IPO uncovers Facebook numbers

The unveiling came late Wednesday when the company filed its plans to raise $5 billion in an initial public offering of stock. It’s a revelatory moment that prospective investors, curious competitors and nosy reporters have been awaiting for two years. During that time, Facebook established itself as a communications hub and emerged as a threat to the Internet’s most powerful company, Google Inc.

As with almost anything crafted by a bunch of lawyers and bankers, the 197-page prospectus that Facebook filed with the Securities and Exchange Commission is filled with boilerplate legalese and mind-numbing numbers.

But there were some juicy details in there, too.

Above all, the documents confirmed what everyone had been hearing: Facebook is very profitable and getting stronger. The company Mark Zuckerberg started with some friends in 2004 has seen its annual revenue soar from $777 million in 2009 to $3.7 billion last year. Facebook’s earnings have grown at a similar rate too, ballooning from $122 million in 2009 to $668 million last year.

Facebook ended 2011 with $3.9 billion in cash. That’s a relatively small amount compared with the nearly $45 billion that Google has in the bank.

Facebook’s prosperity has been fueled by a steady expansion of its audience, making its website a more attractive marketing vehicle for ads, which account for most of the company’s revenue. Facebook ended last year with 845 million users, up 39 percent from 608 million at the end of 2010. Those users share their interests and preferences prodigiously. Facebook recorded a daily average of 2.7 billion “likes” and comments during the final three months of last year.

Facebook has become so addictive that more than half its audience — 483 million users — logs in every day.

Facebook’s revenue total disappointed some people who pored through the documents. One reason: The company generates about $4.39 in revenue per user.

“That is a surprisingly low number,” said University of Notre Dame finance professor Tim Loughran, who studies IPOs. Google’s annual revenue of nearly $38 billion works out to more than $30 per user of its services.

“Facebook needs to find more ways to get revenue from their users,” Loughran said.

Facebook listed its most promising expansion opportunities as Brazil, Germany, India, Japan, Russia and South Korea. The company, based in California, eventually hopes to make its service available in China if it can navigate rules requiring online content to be censored if the Chinese government considers it to be objectionable or obscene.

The big question is whether Facebook’s numbers are impressive enough to fetch the lofty IPO price. It’s still too early in the process for Facebook to reveal how much it intends to ask for its shares, but Wednesday’s filing provides some clues. Facebook valued its Class B common stock at $29.73 at the end of December, down slightly from appraisals of $30.07 in June and September.

Source THE TENNESSEAN