When Facebook reported its Q2 earnings earlier this week, it reported a revenue jump of 39% from a year ago — better than what analysts expected — and completely crushed it on mobile advertising growth.
But there was one area where Facebook's revenue shrank: Payments.
Facebook reeled in only $215 million from payments and other fees this quarter, down from $234 million in Q2 of last year.
Moreover, Facebook said that it expects that stream of revenue to continue to dry up as fewer people use the site from their desktop computers.
Nearly all of Facebook's payments revenue comes from people buying virtual goods from games they play on Facebook. People don't play those games on mobile.
"Facebook usage on personal computers has been declining and will continue to decline in the future, resulting in a decline in our Payments revenue," the company writes in its 10Q report.
The majority of Facebook's payments revenue has historically been generated by a limited number of the most popular games. Back in 2011, Facebook made about 12% of its total revenue from people addicted to Zynga's popular Facebook games like Farmville and Cityville. Today, only about 5% of its revenue came from Facebook games.
Although people spend an astonishing 46 minutes per day on Facebook's various properties, they're mostly accessing them via their smartphones. Games all have their own dedicated apps. Eventually, Facebook may make essentially zero percent of its revenue from games.
Earlier this year, Facebook introduced peer-to-peer payments capabilities through its Messenger app. For now though, Facebook doesn't take a cut of the transactions. Unless that changes, Facebook's "payments" category could eventually disappear as a noteworthy driver of revenue.
Fortunately, Facebook has been able to capitalize on the mobile boom with advertising — in fact, all of the company's revenue growth since it went public three years ago has come from mobile ads.
Here's the full statement from the 10Q, emphasis ours:
We currently generate all of our Payments revenue from developers that use Facebook on personal computers.
Specifically, applications built by developers of social games are currently responsible for substantially all of our revenue derived from Payments, and the majority of the revenue from these applications has historically been generated by a limited number of the most popular games. We have experienced and expect to see the continued decline in usage of Facebook on personal computers for the foreseeable future, which we expect will result in a continuing decline in Payments revenue. In addition, a relatively small percentage of our users have transacted with Facebook Payments. If the Facebook-integrated applications fail to grow or maintain their users and engagement, whether as a result of the continued decline in the usage of Facebook on personal computers or otherwise, if developers do not continue to introduce new applications that attract users and create engagement on Facebook, or if Facebook-integrated applications outside of social games do not gain popularity and generate significant revenue for us, our financial performance could be adversely affected.
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