Prospects for Facebook’s Payments Business [SeekingAlpha Exclusive]

When we last looked at Facebook’s (NASDAQ:FB) payments business we predicted that revenue would plateau as more of its user base transitioned to mobile usage. We made this deduction by observing the trend in payments revenue and ARPU in Asia and rest of world regions, where platform usage is mobile-first or mobile-only. We can now conclude that payments revenue has plateaued as Facebook continues its structural shift to mobile. Further, by using games revenue as an indicator we can deduce that payments revenue will remain flat or decline in the short run.

Payments revenue in Q1 2015 was $226 million, a decline of 5% over the year-ago quarter. According to the company, the year-over-year decrease in payments revenue resulted from a decline in revenue (including in-app transaction revenue) from games played on Facebook on desktop computers. Games revenue makes up materially all of Facebook’s payments revenue, so it serves as a strong proxy for the viability of the payments business. The downward trend in games revenue has been acknowledged by Facebook in successive earnings calls since Q3 2014, and it is reflected in flat revenue for payments.

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