Media Money with Julia Boorstin

Facebook’s Latest S-1 Reveals More Details of Growth and Challenges

A sign with the 'like' symbol stands in front of the Facebook headquarters in Menlo Park, California.
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Facebook’s user growth continues to be gangbusters: the company now has 901 million monthly active users, up from 845 million in the last filing.

And the number of daily active users is also on the rise—500 million up from 372 million a year ago. And more users – 500 million of them -- are engaging with Facebook on mobile devices, an area Facebook just recently started to monetize.

And for the first time Facebook disclosedits worldwide average revenue per user: $1.21, up 6% over Q1 2011.

While the company’s net margins are a whopping 20 percent and revenue jumped 45 percent from a year ago, operating income was down from last year and the previous quarter. Net income and operating income declined from the year earlier and sequentially to $205 million. And Facebook’s first quarter revenue doesn’t look quite as good when compared to the fourth quarter of 2011. First quarter revenue of $1.06 billion is up from $731 million in the year earlier quarter, but it’s down *sequentially* from the $1.131 billion in the prior quarter.

The company attributes this to seasonality—advertising in the first quarter is generally weaker than in the holiday spending driven fourth quarter. Declining profits can be attributed to the fact that marketing and sales costs more than doubled and R&D costs nearly tripled.

Some interesting insight into Facebook’s $1 billion acquisition of Instagram.

Facebook is shelling out $300 million in cash and 23 million shares in Facebook common stock. And if the deal didn’t go through Facebook will agreed to pay a $200 million break-up fee. But perhaps most interesting—Facebook didn’t buy Instagram because the service was eating into its photo activity. Facebook’s photo activity grew faster than the rest of the site: on average more than 300 million photos were uploaded to Facebook every day in the first quarter, up from 250 million photos in the fourth quarter of 2011.

Facebook’s disclosure of risk factors sheds more light on its $550 million acquisitionof AOLpatents from Microsoft , which was announced today. The company says that the final outcome of the litigation is uncertain, and “if an unfavorable outcome were to occur in this litigation, the impact could be material to our business, financial condition, or results of operations.”

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