The Facebook IPO filing has lifted a veil of secrecy around the financials of the world's largest social network, since the S-1 Facebook filed with the Securities and Exchange Commission in February 2012 is publicly available online for anyone to see.
The planned Facebook stock offering aims to raise up to $5 billion from the public for a company that currently is valued at about $96 billion on the private market.
Facebook IPO Reveals Financials
Facebook Inc. earned $1 billion in profit in 2011 on $3.7 billion in revenue, according to its IPO paperwork. It had a ton of money in the bank--$3.9 billion, to be precise, which seems like a lot for a company that only got started in 2004 and turned eight in February 2012.
The Facebook IPO filing showed the social network has become a fairly mature company in a relatively short period. It has been profitable since 2009, earning $229 million in profit that year and $606 million in profit in 2010.
Yet the Facebook IPO stock filing also revealed that its revenue growth rate is actually slowing down, which may not be all that surprising considering how fast it became a large, profitable company. Total revenue grew by 88 percent in 2011, to $3.7 billion from $1.97 billion the year before. That was a slower growth rate than in 2010, when total revenue grew by 154 percent over 2009.
Advertising Growth Slowing
Advertising still produces the vast majority of Facebook's revenue, and ad sales growth rates were what caused the slowing growth rate last year. to be clear, the growth rates are still heady, they're just not doubling or tripling as in the early days.
And the Facebook S-1 also showed that advertising's share of the company's total revenue is falling slightly as the social network diversifies into new sources of income, which could help its long-term growth rates. In 2011, advertising accounted for 85 percent of total revenue, down from 95 percent in 2010 and 100 percent in 2009.
Interestingly, Facebook raised its average ad price by 18 percent in 2011, yet still was able to deliver 42 percent more advertisements than the year before. The increase in ads shown was partly due to more active users and partly due to the fact that Facebook started showing more ads on its pages than it used to, the filing said.
Facebook Payments: Zynga Dominates
Payments that users make for playing social games and doing other things on Facebook is a relatively new income stream for the social network; it accounted for 12 percent of total revenue, or $557 million, in 2011. That was more than five times the amount of payment revenue that Facebook received in 2010.
Zynga Inc., maker of many popular Facebook games, generated most of the payments revenue and 12 percent of Facebook's total revenue in 2011. Facebook takes a 30 percent commission on all sales Zynga makes on Facebook using the social network's payment credit system, which is called Facebook Payments. Facebook required all game developers to use its Facebook Payment system starting in July 2011.
The United States still accounts for a majority of Facebook's revenue--56 percent in 2011--but that was down from 62 percent the year before. The Facebook IPO paperwork makes clear the social network is growing its international business faster. Western Europe, Canada and Australia were the biggest overseas ad customers.Facebook's Army of Users
The Facebook IPO paperwork said the social network had 845 million monthly users in December 2011, including 483 million who use Facebook on a typical day. That daily number was up 48 percent from 2010, an impressive increase; and the monthly user number was up 39 percent from 2010. Monthly users have nearly doubled from the 430 million Facebook said it has in early 2009.
Perhaps more surprising were the mobile use numbers. Facebook said more than 425 million people accessed its network from a mobile device in December.
Other statistics it released said its users collectively:
- Post 250 million photos to the network on a typical day
- Make a whopping 2.7 billion comments or "likes" every day
- Have forged some 100 billion "friend" links with fellow Facebook users
Facebook Stock Sale Timing, Price
Facebook did not reveal when it plans to have the actual public stock sale, though it is widely expected to be in May 2012. Nor did Facebook reveal its target share price. It did specify the stock ticker, which will be--what else?--FB.
When the Facebook IPO finally takes place, some analysts think it could be a further boon to social media investment craze that started in 2011, when the LinkedIn IPO took place and was the first major social media startup to sell stock to the public.
The LinkedIn IPO touched off a social media investing flurry as other startups followed suit and staged IPOs, including Groupon, Zynga and Pandora Media.
