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Updated: Facebook Q2-2012 Concall: On Advertising, Sponsored Stories, ARPU & Mobile First Priority

Update: Facebook has released its quarterly report for its first quarter as a public company. Here are some highlights from the report:

User base across geographies: Facebook stated that users in Brazil, India, and Indonesia represented the key sources of growth in its user base during the quarter. The social networking giant had 59 million MAUs in India as of June 30, 2012, a 15.7% increase from 51 million MAUs in March 31, 2012 and a 84% increase from the same period last year. It had 54 million MAUs in Brazil as of June 30, 2012, a 146% increase from the same period in 2011; 55 million MAUs in Indonesia as of June 30, 2012, a 24% increase from to the same period in 2011; and 168 million MAUs in the United States as of June 30, 2012, a 10% increase from the same period in 2011.

Mobile Only Usage: Facebook stated that out of 543 million Mobile MAUs, around 102 million MAUs accessed Facebook solely through mobile apps or their mobile website as of June 30, 2012 and the remaining 441 million MAUs accessed Facebook from both personal computers and mobile devices during this period.

False Accounts: Facebook stated that approximately 4.8% of its 955 million user base are duplicate accounts, 2.4% are user-misclassified accounts i.e. users have created personal profiles for a business, organization, or non-human entity such as pets rather than pages and 1.5% are undesirable accounts i.e. user profiles that are intended to be used for purposes like spamming, which violate Facebook’s terms of service. Facebook noted that the percentage of false or duplicate accounts is lower in developed markets such as the United States or Australia and higher in developing markets such as Indonesia and Turkey, based on an internal sample review of limited number of accounts.

– Revenue from Zynga: Facebook derived 14% of its revenues from Zynga in Q2 2012, a 1% decrease from 15% in the previous quarter. While Zynga directly accounted for 10% of the total revenues through its sale of virtual goods and direct advertising from Zynga, remaining 4% revenues came from third parties ads shown on pages generated by Zynga apps. In June 2012, Facebook also started displaying personalized ads and sponsored stories on Zynga.com as per the developer addendums announced last year.

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Previously (July 27): Facebook reported revenues of $1.18 billion for the quarter ended 30th June 2012, a 32% increase from $895 million it had registered in the second quarter of 2011. The social network posted a net loss of $157 million for the quarter as against $240 million profit in the same quarter last year. Here are some notes from the Facebook’s first Investor conference call:

Number of Users: Mark Zuckerberg, Facebook CEO said that Facebook ended the quarter with 955 million monthly active users (MAUs), up 6% from 901 million MAUs from the previous quarter and a 29% YoY increase from 739 million MAUs in the same quarter last year. Daily active users (DAUs) were at 552 million on average for the quarter, up 5% from 526 million DAUs in the previous quarter and a 32% increase YoY from 417 million DAUs in the same quarter last year.

Mobile MAUs were 543 million during the quarter, up 11.3% from 488 million MAUs in the previous quarter and an increase of 67% YoY from 325 million MAUs in the same quarter last year. Zuckerberg said that Facebook witnessed an increase in the number of users from all key countries during the quarter with Brazil, India and Japan being key contributors to their growth in daily users.

Mobile is the priority: Zuckerberg said that mobile is a huge opportunity for Facebook since it creates more opportunities for users to share content and connect to their friends. He said that Facebook users who use their mobile services are 20% more active than users who only use their desktop services. Zuckerberg said that the company is investing heavily to improve its mobile apps including its iOS, Android and the mobile web versions. Going forward, the company intends to build mobile experiences which is deeply integrated into every device and mobile app that people use.

During the quarter, Facebook launched a new camera app, released new versions of Facebook messenger, shipped two new versions of its Android app, agreed to acquire popular photo-sharing app Instagram and partnered with Apple to integrate Facebook into iOS 6, the next major release of iOS operating system.

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Facebook as a Platform: Zuckerberg said that one of the biggest opportunities of Facebook is to create identity and social layers that apps and websites can use. He claimed that Facebook platform enables millions of developers to build better products and majority of the top apps in the iTunes Store and Google Play Store are integrated with Facebook. He also claimed that people are sharing nearly 1 billion pieces of content every day using Facebook’s Open Graph protocol.

– Advertising: Facebook reported advertising revenue of $992 million which accounted for 84% of Facebook’s total revenue. Zuckerberg claimed that Facebook is already delivering a compelling ROI in spite of more than half of their ads not being social and the company believes that its ad experience can be better and more social by including social activity in these ads. He said that Sponsored Stories ads in the News Feed are on a run rate of over $1 million per day in revenue (which translates to more than $365 million revenue per year) by the end of June and about half of the revenues are coming from mobile sponsored stories, which was launched earlier this year.

– Facebook Sponsored Stories: While Facebook CFO David Ebersman said that sponsored stories are a very small percentage of Facebook’s ads right now, Facebook COO Sheryl Sandberg said that Sponsored stories on News Feed are corner stone of Facebook’s advertising strategy since it performs better than the ads on Facebook’s right hand column and it integrates seamlessly to the user experience on mobile devices. The company recently launched Premium ads, allowing advertisers to place ads on mobile news feed and Sandberg claimed that they are experiencing strong interest for these ad formats from their clients.

Giving examples of few advertisers, Sandberg claimed that Electronic Arts recently spent $2.75 million promoting their game Battlefield 3 on Facebook and they registered $12.1 million of sales from these ads. Games developer Wooga recently used mobile News Feed to increase the installs of its game Diamond Dash and apparently increased downloads by 26% in the U.S., 29% in Germany and 37% in France.

– Small and Medium Businesses: Sandberg claimed that around 60 million small and medium business owners are Facebook users. Over 11 million businesses have dedicated pages on the portal out of which 7 million are actively used every month. She also claimed that hundreds of thousands of these small and medium businesses advertise on the portal.

– Ad revenues: Facebook CFO David Ebersman said that revenue from ads increased by 28% during the quarter, driven by 18% increase in the number of ads delivered and a 9% increase in the average price per ad. Ads delivered in the US decreased by 2% YoY but the price per ad increased by 9% YoY and CPM increased by 20%. Ebersman said that price per ad also increased significantly in Asia and the rest of world but didn’t reveal any specific numbers for it.

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– Payment Revenues: Ebersman said that Facebook generated payment revenue of $192 million and has been flat for the past three quarters, since Facebook’s payment system is not yet being utilized in Facebook mobile games yet. Global ARPU (Average Revenue Per User) stood at $1.28 for the quarter and ARPU increased by double-digit rates in North America, Asia and rest of world with an exception of Europe where it increased by 8%.

– Facebook-Yahoo deal: Earlier in the month, Facebook signed a strategic alliance with Yahoo to resolve their patent dispute. Facebook COO Sheryl Sandberg said that this deal has two parts – first is the cross licensing of all patents and second is a partnership where both the companies work together on prominent events like the Olympics, to bring Yahoo’s media event coverage to the platform.

– On the long rumored Facebook phone: Mark Zuckerberg stated that it doesn’t make sense for Facebook to develop its own phone. Instead it wants to build apps which can deeply integrate into a system as far as possible like the system wide integration in iOS. Also, it intends to support a development ecosystem, where other apps can build on top of Facebook platform.

On Instagram and Future Acquisitions: Zuckerberg said that since the Instagram acquisition is not yet over, they are currently not working integration as yet, however he said that they will update on the situation when the acquisition is completed. On any future acquisition, Zuckerberg said that they primarily buy companies for talent and this approach will continue for the forthcoming future.

Presentation (pdf) | Conference Call Transcript – Courtesy Seeking Alpha


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Facebook Q2-2012: 955M Monthly Users; $1.18B Revenue
Facebook Claims 30% Of Indian Users Access Only Through Mobile Phones
Facebook Q1 2012: $1.058 Billion Revenue; 51M Indian Users; Instagram Deal Breakdown

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