How the shift to mobile is hurting Facebook’s payments and ad revenues

More users are accessing Facebook from their phones than ever before, but during Thursday’s earnings call the company blamed a slowdown in both payments and ad sales on the shift to mobile.

Facebook’s revenues from payments increased by a scant 3.6 percent quarter-over-quarter, rising from $186 million in Q1 2012 to $192 million in Q2 2012, something CFO David Ebersman blamed on the shift to mobile gaming, and to platforms Facebook can’t monetize on. Facebook has tried to address the issue by developing its own HTML5-based mobile platform, but the technical issues surrounding HTML5 and poor discoverability in its platform have hampered its efforts.

In June game developer Wooga announced it would no longer distribute HTML5 games on Facebook, and was making its experimental HTML5 game Pocket Island open source. According to Wooga’s blog post, “installs were initially very low, as users struggled to find the game page… retention rates remained exceedingly low with around 5 percent of users returning to play the next day.”

It was a similar story with advertising. Revenues for Q2 were up 13.8 percent quarter-over-quarter to $992 million, but the total amount of ads Facebook delivered during the quarter actually declined.

“The overall number of ads delivered in the U.S. this quarter decreased two percent year-over-year despite a 10 percent increase in daily users and despite the increase in ads per page as daily web users in the U.S. declined in favor of mobile users, and we are seeing similar trends in other developed markets,” Ebersman said during the earnings call.

That shift is bad news for Facebook, as display advertising makes up the lion’s share of Facebook’s revenue stream, accounting for 83 percent of its total earnings in Q2.

During its second quarter earnings call, Facebook reported it now has 543 million monthly active users on mobile, an increase of 67 percent year-over-year and 11.2 percent quarter-over-quarter. Although the company did not reveal what percentage of its mobile users access the service through its iOS, Android and feature phone apps, we estimate there are about 95 million active feature phone users on the social network, based on analysis from the Facebook ad tool. In March, the company reported it had 83 million members who only accessed its site through its mobile apps or mobile website.

This post originally appeared on our sister site, Inside Mobile Apps.