Oops! Facebook Admits One Of Its Algorithms Was Wrong; Restates A Revenue Metric


Photo: ktpupp via Flickr

Facebook, in its first ever 10-Q filing with the SEC, admitted one of the algorithms it uses to calculate the average revenue per user in its largest market, the U.S. and Canada, was wrong.The 10-Q restates the revenue breakdown and adjusts some of the numbers and columns in its reporting of revenues (most of which comes from ads) by geography.

Here’s what Facebook said:

In June 2012, we discovered an error in the algorithm we used to estimate the geographic location of our users that affected our attribution of certain user locations for the first quarter of 2012. The first quarter of 2012 ARPU amount for the United States & Canada region below reflects an adjustment based on the reclassification to more correctly attribute users by geographic region.

… While this issue did not affect our overall worldwide MAU and DAU numbers, it did affect our attribution of users across different geographic regions. We estimate that the number of MAUs as of March 31, 2012 for the United States and Canada region was overstated as a result of the error by approximately 3% and this overstatement was offset by understatements in other regions.

Here are the two charts affected by the change (and apologies for the image quality). We’ve highlighted the restated sections in red. First, the Q2 2012 chart, on which revenue per user in North America is $2.90:

Facebook error

Photo: SEC

Now here’s the old chart from Q1, where revenue per user was incorrectly listed as $2.86:

facebook error

Photo: SEC

In all, it’s not a huge error and it doesn’t affect Facebook’s top or bottom lines. But it is interesting to know that Facebook’s accounting isn’t completely perfect.


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