Facebook finances stronger than thought

Revenue at the social networking site may have hit as much as $800 million in 2009. And the company is solidly profitable, Reuters says.

By Charley Blaine Jun 18, 2010 2:48PM
Mark Zuckerberg © Paul Sakuma/AP PhotoFacebook's financial performance is stronger than previously believed, as the Internet social network's explosive growth in users and advertisers boosted 2009 revenue to as much as $800 million, sources told Reuters.

The company also earned a solid net profit, in the tens of millions of dollars last year, two sources told the news service.

That growth in profit and revenue underscores how Facebook is increasingly making money off its 6-year-old service, Reuters noted. Facebook ranks as the world's largest Web social network with nearly half a billion users.

That sort of performance is likely to whet the appetites of investors keen for an initial public offering, despite the company's insistence that an IPO is not a near-term priority.

Facebook, the booming social networking site dreamed up by Mark Zuckerberg (pictured above) and his buddies in a Harvard dorm room in 2004, is privately held and has released only very limited nuggets of financial information.

The 2009 results are significantly higher than some of the figures that Facebook had suggested earlier in 2009, as well as analysts' estimates that have appeared in various media reports.

Last July, Facebook board member Marc Andreessen told Reuters the company was on track to generate more than $500 million in annual revenue for 2009.

In September, Facebook said it had become free-cash-flow positive, meaning the company was generating enough cash to cover its operating expenses as well as its capital spending needs.

Estimates in various media reports had previously pegged the company's 2009 revenue at $550 million to $700 million.

Reuters' sources said revenue in 2009 was, in fact, $700 million to $800 million.

"They are downplaying their performance," one source told Reuters, adding that 2009 revenue was more than double the previous year's total. "There's no upside in getting people's expectations high, it's always better to go low."

If Facebook eventually seeks to go public, unveiling financial figures above expectations could help bolster investor interest.

Facebook declined to comment.

Since its inception, Facebook has emerged as one of the Internet's most popular destinations.

The social network is increasingly challenging more established Internet players such as Yahoo (YHOO) and Google (GOOG) for consumers' online time and for ad dollars, even as it tries to strike a delicate balance between protecting privacy and promoting social sharing by its users.

In May, Facebook said it would introduce new tools to give users more control to limit how much of their profile information is publicly accessible, following criticism by privacy advocates about certain new Facebook features.

Facebook's backers include Digital Sky Technologies, Microsoft (MSFT), Hong Kong tycoon Li Ka-shing and venture capital firms Accel Partners, Greylock Partners and Meritech Capital Partners. (Microsoft publishes MSN Money.)

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