If you compare to Europe, most economic factors are similar. There are significantly more ads on television, billboards, even benches, but if anything, that would mean more surface to compete with Facebook. Small and medium companies are more likely to advertise, too -- but again, that doesn’t explain how large the difference is. There is more inequality which means more disposable income overall but not an order of magnitude more.
I have not looked at it when I worked for Facebook, so this is pure speculation, but I would suspect that this is due to saturation and data quality:
- ads are auctioned off at the equivalent of a second price meaning, an ad buyer pays enough to compensate for the second best offer (compensating for expected conversion); if you look at the revenue as a function of ratio of ads to customers, that means that there is a discontinuity when (targeted) ads become more common than available slots: they bid against each other and not against poorly targeted ads, raising the second price;
- ad targeting: there are more specific targeting options in the US; I was very taken aback to see ethic background was one (at the request of minority advocacy groups, actually); I suspect that gender orientation is; a third party was also offering income-level (an option now discontinued after the CA scandal); there are more. Better targeting allows far more valuable ads, but higher value per clic but also a higher conversion, which means a higher auction level (bid * estimated conversion).
I have not looked at it when I worked for Facebook, so this is pure speculation, but I would suspect that this is due to saturation and data quality:
- ads are auctioned off at the equivalent of a second price meaning, an ad buyer pays enough to compensate for the second best offer (compensating for expected conversion); if you look at the revenue as a function of ratio of ads to customers, that means that there is a discontinuity when (targeted) ads become more common than available slots: they bid against each other and not against poorly targeted ads, raising the second price;
- ad targeting: there are more specific targeting options in the US; I was very taken aback to see ethic background was one (at the request of minority advocacy groups, actually); I suspect that gender orientation is; a third party was also offering income-level (an option now discontinued after the CA scandal); there are more. Better targeting allows far more valuable ads, but higher value per clic but also a higher conversion, which means a higher auction level (bid * estimated conversion).