Facebook earned $5M from non-game payments in Q4 2012, expects Gifts and other revenue sources to grow slowly

Facebook today announced that $5 million of its $256 million payments business came from sources outside of games, such as Gifts and user promoted posts during the fourth quarter of 2012. The company didn't offer a specific breakdown, but CFO David Ebersman said that user promoted posts were the primary source of that revenue. Ebersman said the company believes in the longterm potential of promoted posts, Gifts and other payments opportunities, but for now they represent a very small portion of overall revenue. Ebersman says the company expects this to continue to be the case through 2013, based on current run rates. Facebook launched Gifts in September 2012 as a way for users to buy physical and digital gifts for their friends via desktop or mobile. The product rolled out to all U.S. users by mid-December, but the company has not revealed plans to expand Gifts beyond the U.S. for now. Although the company heavily promoted Gifts over the holidays, sales don't seem to have taken off. CEO Mark Zuckerberg said he wanted to "temper near term expectations" about Gifts and other new products outside of ads. Zuckerberg said the focus is creating "great user experiences" that can be better monetized over time. Ebersman iterated that approach when asked specifically about Gifts. "The focus right now is to figure out what the right product is," Ebersman said." We think if done well, Gifts can be very natural and positive part of the Facebook experience." User promoted posts were apparently more effective in driving revenue last quarter than Gifts. This feature allows users to pay to push their personal posts to the top of friends’ feeds. It is available in several countries and, at least in the U.S. seems to cost about $7, though the company has experimented with a range of price points, from free to $16, we've heard. It remains to be seen how many users will ultimately use this feature and how often. Facebook could have seen a spike in revenue from users testing it out for the first time. If done right, promoted posts could be useful for letting friends know about garage sales, fundraising efforts or roommate searches. Facebook also suggests using the feature for engagement announcements, wedding photos or other big news. Late last year Facebook also announced a small test that will allow some users to pay to send direct messages to another user’s inbox rather than their “other” folder. This is another relatively minor opportunity for monetization that could grow over time. For now the test is so limited and the use cases so infrequent that any revenue from the feature is likely to be immaterial even in the next quarter. As for game-related payments, Ebersman said the company is seeing "nice diversification in games," but overall the move to mobile platforms where Facebook cannot collect payment fees is a strong trend that is preventing Facebook from significantly increasing its revenue in this area, like it is with advertising.

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Facebook earned $5M from non-game payments in Q4 2012, expects Gifts and other revenue sources to grow slowly

Brittany Darwell

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Brittany Darwell