Archived entries for ARPU

An Uptick in Facebook’s Payments Business

As we noted in February, Facebook recorded an increase in payments revenue in the fourth quarter of 2012; however, the increase in payments revenue was the result of deferred revenue recognition. In fact, when accounting for the $66 million in deferred revenue, Facebook’s payments revenue remained essentially unchanged over the year ago quarter. We concluded that Facebook’s payments business has remained flat for the past five quarters.

However, Facebook’s Q1 2013 earnings shows a slightly different picture for Facebook’s payments business. According to its 10-Q, Facebook earned $213 million in revenue from payments and other fees, a 15% increase from the year ago quarter. According to the company, the uptick in quarterly payments revenue is primarily the result of increased games revenue, and to a lesser extent revenue from Promoted Posts and Gifts.1

Facebook’s payments revenue from games increased by 12%; however, the company admitted that when accounting for deferred revenue recognition in the fourth quarter, the increase in payments revenue over the year ago quarter was closer to 6%. Despite a 37% decline in bookings from Zynga, Facebook’s largest games developer, the company still enjoyed a 60% increase in games-related payments volumes.

Facebook's payments business revenue by region

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Slowing Growth in Facebook’s Mature Regions

In our earlier analyses, we observed that Facebook’s user base growth in North America region was outpaced by Facebook’s other regions, especially its emerging market regions Asia and rest of world. In fact, Facebook’s S-1 filing revealed to an extent that this was occurring. Based on the latest quarterly data, we can see that Facebook’s emerging market regions continue to outgrow its established markets on a sequential basis.

Facebook provides data about monthly active users (MAUs) and daily active users (DAUs). MAU data show that Facebook’s growth in North America has slowed substantially relative to growth in its other markets. At a reported 195 million monthly active users, Facebook continues to edge closer to market saturation in North America. As we can see, the growth rate has slowed to between 1% and 2% for the past three quarters.1

Facebook's monthly active users per region

According to its 10-Q, Europe region includes all users from Russia and Turkey. Europe region is therefore larger than North America; however, it shows simliar user base growth deceleration. According to Facebook, Europe region accounted for 269 million monthly active users. The region is still growing slightly faster than North America, showing 3% sequential growth. However, Europe region shows a maturation trend simliar to North America.

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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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The Disparity Between User Growth and Revenue in Emerging Markets

In addition to its earnings, Facebook provided details of its regional user base numbers, as well as average revenue per user (ARPU) by region. Predictably, Facebook claims that its highest user growth regions are Asia and rest of world. However, Facebook’s data also demonstrates a disparity between user growth and ARPU in these regions. While user growth continues to rise, outpacing its other regions, revenue in these regions remains low.

Over the past nine quarters, Facebook’s monthly active users in Asia has increased 166% from 96 million to 255 million in the second quarter 2012. Asia region daily active users increased 187% over the past nine quarters, from 45 million to 129 million. Rest of world region shows similar growth trends: monthly active users increased 173% (98 million to 268 million), while daily active users increased 231% (42 million to 139 million).1

While Facebook shows a consistent increase in user base in Asia and rest of world during the last nine quarters, ARPU has grown less consistently. During the second and third quarter 2010, Facebook generated $0.36 per user in Asia. At its height, the company earned $0.56 per user; however, during the first quarter 2012 Facebook earned only $0.53 per user, and during the second quarter 2012, that number increased only slightly to $0.55 per user.

Facebook's Asia region ARPU

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