I went in thinking I'd just do a DAU times average CPM type breakdown and call it a day.
Break down Facebook's advertising revenue using a bottom-up approach: estimate the number of monthly active users (MAUs), then estimate the portion of users who are monetizable (e.g., excluding those in regions with low ad spend), then estimate average revenue per user (ARPU) based on ad load and pricing. Alternatively, use a top-down approach by estimating total digital ad market size and Facebook's market share. Choose one approach, state assumptions clearly, and calculate.
Pro tip: Show awareness of Facebook's business model: revenue is driven by ad impressions and pricing, which vary by region and user engagement. Mention that ARPU is much higher in North America and Europe compared to Asia-Pacific and Rest of World, and that ad load optimization and pricing power are key levers.
Define what 'Facebook' includes (e.g., core Facebook app vs. Family of Apps) and the time period (e.g., last 12 months). State that you'll estimate global ad revenue for the core Facebook app, excluding Instagram, WhatsApp, etc.
Estimate Facebook's global monthly active users (MAUs) and daily active users (DAUs). Use known figures (e.g., ~3 billion MAUs) or reason from internet penetration and social media adoption.
Divide users into regions (North America, Europe, Asia-Pacific, Rest of World) because ARPU varies significantly. Estimate the number of monetizable users (e.g., those who see ads) in each region.
For each region, estimate average revenue per user (ARPU) by considering ad load (number of ads shown per user per day) and average price per ad (CPM). Use known benchmarks or reason from market data.
Multiply users by ARPU for each region and sum to get total ad revenue. Compare with known figures (e.g., Facebook's 2022 ad revenue was ~$113 billion) to validate your estimate.
AI-generated suggestions, not part of the candidate's original notes. May be inaccurate — verify before relying on them.