Despite the Spin, Facebook Payments Seem to Have Stalled

It’s all rosy at Facebook, except when it comes to payments.

Payments revenue has all but stalled at Facebook, and there is no sign that revenue stream will begin growing again at the social media company. In fact, Facebook’s payments business is contracting in some respects.

Facebook generated $218 million of payments revenue last quarter, an increase of just 0.47% over the previous quarter, according to the company. By comparison, advertising revenue at Facebook increased 12.4% last quarter.

Facebook officials emphasized the company’s year-over-year increase in payments revenue during its quarterly earnings call, Here’s what David Ebersman, chief financial officer of Facebook, said yesterday:

Total payments and other fees revenue was up 24% year-over-year to $218 million and roughly flat sequentially. Payments revenue from games was up 18% from last year. So we believe 12% represents the best apples-to-apples comparisons adjusting for accounting items such as the change in revenue recognition timing from late last year.

That might be true, but when compared to advertising, payment revenue is nothing short of a laggard. To wit, YOY advertising revenue at Facebook increased 66% last quarter. Payments revenue performance is also disconnected from Facebook’s other performance metrics, such as active users per day (+25% YOY) and average revenue per user (+33% YOY).

Simply put, the growth story at Facebook has shifted from advertising and payments to advertising. There was not one question from analysts on yesterday’s earnings call about payments. Not one.

This was the only additional comment Ebersman made about payments:

Turning to payments revenue. Remember that in the fourth quarter of 2012, we recognized revenue from four months of payments transactions, so for that reason we expect payments revenue will be down this coming Q4 compared to last year.

It seems to me that there are signs of not just stalled growth, but even decline in the company’s payments business. On a regional basis, payments revenue in the “rest of the world,” which excludes Asia, Europe, the US and Canada, actually declined to $9 million from $11 million last quarter and $10 million in the third quarter of 2012. Revenue only modestly gained elsewhere. Granted, the “rest of the world” does not comprise a majority of the world’s population, but could the decline in Facebook payments revenue there spread? Perhaps. But one thing seems clear: no one should expect payments revenue to keep pace with advertising revenue at Facebook.