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There's no sugarcoating Quepasa's (AMEX: QPSA ) disastrous third quarter.
Revenue at the Spanish-language social networking site plunged 46% to a mere $1.5 million. The drop occurred primarily due to a 32% plunge in monthly active users of its namesake website, as well as delays in executing marketing deals like the sweetheart deals it had in place last year with sponsors affiliated with a Quepasa board member. The quarterly deficit widened to $3.5 million.
It's not all terrible news. Quepasa Games -- the company's social gaming arm -- grew its user base by 42% over the past year. Quepasa also served up 579 million page views during the quarter, 29% ahead of where it was a year ago. In short, there may be fewer users around, but they're more engaged even if they're not being monetized more effectively.
However, the best news of all is that it completed the merger of myYearbook.com's parent company last week. Even though it was a merger of equals -- nearly doubling the size of Quepasa's share count -- myYearbook will have a far greater effect on Quepasa's financials.
Revenue actually grew 26% to a meatier $8 million at myYearbook, and monthly active users rose 29% to 2.9 million. It's also far more engaging than Quepasa's namesake site, serving up more than 7.1 billion page views during the period. Oh, and myYearbook posted a small yet noteworthy profit on its own.
It's at this point where one can wonder how myYearbook got hoodwinked into this deal on terms that priced the buyer and seller as equals. However, in this crummy climate, it's not as if a company as small as myYearbook could go public.
The IPO stage for social networking and social gaming is limited to the top dogs. LinkedIn (Nasdaq: LNKD ) and China's Renren (Nasdaq: RENN ) have been able to go public over the past year. Social gaming leader Zynga should go public in a couple of weeks. Everyone else is at either the mercy of market stability returning or for the scrappy Internet upstarts to scale quickly. AOL (NYSE: AOL ) and News Corp. (Nasdaq: NWSA ) even had to recently dump social networking websites that they acquired at nine-figure prices a few years ago
The deal closed last week, so it's not as if the current quarter will feature the full fourth-quarter impact of myYearbook's presence. However, the outlook for 2012 is now realistically optimistic -- and not limited to investors that were suckered into buying Quepasa late last year believing it to be the Facebook of Latin America.
Add Quepasa to My Watchlist to stay on top of its transformative merger.