Sheryl Sandberg Thinks Facebook Inc. Is Undermonetized -- and She Couldn't Be More Right

At the Morgan Stanley Technology, Media, and Telecom conference last week, Facebook COO Sheryl Sandberg and CFO Dave Wehner answered questions about the company. At one point, Sandberg compared time spent on Facebook to time spent on print media and pointed to a clear indication that Facebook has room to grow.

"Right now in the U.S., consumers spend about 25% of their media time on mobile, and it's about 10% of the [ad] budget," she said. "And to put that in perspective that means U.S. marketers spent about $0.07 per [hour] ... on mobile compared to $0.80 on print."

What's more, there are already several indications that Facebook will capture a larger share of mobile ad spend than its already huge share of time spent on mobile. As such, Facebook still has lots of room to grow revenue.

Facebook continues to roll out new ad services like Product Ads to increase ad spend. Source: Facebook.

People spend a lot of time on FacebookThe average Facebook user in the U.S. spends about 40 minutes on the website or app every day, according to Facebook CEO Mark Zuckerberg. One in every five minutes spent on a mobile device in the U.S. is with a Facebook app, or about 33 minutes a day for the average user.

A large chunk of that time is spent on Instagram. On the company's third-quarter earnings call, Zuckerberg said the average Instagram user spends 21 minutes per day with the app. With a user base just 21% of Facebook's, Instagram accounts for about 4.5 minutes of the average Facebook user's time on Facebook. And the amount of revenue coming from the popular photo-sharing app is still minimal.

Facebook is also seeing time spent on its other apps that don't generate significant revenue. Facebook Messenger and WhatsApp are tremendously popular and equally unprofitable.

So even if Facebook monetized its U.S. users at just $0.07 per minute across its entire app ecosystem, it's still generating a significant amount of revenue. That's about $14 per user in ad revenue over the course of a year. In reality, Facebook generated about $16.80 from its average user from mobile advertising.

Despite all of the time spent on apps that drag down Facebook's average, it's still generating above-average advertising revenue.

How does this compare?The average Twitter user in the U.S. spends about seven minutes per day on the app. Last year, Twitter generated approximately $11.53 per user from mobile users. That translates into $0.27 per hour spent on Twitter's mobile app -- significantly more than Facebook's $0.08.

Twitter's success in getting the most out of the relatively little time spent on its app compared with Facebook should encourage Facebook investors. It's proof that the time spent on Facebook is worth much more than it's being valued at today, and eventually ad spend will catch up.

The shift from one ad platform to the next always lags behind engagement. Despite time spent on mobile surpassing television and print, no advertising exec is going to get fired because he or she bought a 30-second spot during The Blacklist or a spread in Cosmo. Sandberg likened it to the old saying about IBM -- "Nobody ever got fired for buying an IBM."

Eventually, more ad dollars will shift to mobile. Facebook is positioned with superior mobile ad products and a huge amount of time spent on its platforms to capitalize on that shift. In the meantime, its competitors show that there's still plenty of room for improvement even in today's environment.

The article Sheryl Sandberg Thinks Facebook Inc. Is Undermonetized -- and She Couldn't Be More Right originally appeared on

Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, Facebook, International Business Machines, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.