Facebook Is Failing In Europe — And It’s All Russia’s Fault

Business Insider
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Jim Edwards
Oct. 25, 2012

Facebook
had a great Q3 2012, with revenue up 32 percent to $1.26 billion, driven largely by a 36 percent increase in advertising sales to $1.09 billion, and a new $152.6 million mobile ad business.

Zuckerberg europe
Facebook’s Zuckerberg

In Europe, Facebook is sinking. It’s the only area of the world where Facebook appears to be in decline, according to the social network’s own numbers.

Here’s a look at how revenues have stalled in the old world based on active users, revenues per user, and a geographic breakdown of Facebook’s revenue sources.

We’ve also discovered the reason Facebook’s having such a rocky time in the Old World:

Pirates!

That’s right. Russian pirates have distorted the market in a way that has left Facebook at a disadvantage to domestic social networks in certain East European countries — and it’s wiping millions from Facebook’s potential European revenue base.

European user growth is slowing. On its own that’s not bad news — Facebook is so ubiquitous it may be close to capturing all the customers it possibly can.

European user growth is slowing. On its own that's not bad news — Facebook is so ubiquitous it may be close to capturing all the customers it possibly can.

SEC

But European revenue is falling. It’s the only geographic region of Facebook that is contracting.

But European revenue is falling. It's the only geographic region of Facebook that is contracting.

This isn’t a one-off result. Revenue per user has been in decline in Europe since 2011. Everywhere else, Facebook is still growing.

This isn't a one-off result. Revenue per user has been in decline in Europe since 2011. Everywhere else, Facebook is still growing.

SEC

A big part of the collapse is in payments revenue, which mostly come from Zynga games. Zynga’s problems are Facebook’s problems, especially in Europe. Note, however, that payments went into decline in Europe a long time BEFORE Zynga’s recent collapse.

A big part of the collapse is in payments revenue, which mostly come from Zynga games. Zynga's problems are Facebook's problems, especially in Europe. Note, however, that payments went into decline in Europe a long time BEFORE Zynga's recent collapse.

SEC

The Zynga issue wouldn’t be so significant in Europe if the ad business was healthier. It’s not. In Q3, ad revenue was flat. It’s still down 4 percent from Q4 2011. All the other regions have grown since then.

The Zynga issue wouldn't be so significant in Europe if the ad business was healthier. It's not. In Q3, ad revenue was flat. It's still down 4 percent from Q4 2011. All the other regions have grown since then.

SEC

While Facebook has maxed out its user-base in the U.S. and Western Europe, in Russia Facebook has only 5-7 million members, which is ony 12 percent of the online population …

That explains, in part, why CEO Mark Zuckerberg visited Russia at the beginning of the month, and had a brief meeting with Prime Minister Dmitry Medvedev. (Note that Zuckerberg even wore a suit). He got a lot of Russian media publicity for Facebook by doing that.

That explains, in part, why CEO Mark Zuckerberg visited Russia at the beginning of the month, and had a brief meeting with Prime Minister Dmitry Medvedev. (Note that Zuckerberg even wore a suit). He got a lot of Russian media publicity for Facebook by doing that.

Russia Today / YouTube

Facebook is getting its butt kicked in Russia by Vkontakte, a domestic social network. VK looks a lot like Facebook, but has one major advantage that Facebook doesn’t …

Read more: http://www.businessinsider.com/facebook-is-failing-in-europe–and-its-all-russias-fault-2012-10?op=1#ixzz2BKKbN0RS


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