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Facebook: The Social Network Cash Register

facebook-money1The curtain was raised two weeks ago on Facebook’s finances, and the performance is impressive. Facebook filed for an initial public offering (IPO) and is looking to raise $5 Billion. Estimates are that CEO/Founder Mark Zuckerberg’s net worth would be roughly $24 Billion (take that, Winklevoss brothers). Not too shabby. The financial success of Facebook is was no surprise given its omnipresence but the magnitude of their financial success was larger than expected.

Some basic factoids:

–There are 845 Million Facebook users

–Think that most accounts are dormant? Wrong. Almost 500 Million accounts are active daily

–There are 2.7 Billion likes or comments EVERY day

–There are 250 Million photos uploaded every day (no wonder why traditional photo giants, Kodak and Polaroid, are shells of their former selves)

–Facebook generated $3.7 Billion in sales last year and $1 Billion in profit. Revenue in 2010 was almost $2 Billion and therefore the pace of growth has been dramatic. 85% of the revenue ($3.154 Billion) was generated by advertising. And Facebook is not merely a U.S. phenomena as 44% of its revenue was generated outside the U.S. (an increase from 38% in 2010)

The number of shares it intends to sell and the price won’t be determined until closer to the May live date. But Facebook can’t sustain the rapid growth to date, if only because of its already existing dominant position. But there are also reasons for caution down the line as well from several areas:

1. Mobile

Though half of Facebook users are mobile users (and this % is growing), Facebook currently has no display ads.

2. Google

Though still developing, Google + continues to grow at almost 100 Million users. It may never rival Facebook but nonetheless represents a threat. Goggle’s dominance in search and its growing Chrome browser could help Google + divert members and advertisers.

3. Privacy concerns and cyber attacks

Given its massive size a successful cyber attack unleashed on Facebook which could yield privacy breaches always remains a real threat.

The coming months will be interesting as Facebook emerges from its IPO “quiet period”. There will be nothing quiet about Facebook when it does.




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