Facebook or Fadebook? Race for revenue growth

(MoneyWatch) Facebook (FB) announced earnings that were positive with a slight earnings miss as it continued its drive to capture the mobile market and justify the high valuation when it went public.

Year-over-year revenue growth of 38 percent was nothing to sneeze at. Mobile hit 30 percent of ad revenue. The latter was particularly impressive and important because it was worry about mobile revenue that originally sent the stock tumbling after its IPO.

Look deeper into the data about continued impressive average user growth, revenue per user and geographic breakout, and things are muddy. Can Facebook grow as fast as so many want it to? And can it continue to increase revenue per user to more than offset the ever more noticeable slowing of user growth in its most financially important markets?

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The day after its earnings announcement, the stock jumped 5.6 percent, ending the day at nearly $29 a share. Clearly, investors were happy with the direction, mainly because any falloff in profit was due to higher infrastructure and personnel spending. Furthermore, monthly active users -- critical because advertising doesn't go far without an audience -- grew by 23 percent, which also means that the vital metric of revenue per user also improved by 11 percent.

That's the good news. Now for the hazier view. North America has been the company's financial center. When Facebook originally went public, the region provided half of all revenue. In the last quarter that amount was down to 46.5 percent. It's a strong improvement, particularly when you consider that in 2012, North America was still about half of the company's business. But Facebook is still completely dependent on the U.S. and Canada.

Hence the problem: Monthly average users have been relatively flat in the U.S. and Canada, growing 6.6 percent year-over-year. Stretch the comparison window to two years, and it's still under 20 percent. Considering how loosely Facebook defines users -- clicking a Facebook-like button on another site once in a month puts someone into the user category -- that's a significant slowdown in the engine of commerce. Growing the mobile business is nice, but that essentially becomes a replacement for desktops, and it's tough to tell from outside the company whether mobile is keeping pace on the revenue front or if the switch could negatively affect sales.

Average revenue per user growth has been the saving grace. In the U.S. and Canada it has gone from $2.90 in the first quarter of 2012 to $3.50 in 2013. For comparison, ARPU last quarter was $1.60 in Europe, $0.64 in Asia, and $0.50 throughout the rest of the world.

Because user growth is slowing significantly in North America -- not surprising, as every business eventually hits a saturation point -- Facebook must keep pumping up the revenue per user to mask that slowdown. Maybe it can keep doing it like Google did. But that's a big if.