Facebook: Less risky investment after Q3 report

• User growth continues at 55 m per quarter, 28% yoy
• ARPU rose 3.6% yoy
• Revenue grew 32.6% yoy
• Daily usage increases which is good for value

We don’t have detailed numbers on segments etc. so this is just a brief round-up of Facebook's Q3 earnings report which was released yesterday. Overall I think the report was very positive and as I have mentioned several times we have to acknowledge the initiatives Facebook (NASDAQ:FB) is taking to diversify its revenue streams. But let’s look at some numbers.

Overall user numbers
We already knew that the 1 billion mark was crossed just a few weeks ago but 10 million more users have joined since then. Facebook has kept a pace of user growth of 55 m per quarter since mid-2011 which is impressive. Maybe its growth rate is slowing, but this is natural. The important thing is 55 m potential spenders are coming in at a steady pace!

The amount of daily average users (DAU) has reached 584 m which is very important as daily users definitely have a higher value than monthly users. Much of the increase in daily usage stems from access via mobile devices according to CEO Mark Zuckerberg. This makes a lot of sense as users are inclined to access Facebook via mobile devices while commuting.

Mobile (Monthly Average Users) have reached 604 m and I would not be surprised to see this number continue to rise as growth markets in Asia and LatAm could skip PC access and jump straight to mobile access as this technology is affordable for the vast and growing middle class

Revenue
The earnings hiccup from Google (NASDAQ:GOOG) made me nervous ahead of Facebook's report but my concerns were allayed. Facebook's revenues rose 32.3 percent over the last 12 months which is very good. This stems partly from more users (28% growth) but also a 3.6% increase in Average Revenue per User (ARPU) - a relatively small number but very important in terms of the value of Facebook.

Okay, one quarter does not tell the whole story but up to now Facebook has been unable to persuade investors and analysts that it is capable of compensating for the loss of PC advertising revenue by mobile revenue. The Q3 earnings report may be an indication that the tide is turning. The actual lift in ARPU is a strong signal in my opinion, particularly considering Google messed up on this front.

Looking ahead
I am now much more confident than previously on the revenue side of things for Facebook. User growth continues and global mobile uptake increases the potential number of Facebook users on the planet. The pool is bigger! We also see signs of new initiatives paying off.

Before you rush out to invest in Facebook though you must keep in mind the timing. Monday we will see 234 m shares unlocked and this could put pressure on the stock price. If this was not headwind enough then we have a further 777 m shares potentially coming on the market in the middle of November.

Conclusion
As I wrote yesterday I would look to buy Facebook and the report has definitely not changed my view, though timing is of utmost importance. I hope I don’t miss the boat.

Read also:

1. Apple - iOS6 and the implications for Google, Facebook...
2. Facebook - Relief rally but did the big picture really change
3. Facebook analysts agree on price disagree on revenue, net income.
4. The first flood of shares will be unlocked August 16th.
5. Facebook stock is cheaper now - and maybe even be worth buying.
6. Facebook - Opportunities risks and lots of volatility ahead
7. Facebook Q3 results could be a perception changer
8. Facebook new share un-locking structure cuts risk on Q3 earnings
9. Facebook Why did its shares fall 9% on Monday
10. Facebook earnings later today will they disappoint?

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