Facebook’s 10-Q Reveals Serious MAU Problems [ANALYSIS]

Last week, Facebook Inc (NASDAQ:FB) released its highly-anticipated second quarter earnings report. It disclosed a net loss of $157 million ($0.08 a share) thanks to expenses from its May 18 IPO. Without special charges, Facebook earned $0.12 cents a share, meeting analysts’ estimates.

In the earnings conference call following its earnings release, the following topics had been discussed. BTIG Research combed through Facebook’s July 31 10-Q filing and highlighted the following datapoint topics.

Take a look.

Without A First Quarter Restatement, US Monthly Active Users (MAUs) Would Have Declined

In Facebook’s second quarter earnings call, the company’s management said that its first quarter MAU results had been restated from an algorithm error; they didn’t say that if it hadn’t been for the error, USA MAUs would have incurred a sequential decline.

With a first quarter restatement, US MAU’s rose two percent vs. a one percent drop.

In addition, during Facebook’s IPO process, investors saw US MAU growth accelerating to five percent sequential growth for the first quarter vs. the fourth quarter’s two percent growth. After the company corrected the error, first quarter US growth was at the usual two percent growth as seen by Facebook in the last several quarters.

Payments Will Get a Boost in the Fourth Quarter, Pressured in 2013

Payments revenue flattened as gaming moved to mobile. Facebook Inc (NASDAQ:FB) announced a one-time event that will increase fourth quarter revenue. As noted by the 10-Q, the company will book payment revenue that is less than 30-days old discounted for a reserve; this differs from the last two years when revenue had been deferred.

BTIG interpreted this as almost four months of payment revenues booked in the fourth quarter. This also means that it will depress 2013’s first quarter payment revenue as December revenue isn’t booked in January.

In addition, full-year 2013 will have 12 months of payment revenue whereas 2012 will have 13 months (minus the reserve of the 13th month) making a path to Facebook’s 2013 growth. The company did not talk about its 30-day deferral policy in the original Facebook S-1; page F-16 of it discusses deferred revenues but not anything about a deferral policy.

Facebook Web Users Decline in Europe, US Due to Mobile

In the call, Facebook Inc (NASDAQ:FB) management said that US daily web users fell as they moved to the mobile site for access; they also saw this in additional developed markets, but they weren’t cited by the company.

In the 10-Q disclosure, Europe also saw a fall as Facebook Inc (NASDAQ:FB) web users moved to mobile.

Fast Growth of Mobile-Onlys

Facebook Inc (NASDAQ:FB) included the following statistic in its 10-Q: “Mobile-Onlys” (users who only accessed Facebook from a mobile device) rose to 11 percent of total MAUs in June 2012, up from nine percent three months earlier. Total MAUs increased six percent sequentially, but  Web/hybrids (Web and mobile) increased four percent while mobile-onlys grew 23 percent.