Every social network wants to be the “Facebook (Nasdaq: FB) of ______.” Well, one aspiring social network is just going to have to let Facebook be the Facebook of its country. The dominant social network has just recently surpassed Japanese social networking site Mixi in monthly active users, or MAUs, for the first time, according to COO Sheryl Sandberg.


Source: Mixi.

Facebook has narrowly edged past Mixi, at 15 million MAUs, compared to Mixi’s 14.5 million in June. That’s down from the 15.2 million that the local alternative had in February, while Facebook’s Japanese MAU base has tripled over the past year. Sandberg said Facebook had just 10 million six months ago. With a population of roughly 127 million, that represents a penetration of approximately 12%. Sandberg also said the company is planning on focusing more heavily on that geography, as well as building up a local presence in its Tokyo office.

The next big question in Asia is whether or not Facebook will ever enter China to compete with local competitors there, like Renren (Nasdaq: RENN) and SINA (Nasdaq: SINA), who operate the "Facebook of China" and "Twitter of China," respectively. For now, it remains on the Chinese sidelines due to "regulatory complexities."

The question after that in Asia is how well Facebook can improve monetization there, which still lags by a long shot relative to its home turf of the U.S. and Canada.


Source: 10-Q.

As of last quarter, Facebook had 37% more total MAUs throughout Asia than domestically, yet monetization is less than a fifth. That’s true for both Facebook’s advertising and payments platform business. I manually decompose average revenue per user, or ARPU, by segment, to get a better sense of monetization.

Q2 2012 US & Canada Asia
Ad ARPU $2.60 $0.47
Payments ARPU $0.60 $0.08
Total $3.20 $0.55
Sources: SEC filings, author’s calculations.

Facebook’s growth is a two-step process though: 1) grow its MAU base; and 2) monetize it. Step 1 is proceeding along just fine.

For now, I remain on the sidelines with Facebook. I see the potential, but can’t justify the valuation quite yet. Read this premium report to learn more on what I’m waiting for. Sign up today and get free updates for a year.