How much money does FB make off of you?
06.22.2020 - Today's market sizing exercise
Hello Case Dojo,
You've probably seen a lot of Facebook and Instagram ads, some that make you scratch your head and ask “why did I get recommended this?” and others that make you suspicious that your phone is listening to your conversations. Let’s find out how much money advertisers actually pay for these. Good luck and have fun!
Reminders
Spell out your thinking process, state your assumptions, and evaluate your final answer. There are many valid approaches to each problem.
No calculators are allowed, so make the math easy for yourself.
Try to come to an answer within 3-4 minutes at the longest (here’s a timer).
Today’s Question
How much money did Instagram & Facebook make off of you from ads in 2019?
Our sample answer
How we broke things down
We want to know how many ads we see and multiply that by the price to the advertisers to push those ads to us.
We split this problem into two types of ads — ones that you click into and ones where you see but don't click into.
We can estimate the # of ads clicked into and seen per day, work it up to per year.
Then, we guess the $/click or $/impression, and get our final answer!
Assumptions we made
# of ads you click per hour = 2.
# of ads you see per hour = 20.
# of hours on Instagram per day = 1.
# of hours on FB per day = 0.5 (these four figures are from personal experience).
# of weeks in a year = 50 (so it's easy to calculate).
Cost per click = $1.
Cost per impression = $0.01 (FB sometimes charges based on cost per 1000 impressions, so estimating that 1000 impressions may cost $10).
Our evaluation
We arrived at $165 per person. This could be an underestimate because there are outlier days where I spent an inordinate amount of time on social media, which would increase my # of hours on each platform per day.
Other potential approaches we like
Estimate the amount that all ads make off of you per day, and take the market share of FB & IG
Segment ads into less invasive ads (those that show up on your feed and you can scroll past) vs. more invasive ads (those that stop a video you're watching or a post you're opening)
Actual answer
It depends on where you are!
Worldwide, it's $28.82 per user per year.
In Europe, it's $43.47 per user per year.
In the US and Canada, it's $136.65 per user per year.
Extras
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🤠 Fun Fact
Facebook once had a language setting for "English (Pirate)", so you can weigh anchor into Facebook, check yer bottle o' messages, and check which o' yer mateys arr aboard!
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