SEC Filing: Facebook Discloses Negative Financial Data Ahead of IPO

SMS Text

sec filing facebook ipoFacebook, which is on the verge of the long-awaited and hyped initial public offering (IPO), recently disclosed that their net income fell 12% in the first quarter of 2012. Also, when compared to fourth quarter revenues, the first-quarter total revenues for Facebook fell by 6% to $1.06 billion. However, the social networking giant told investors that the sales and profit decreases were due to “seasonal trends” and user growth in less profitable areas.  In addition, the Securities and Exchange Commission (SEC) paperwork emphasized that year over year growth for the first quarter was strong at 45%.

The paperwork also revealed that acquisition and operating expenses are rapidly rising. Last year the total acquisition costs were only $68 million. Recently, the social network agreed to purchase the popular photo sharing app Instagram for $1 billion (23 million shares of stock and $300 million in cash) and to pay Microsoft $550 million for the rights to a patent portfolio. Operating costs, which were $343 million for the first quarter of 2011, increased dramatically to $677 million last quarter.

In spite of the recent filing, Lou Kerner, the founder of the Social Internet Fund, indicated that he believes the negative data is insignificant:

“Few investors are buying Facebook for first-quarter results. Facebook is trying to dominate a massive new sector — social media — and is willing to forgo short-term revenue growth and profitability.”

While some of the important investment data suggests a potential growth and profit slowdown, Facebook also reported that they recently surpassed 900 million active users compared to only 680 million users one year ago. In addition, the majority of the users are accessing their accounts with regularity on mobile devices.

Although Facebook’s final SEC filing contains positive and negative indicators, there is little doubt that the Facebook IPO will be the largest in Internet history. The company is expected to raise as much as $10 billion and potentially receive a valuation in excess of $100 billion. Facebook is expected to reach $6.1 billion in revenue this year.

Sources Include: The Wall Street Journal & LA Times
Image Source: Shutterstock

David Angotti

David Angotti

After successfully founding and exiting an educational startup in 2009, I began helping companies with business development, search engine marketing (SEM), search engine optimization (SEO),... Read Full Bio
David Angotti
Get the latest news from Search Engine Journal!
We value your privacy! See our policy here.
  • A few of my clients have been pitched by Facebook’s “FastTrack” program which they are pushing to increase their revenue and it’s a total joke. While their ad platform can be effective it’s not in the same league as Adwords or Adcenter. Seeing as that is how they generate the bulk of their revenue I think they should focus on improving their ad infrastructure, I see it as a huge weakness and it’s far too important to ignore. I have no illusion about Facebook going anywhere, but before I’d personally invest in a company I’d like to see their system to generate revenue significantly improved.

    As we’ve seen with recent tech IPO’s that shouldn’t matter, GRPN managed to fool people for the first few months. Facebook is a sure thing compared to that time bomb!

  • Facebook has the potential to become the leading ad platform, even surpassing Google. A site where millions of people share their likes, interests, and opinions should be any advertisers dream. The trouble lies in finding that perfect balance of making people still believe that their not being sold something, and it is an actual social network. Myspace made the mistake of selling their landing pages and flooding their site with advertisements that people did not want. Facebook capitalized on that my keeping things simple, and are still here because they haven’t strayed to far from that.

    If Facebook can somehow learn from other failed social network’s mistakes, then the sky is the limit. Unfortunately, you would be investing on that potential alone.