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Growth in the average price per ad during 2012 compared to 2011 was driven primarily by an increase in
price per ad in the United States, which benefited from growth in ads in News Feed across desktop and mobile
devices. Ads in News Feed have a significantly higher average price per ad due to factors which include the
prominent position of the ads. The increase in price per ad in the United States was partially offset by an
increased percentage of our worldwide ads being delivered in the Asia and Rest of World geographies where the
average price per ad, while growing on a year-over-year basis, is relatively lower. The average price per ad was
also affected by a decline in the average price per ad in Europe in 2012 compared to 2011 due to the impact of
foreign exchange rate changes, an increase in the percentage of ads being delivered in European regions where
the average price per ads is relatively lower, and in part, we believe, to continuing weak economic conditions in
that region affecting advertiser demand.
For the year ended December 31, 2012, we estimate that mobile advertising revenue as a percentage of
advertising revenue was approximately 11%. As mobile advertising was not offered prior to the first quarter of
2012, comparisons to prior year are not meaningful.
Advertising revenue in the fourth quarter of 2012 increased 41% compared to the same period in 2011, due
to a 46% increase in the number of ads delivered, partially offset by a 4% decrease in the average price per ad.
The increase in ads delivered was driven by user growth and certain product changes, including the addition of
News Feed ads on personal computers and mobile devices. MAUs grew 25% from December 31, 2011 to
December 31, 2012 and average DAUs grew 28% from December 2011 to December 2012. Additionally, in the
fourth quarter of 2012, we lowered our market reserve price (i.e. the minimum price threshold accepted in our
ads auction), and this product change had the effect of increasing the number of ads delivered and decreasing the
average price per ad. This change primarily affected the Rest of World and Asia markets where the average price
per ad is relatively lower, and the change increased the percentage of our ads that are shown in relatively lower
priced markets, which has the effect of decreasing the overall average price per ad. For the fourth quarter of
2012, we estimate that mobile advertising revenue as a percentage of advertising revenue was approximately
23%.
Payments and other fees revenue in 2012 increased $253 million, or 45%, compared to 2011. Excluding the
one-time increase in Payments revenue described below, Payments and other fees revenue in 2012 increased 34%
compared to 2011. Facebook Payments became mandatory for all game developers accepting payments on the
Facebook Platform with limited exceptions on July 1, 2011. Accordingly, comparisons of Payments and other
fees revenue to periods before this date may not be meaningful.
Payments and other fees revenue in the fourth quarter of 2012 was $256 million. Comparisons to prior
periods are not meaningful due to the one-time increase in Payments revenue described below.
Our Payments terms and conditions provide for a 30-day claim period subsequent to a Payments transaction
during which the customer may dispute the virtual or digital goods transaction. Through the third quarter of
2012, we had deferred recognition of Payments revenue until the expiration of this period as we were unable to
make reasonable and reliable estimates of future refunds or chargebacks arising during this claim period, due to
lack of historical transactional information. Beginning in the fourth quarter of 2012, we had 24 months of
historical transactional information which enabled us to estimate future refunds and chargebacks. Accordingly, in
the fourth quarter of 2012, we recorded all Payments revenues at the time of the purchase of the related virtual or
digital goods, net of estimated refunds or chargebacks. This change resulted in a one-time increase in Payments
revenue in the fourth quarter of 2012 of approximately $66 million as we recognized revenue from four months
of transactions.
Seven and nine percent of our total revenue for the three and twelve months ended December 31, 2012,
respectively and 11% and 12% of our total revenue for the three and twelve months ended December 31, 2011,
respectively, came from a single customer, Zynga. Revenue from Zynga consisted of payments processing fees
related to their sale of virtual goods and from direct advertising purchased by Zynga.
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