, in countries such as Chile, Turkey, and Venezuela we estimate that we have penetration rates of greater than 80% of Internet users; in countries such as the United Kingdom and the United States we estimate that we have penetration rates of approximately 60%; in countries such as Brazil, Germany, and India we estimate that we have penetration rates o approximately 20-30%; in countries such as Japan, Russia, and South Korea we estimate that we have penetration rates of less than 15%; and in China, where Facebook access is restricted, we have near 0% penetration.

The company goes on to say that it expects its monthly active user counts to continue growing as more and more of the 6.8 billion people in the world get broadband and mobile internet access, particularly in developing markets. “Growth in MAUs depends on our ability to retain our current users, re-engage with inactive users, and add new users, including by extending our reach across mobile platforms.”

But the filing also includes a word of warning about further growth rate declines:

We believe that our rates of user and revenue growth will decline over time. For example, our annual revenue grew 154% from 2009 to 2010 and 88% from 2010 to 2011. Historically, our user growth has been a primary driver of growth in our revenue. Our user growth and revenue growth rates will inevitably slow as we achieve higher market penetration rates, as our revenue increases to higher levels, and as we experience increased competition. As our growth rates decline, investors’ perceptions of our business may be adversely affected and the market price of our Class A common stock could decline.

[Top image via NASA]