Facebook’s revenue slides ahead of IPO

Facebook’s revenue has slipped slightly ahead of its IPO, but its number of monthly users is climbing towards the billion mark.

Facebook's revenue slides ahead of IPO

The social network is expected to sell a tranche of shares within weeks, valuing the site at £100bn.

According to a filing document ahead of the IPO, Facebook posted revenue of $1bn over the first quarter of the year, up from $731m for the same quarter last year but down 6% from the last quarter of 2011 – its first sequential decline since 2010.

Net income slid to $205m this quarter from $233m in the previous three months. Last year, it posted a total net income of $1bn.

I’m still encouraging people to participate in the IPO, under the acknowledgement that it could be a bumpy ride

Analysts said the weaker results could affect the IPO, although investors are still expected to jump on the chance to buy shares. “The biggest issue is the realisation that Facebook is not going to have an easy time meeting high expectations of the public market,” Jeff Sica, chief investment officer of SICA Wealth Management, told Reuters. “It will affect how people look at the IPO.”

“I’m still encouraging people to participate in the IPO, under the acknowledgement that it could be a bumpy ride,” Sica said. “There are high expectations and I hate high expectations.”

Facebook said most of its revenue continues to come from advertising, but it is starting to make more from other sources. While 82% of its sales came from ads in the first quarter this year, that’s down from 98% in 2009.

Another large portion of Facebook’s revenue came from in-app payments in games made by Zynga, such as Farmville. “In 2011 and the first quarter of 2012, Zynga directly accounted for approximately 12% and 11%, respectively, of our revenue, which was comprised of revenue derived from payments processing fees related to Zynga’s sales of virtual goods and from direct advertising purchased by Zynga,” the company said.

Nearing the billion mark

The filing also revealed that Facebook now has 901m users signing in at least once a month, while 526m sign in daily. Facebook said 3.2bn “likes” or comments were posted each day in the first quarter.

The site posted growth in the mobile market, with 488m accessing the site from a mobile device each month, and Facebook said it had started showing ads to news feeds of mobile users for the first time in March.

Facebook has been on a spending spree lately, buying a package of patents from Microsoft for $550m and photo app Instagram for $1bn. The filing revealed $300m of that acquisition was in cash and the rest in shares.

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