Gaming revenues flat as Facebook posts heavy Q2 loss
Costs rise 295% year-on-year " founder Zuckerberg pledges further investment in mobile.
Facebook has blamed a huge rise in costs for a US$743m loss for the three months ending 30 June 2012 with gaming revenues described as “flat” as a result of users playing more on their mobiles.
Revenues for the quarter rose 32% year-on-year to $1.18bn, driven predominantly by an increase in advertising revenue, which rose 28% from Q2 2011 to $992m, attributed in part to the rolling out of sponsored stories in the Facebook timeline which generates $1m a day according to COO Sheryl Kara Sandberg. Advertising now accounts for 84% of Facebook’s total revenues, with payments and other fees “ including revenue from social games “ contributing $192m.
This was offset, however by heavy losses, with costs and expenses rising 295% year-on-year to $1.93bn as a result of share-based compensation expenses ($157m), while capital expenditure grew to $413m “ up 213% from the corresponding period in 2011.
Facebook CFO David Ebersman described payments revenue [the 30% fee it receives from developers] as having been “essentially flat” for the past three quarters, explaining that growth in gaming had shifted to mobile devices where games are not as effectively monetised. This, Ebersman claimed, was being addressed through “investment in the gaming ecosystem” with the introduction of the Facebook App Center, allowing operators to promote new games.
However, Zynga COO John Schappert’s said earlier this week that these changes “favoured new games over live games”, resulting in lower player retention rates and contributed to disappointing revenues for the leading social gaming developer which announced its plans to enter the real-money gambling sector in its Q2 results call on Wednesday.
The network ended June with 955m monthly active users, with more than half accessing Facebook via mobile devices. In the company’s first-ever analyst call, founder and chief executive Mark Zuckerberg reiterated his desire to address Facebook’s perceived weakness in monetising mobile devices.
“Mobile is a huge opportunity for Facebook. Our goal is to connect everyone in the world, and over the next five years, we expect 4 to 5 billion people to have smartphones.
“That’s more than twice as many people that have computers today, so building great services for these devices is essential for us to help people connect. We also think that people are inherently social, and having a device with you wherever you are creates more opportunities for sharing and connecting,” Zuckerberg explained.
However, the rumoured announcement of a ‘Facebook phone’, developed in partnership with HTC, proved to be wide of the mark, with Zuckerberg denying any such project and explaining that Facebook will instead invest in further app development: “We don’t just want to have the most widely used mobile apps, though. We want to build the best apps and we also want to build experiences that are as deeply integrated as possible into every device and mobile app that people use.
“We’re investing very heavily in improving our mobile apps, primarily across iOS, Android and the mobile Web,” he said.
(Photo courtesy of Jason McELweenie – obtained via Creative Commons)