25 May 2017
Visit www.capgemini.com/worldreports

Facebook IPO: Payments biz 2011 revenues hit $557m

02 February 2012  |  6766 views  |  1 cash

Facebook pulled in revenues of $557 million from its payments business in 2011 as its decision to force games developers to use its virtual currency bared fruit, according to the social network's IPO filings.

In its S1 filing for an IPO that could value the firm at up to $100 billion and raise it $5 billion, Facebook reveals that payments and fee revenues have rapidly become a major source of income in the last year.

In 2009 payments contributed just $13 million to total revenues of $777 million, with advertising making up the rest. In 2010 the initial introduction of Facebook Credits saw a surge in revenue to $106 million, but this was still a tiny fraction of a total $1.97 billion.

However, the payments business began making a serious contribution when Credits became mandatory for all game developers accepting money, with limited exceptions, in July 2011. In 2011, revenues were $557 million out of a total of $3.71 billion.

Meanwhile, platform developers received more than $1.4 billion last year from transactions enabled by Facebook's infrastructure.

The IPO filing reveals the importance of Facebook's relationship with games developer Zynga, which contributed - through payments and advertising - 12% of the social network's total revenues in 2011.

In May 2010, the pair entered into an addendum to their terms and conditions with Zynga agreeing to use Facebook Payments. This deal, running until 2015, gives Facebook a fee of up to 30% of the face value of user purchases in Zynga's games on its platform.

On how Facebook will develop its payments strategy, the filing notes: "Payments integration is currently required in apps on Facebook that are categorized as games, and we may seek to extend the use of Payments to other types of apps in the future."

More generally, says the company: "Our future revenue from Payments will depend on many factors, including our success in enabling Platform developers to build experiences that engage users and create user demand for their products, and the fee arrangements we are able to negotiate in the future."

In a long section on the risk factors facing the business, Facebook suggested that regulatory demands may slow its progress in the payments arena:

"Depending on how our payments product evolves, we may be subject to a variety of laws and regulations in the United States, Europe, and elsewhere, including those governing money transmission, gift cards and other prepaid access instruments, electronic funds transfers, anti-money laundering, counter-terrorist financing, gambling, banking and lending, and import and export restrictions."

The filling confirms that Facebook has already applied for money transmitter licenses in the US. This will mitigate regulatory uncertainty and "increase flexibility in how our use of payments may evolve" states the firm.

Comments: (1)

Chris Yaldezian
Chris Yaldezian - IBM (Software Group) - San Ramon | 03 February, 2012, 17:05

In the beginning there were banks, and they did payments.  They did them in many forms, and charged many fees, and life was good.

Then came EBAY and it begat PayPal.  No big deal, they just do EBAY...oops.  Now there is FACEBOOK and they have "credits" and no big deal, it is funny money only useable on FACEBOOK. OOPS again!

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Financial services firms and Internet giants team to fight spam

Financial services firms and Internet giants team to fight spam

30 January 2012  |  6969 views  |  0 comments
Facebook to extend Credits currency across the Web

Facebook to extend Credits currency across the Web

25 October 2011  |  7298 views  |  1 comments
Amex partners Facebook for coupons push

Amex partners Facebook for coupons push

19 July 2011  |  10086 views  |  0 comments
Facebook revises virtual money terms in wake of anti-trust complaint

Facebook revises virtual money terms in wake of anti-trust complaint

07 July 2011  |  8033 views  |  0 comments
Antitrust suit filed over Facebook Credits

Antitrust suit filed over Facebook Credits

30 June 2011  |  8075 views  |  0 comments
Facebook creates payments unit

Facebook creates payments unit

22 March 2011  |  13939 views  |  0 comments
Facebook to sell virtual currency gift cards at US retail stores

Facebook to sell virtual currency gift cards at US retail stores

01 September 2010  |  11120 views  |  0 comments
Facebook moves virtual currency offline

Facebook moves virtual currency offline

09 July 2010  |  11945 views  |  0 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
02 February 2012
visit www.ebaday.comvisit dh.comVisit www.capgemini.com/worldreports

Top topics

Most viewed Most shared
BBVA launches Open API marketplaceBBVA launches Open API marketplace
10250 views comments | 47 tweets | 70 linkedin
Banks must get on AI bandwagon now – new Finextra researchBanks must get on AI bandwagon now – new F...
9700 views comments | 22 tweets | 31 linkedin
Twins fool HSBC voice biometrics - BBCTwins fool HSBC voice biometrics - BBC
9225 views comments | 21 tweets | 24 linkedin
UK SMEs missing out on £1.6bn by not accepting 'next gen' paymentsUK SMEs missing out on £1.6bn by not...
6924 views comments | 25 tweets | 18 linkedin
Bank/fintech collaboration can take transaction banking to new heightsBank/fintech collaboration can take transa...
6907 views comments | 12 tweets | 24 linkedin

Featured job

Six Figure Base + Commission + Stock Options
London

Find your next job