How Has The Efficiency Of Facebook’s Sales And Marketing Spending Evolved?

Facebook’s (NASDAQ:FB) marginal increase in revenue per incremental dollar spent in revenue has remained sustainably high due to Facebook’s highly engaged user community. After declining in 2018, Trefis expects the company’s sales and marketing (S&M) efficiency to go up in 2019 on the back of the company’s investments in 2018.

Our interactive dashboard on the Efficiency Of Facebook’s S&M Spending outlines our estimates. You can modify any of the key drivers to visualize the impact of changes, and see all Trefis technology company data here.

Per the company’s 10K for 2018, S&M expenses consist of, “salaries, share-based compensation, and benefits for our employees engaged in sales, sales support, marketing, business development, and customer service functions. Our marketing and sales expenses also include marketing and promotional expenditures, and professional services such as content reviewers.”

Facebook’s sales and marketing expenses increased substantially in 2018 to over $3 billion, as it invested heavily in “community operations” in order to improve the security and health of its platform. We note that a large part of this investment may already be done, and 2019 may begin to see the benefits of these investments by way of higher S&M efficiency.

We estimate that Facebook’s Sales and Marketing expenses are likely to witness much less growth in 2019 than what was seen in 2018. Management commentary suggests that it continues to deploy additional manpower to check the spread of problematic content. Furthermore, the company has been supplementing its manual efforts with AI and ML tools to enhance the efficiency of its overall efforts. Facebook has also been setting up ‘war rooms’ for important events such as elections.

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