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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