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Facebook’s Mobile Platform Race

As we previously discussed, in its fourth quarter earnings slides, Facebook for the first time provided color on mobile only user base growth since Q4 2011. Growth in mobile only monthly active users rose to 157 million in the fourth quarter. While the emphasis on mobile only users represents a shift in Facebook’s focus, it is important to remember that Facebook’s mobile only emphasis really started with its purchase of Instagram on April 12, 2012.

It is instructive to contrast the user base growth of both platforms. While Instagram has provided sporadic updates on its user base growth, and it is unclear whether Instagram has reported monthly active users or total registrations, the chart shows that Instagram has been growing quickly, notably without the benefit of Facebook’s network effect on Instagram’s user base growth until at least its acquisition by Facebook at month 18 in the chart.

Facebook (mobile only) and Instagram User Growth

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Facebook’s Payments Flatline

At a glace, Facebook appears to have realized an increase in payments revenue in Q4 2012; however, upon closer inspection we can see that payments revenue from the quarter was actually flat (barring a one-time accounting recognition). In fact, Facebook advised investors of this development in its 10-Q filing, where it remarked that an accounting change would recognize deferred revenue in the fourth quarter.

In its October 24 10-Q filing, the company explained that its terms and conditions provide for a 30-day claim period where a customer may dispute a virtual goods transaction. Facebook’s payments revenue deference stems from the company’s admission that it would not be able to reasonably or reliably estimate future refunds or chargebacks arising during the claim period, due to a lack of historical transactional information.1

Facebook’s 8-K shows $256 million in revenue from payments and other fees in the fourth quarter. Adjusting for the $66 million in deferred revenue, we can see that revenue remained essentially unchanged, compared both to the previous quarter and the year ago quarter. Assuming approximately $190 million in payments revenue in the quarter, Facebook saw only a 7% increase over the previous quarter, and a more modest 1% increase over the year-ago quarter.2

Facebook's payments revenue

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Revisiting Facebook’s Emerging Market ARPU

In our earlier analysis, we looked at Facebook’s emerging market average revenue per user (ARPU). We saw that while Asia and rest of world regions showed the highest rate of user base growth, they also showed the lowest ARPU. After two quarters, we can reassess Facebook’s ARPU story, taking a closer look at user growth trends and concurrent ARPU, while also considering the affect of mobile monetization in Facebook’s fastest growing regions.

Facebook continues to see healthy user base growth in its emerging markets. In the past two quarters, Facebook’s user base in Asia and rest of world regions, measured by monthly active users (MAUs), grew by 8.6% and 7.6%, respectively. Facebook saw 298 million MAUs in Asia in the quarter, and 304 million MAUs in rest of world region in the quarter. Combined, these regions represent 57% of Facebook’s overall MAUs. In absolute terms, Asia and rest of world regions continue to outgrow Facebook’s established markets.1

The average revenue per user story for Facebook’s emerging markets over the past two quarters is more positive, showing good revenue growth relative to user base growth in Asia and rest of world. In the third quarter, the company averaged $0.58 per user in Asia and $0.47 per user in rest of world region. In the fourth quarter, Facebook averaged $0.69 per user in Asia, and $0.56 per user in rest of world. Accordingly, the company saw a 5% and 18% increase in ARPU over the third quarter, respectively.

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Continuance - Facebook Analysis by . @jonmilani. Copyright © 2017. All rights reserved. Hosted by (mt) Media Temple.