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Facebook's IPO filing reveals growth trends and key hurdles

By
Richard Broughton

Daniel Knapp

Eleni Marouli

Jack Kent

Steve Bailey

March 16, 2012

Social networking giant Facebook filed is prospectus for an IPO, revealing that it made a profit of $1bn on revenues of $3.7bn in 2011, and had 843m monthly active users at Q4. To consolidate its meteoric rise to become the leading global social network, Facebook will need to respond to multiple challenges posed by growing mobile usage, its approach to monetising usage through advertising and virtual currencies and the fickle nature of consumers and their interaction with social media. We expect Facebook to generate $5.5bn in revenue through full-year 2012, and predict operating income of $2.6bn in the same period.

Facebook's well-documented rise to become the leading global social network has been meteoric. Launched in 2004 as 'thefacebook', with access initially restricted to students at a handful of US universities, the company streamlined its brand to simply 'Facebook' in 2005, and soon launched internationally. By the end of 2011, Facebook registered 845m monthly active users worldwide.

Despite Facebook's North American origins, Europe is currently Facebook’s largest market worldwide in terms of monthly active users, at 229m as of December 2011-compared to 179m in North America-current trajectories suggest that Asia will overtake Europe by the end of 2012.

This report addresses the future prospects for the company, looking at user and financial metrics, and discusses key challenges and issues that Facebook will need to overcome in order to ensure it remains the dominant global social network.

Highlights:

Social networking giant Facebook filed its prospectus for an IPO, revealing that it made a profit of $1bn on revenues of $3.7bn in 2011, and had 843m monthly active users at Q4.
To consolidate its meteoric rise to become the leading global social network, Facebook will need to respond to multiple challenges posed by growing mobile usage, its approach to monetising usage through advertising and virtual currencies and the fickle nature of consumers and their interaction with social media.
We expect Facebook to generate $5.5bn in revenue through full-year 2012, and predict operating income of $2.6bn in the same period.
Advertising provided 85 per cent of Facebook's revenues in 2011, and the site offers a powerful incentive for online advertisers thanks to the detailed information it has collected about its users.
Future growth will also be driven by developing its still relatively small revenue streams from payments and the rapidly developing mobile user base. IHS Screen Digest forecasts non-advertising revenues of $1.1bn for Facebook this year, up from $575m in 2011.

In this report:

Facebook monthly and daily active users
Facebook revenue and operating income forecasts
Facebook vs Google IPOs - comparison of key metrics
Assessment of Facebook's advertising strategy
Monetising mobile - a key issue
Gaming on Facebook
Maintaining user engagement

Tables and charts included:

Global Facebook Monthly Active Users
Quarterly Revenue per Daily Active User
Facebook revenue & operating income
IPO Multiples
Facebook vs Google - key metrics
Facebook quarterly advertising revenue
Facebook payments/other revenues
Facebook portfolio performance for Zynga, 2011
MAUs of top 200 Facebook games
Facebook user activity - ratio of daily active users to monthly active users
comScore - Facebook daily visitors/average minutes per day

Pages: 15

Tables & charts: 11

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