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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