Sunday, July 29, 2012

Facebook Grows to 1 Billion Users (almost)

Facebook (NASDAQ: FB) reported solid second quarter 2012 results on Thursday July 26.  Despite the growing subscriber base, increased revenue and profits, Facebook could not win over the Wall Street traders.

"Our goal is to help every person stay connected and every product they use be a great social experience," said Mark Zuckerberg, Facebook founder and CEO. "That's why we're so focused on investing in our priorities of mobile, platform and social ads to help people have these experiences with their friends."

Here were the key highlights from the press release:

User Growth Highlights
  • Monthly active users (MAUs) were 955 million as of June 30, 2012, an increase of 29% year-over-year. "If Facebook were a country, it would be the third largest in the world, after China and India"
  • Daily active users (DAUs) were 552 million on average for June 2012, an increase of 32% year-over-year. "More then 50% Facebook users use the social network daily! Amazing."
  • Mobile MAUs were 543 million as of June 30, 2012, an increase of 67% year-over-year. "Phenomenal growth in mobile users! By next year, there will be more active mobile years than desktop users!"

Product Highlights
  • Facebook launched several new mobile products, including:
    • a new Facebook Camera app for iPhone,
    • an improved version of the mobile messenger app for both iOS and Android, and
    • several updates to the Facebook Android app.
    "Facebook is going All-In with mobile! Facebook wants to seize the mobile opportunity!
  • Launched global App Center where users can discover relevant apps for mobile and web. "This is analogous to the App Store and the Android Market. Lots of growth ahead"
  • Apple announced plans for a deep Facebook integration throughout the next version of Apple's iOS and OSX. "Apple's integration will catapult MAUs, DAUs, and Mobile MAUs further"
Corporate Highlights
  • Announced proposed acquisition of Instagram, a popular photo-sharing app.
  • Entered into a definitive agreement with Yahoo! to settle all pending patent claims between the companies and deepen the companies' current business partnership.
  • Began serving users from our new data center in Forest City, N.C.
  • Announced that Sheryl Sandberg, chief operating officer at Facebook, joined the company's board of directors. "This is the most important announcement!"
Financial Highlights

Revenue – Revenue for the second quarter totaled $1.18 billion, an increase of 32%, compared with $895 million in the second quarter of 2011.
  • Revenue from advertising was $992 million, representing 84% of total revenue and a 28% increase from the same quarter last year.
  • Payments and other fees revenue for the second quarter was $192 million.
Income (loss) from operations – For the second quarter, GAAP loss from operations was $743 million, compared to income from operations of $407 million for the second quarter of 2011. Excluding share-based compensation and related payroll tax expenses, non-GAAP income from operations for the second quarter was $515 million, compared to $477 million for the second quarter of 2011.

Facebook Stock Roller Coaster Ride Presents Buying Opportunity


Facebook reported a solid quarter. Wall Street had sky high expectations, and even though Facebook delivered on most user metrics, the traders were not pleased. Facebook stock dropped to its lowest level since IPO. This could present an attractive buying opportunity.

According to this article, "The company didn't blow the doors off of earnings, but it didn't miss Wall Street estimates."

Facebook proved that it can do good business, grow the user base, make profits and find new ways to monetize. It is a real company. What's not to like? When Facebooks grows to over 1 billion users worldwide (soon), the revenue and profits will go up likewise! Add to that Facebook's China entry (likely this year), and Facebook user base will explode. Many other businesses would love to be in its shoes. There are many things to like about Facebook's longer term prospects.

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