Facebook made $355 million profit in nine months last year

Documents provided to Goldman Sachs clients have revealed Facebook made $355 million US in profit in the first nine months of last year.

Reuters reports that the investments and securities firm began hand-delivering copies of a 101-page private placement memorandum for its Facebook offering to select clients around lunchtime Thursday in New York. Clients also reportedly received a six-page statement providing the clearest picture yet of Facebook's financial situation.

One such client, who declined to be named citing a Non-Disclosure Agreement, said the financial statement showed Facebook had $1.2 billion US in revenue in the first nine months of 2010. How the social networking company generated its revenue was not detailed. Ryan Jacob of the Jacob Internet Fund told Reuters that Facebook most likely made around $500 million US in profit in the whole of last year.

Reuters columnist Robert Cyran added that the same documents apparently state that Facebook had almost $800 million US in revenue and profit of $200 million US in 2009, which if true gives a strong sign of just how fast the company is growing. Two days ago, Neowin reported that the site had reached 600 million active users and could hit the one billion mark in late 2012.

Investors are reportedly eager to snap up Facebook stock via Goldman Sachs, which is investing $450 million US of its own capital in the company. Goldman is aiming to raise at least $1.5 billion US from its wealthy customers through a limited-time offering.

The Goldman Sachs financial statement also reportedly predicted that Facebook is likely to have more than 500 shareholders this year, which would trigger a Securities and Exchange Commission rule requiring the company to begin filing public financial reports. Based on that information, analysts have pegged a long-awaited Facebook IPO at April 2012.

Image Credit: beppegrillo.it

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21 Comments

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I still don't see how it is "worth" 50 billion or whatever it is. FB is setting itself up to be another dot com bubble breaker. It will be interesting to see how many other businesses fail when it goes pop.
Myspace was suppose to be "the thing" as was AOL, compuserve etc etc. People are like locust. When they stop feeding on FB, something else "hot & happening" will come along to take its place.

naap51stang said,
I still don't see how it is "worth" 50 billion or whatever it is. FB is setting itself up to be another dot com bubble breaker. It will be interesting to see how many other businesses fail when it goes pop.
Myspace was suppose to be "the thing" as was AOL, compuserve etc etc. People are like locust. When they stop feeding on FB, something else "hot & happening" will come along to take its place.

AOL was an ISP that relied on old technology (dial-up). It didnt have any high-speed infrastructure, so when broadband became available to consumers, it took a dive. Yes it partnered with local ISPs on some occasion, but mostly, they couldnt compete anymore. People also became less and less a fan of being forced to use another program to access the internet when they didnt need to, especially how bloated it had become

Compuserve--same thing as AOL, another dialup company

MySpace is the interesting one. It was first before Facebook, but the problem was that they were too open. People (myself included) were annoyed with the customization that was available as each person's page could be full of glowing and sparkling things that were just overkill. I personally remember having to mute my computer as each persons page would have music that would automatically start playing.

Facebook is a lot more streamlined. It also has many more users than any of the companies you mentioned above. 600 million users? Thats almost double the population of the United States. Its something where it isnt just for kids, but adults can have one to keep in contact with friends and family members.

Brandon said,
MySpace is the interesting one. It was first before Facebook, but the problem was that they were too open. People (myself included) were annoyed with the customization that was available as each person's page could be full of glowing and sparkling things that were just overkill. I personally remember having to mute my computer as each persons page would have music that would automatically start playing.

Facebook is a lot more streamlined.

Yeah the way Facebook and Myspace have been run differs completely. I always found MySpace a huge mess, even if I wasn't customizing things doing simple tasks could be difficult because they had to cater for so much functionality. Facebook on the hand rolls things out quite slowly and nothing is every that overly invasive. They also haven't been afraid to roll back and in a way, take functionality away from users, especially when they deemphasized apps by making them less dominant on peoples profiles.

Myspace too always seemed to want to target the younger market and never grew out of that. Facebook did. While Facebook was opening up to more markets MySpace was getting excited about things such as better support for hosting bands content. I have no idea what fool at the company thought multimedia was going to be the thing to take them forward but since they've lost the marketshare to facebook the entire site now resembles some sort of music/movie directory. They really wasted what potential they had.

The valuation is for a $50bn company. Those numbers don't seem to justify that valuation. Also could the profit include any investments Facebook might have received?

Regardless, it still boggles my mind that these websites generate that much money to begin with. Are people really clicking or reading ads on any of these sites?

AndyD said,
The valuation is for a $50bn company. Those numbers don't seem to justify that valuation. Also could the profit include any investments Facebook might have received?

Investment will hit the balance sheet and not the income statement. So no, it shouldn't show up here. Cash-flow sometimes does include incoming investments.

But you're on the right track. We don't know what kind of profit numbers we're being given here. GAAP profit? EBITDA profit? EB-whatever-expenses-I-feel-like-excluding profit?

Facebook generates a substantial amount of money from credits. It's not all advertising. And yes, it boggles my mind, too. But then, there are all sorts of things that I wouldn't pay a penny for, but other people pay dollars for.

Still, kinda funny seeing how goldman sachs before bankrupted nearly the entire US economy and now they have yet soon a firm grip on users of FB.

Wombatt said,
I think the eventual downfall of Facebook will be from the financial side of things.
Highly doubt that. Now that they have big daddy Goldman on their side things will start maturing financially.

dnast said,
$500 million in profit and 600 million users...so they didn't even make a dollar off me?

They only just crossed the 600 million mark recently some of 2010 they didn't have 500 million, so yes it probably averages out at about $1 per user.

thealexweb said,

They only just crossed the 600 million mark recently some of 2010 they didn't have 500 million, so yes it probably averages out at about $1 per user.

And that's profit, after taking out the expenses (server costs etc). Personally I'm impressed but if they're making that much money why exactly do they want this massive investment?

Good point.

It still seems extremely low considering the amount of time people spend on Facebook. It's not only the most visited site in the US but people spend on average much more time on FB than other sites including Google.

It'd be interesting to see the number of man-hours spent on FB compared to other sites.

dnast said,
Good point.

It still seems extremely low considering the amount of time people spend on Facebook. It's not only the most visited site in the US but people spend on average much more time on FB than other sites including Google.

It'd be interesting to see the number of man-hours spent on FB compared to other sites.

$1 per user, profit. So thats after paying off staff/servers/extras.

wow. thats amazing. well done mark. ;P

dnast said,
Good point.

It still seems extremely low considering the amount of time people spend on Facebook. It's not only the most visited site in the US but people spend on average much more time on FB than other sites including Google.

It'd be interesting to see the number of man-hours spent on FB compared to other sites.

As far as I am aware google doesn't take a singe penny from their users. They aren't selling a single thing. Google has enterprise solutions for one which they sell

DomZ said,

And that's profit, after taking out the expenses (server costs etc).

Perhaps.

We peons haven't seen this Goldman document, so we don't know if it's GAAP profit or accounting gimmicks. During Bubble 1.0, dot-com firms got a reputation for putting out EBITDA numbers -- essentially, revenues minus some expenses, pretending that the other expenses are stuff you don't care about.

EBITDA got a very bad name from Bubble 1.0 (as Warren Buffett's partner Charlie Munger used to call them: bullsh*t earnings). Today, firms don't call it EBITDA, but the most bubbly firms still put out two sets of numbers. For example, Salesforce.com's press releases all use one set of numbers, and then you flip to the income statement at the back and find out that the real numbers are 70% lower by GAAP accounting.

When I can see real numbers on a full income statement, audited by an accounting firm according to Generally Accepted Accounting Practices, then I'll believe it. Right now, it's just another in a long series of leaks.

I believe that Facebook is profitable. Did it make $355 million in profit in the first three quarters of 2009? Maybe, maybe not. I really don't know -- and neither can anyone who's not seen this document firsthand.

DomZ said,

As far as I am aware google doesn't take a singe penny from their users. They aren't selling a single thing. Google has enterprise solutions for one which they sell

LOL That is such a naive comment. Both Google and Facebook are in the same business. Google sells you advertisements. Facebook does exactly that. They just need cash flow to make it BIG. Hence the $50 billion dollar valuation.

You have no idea how much money Google and Facebook are going to make from all that information both are collecting about people. Facebook has not even started much yet. The potential is huge for Facebook because they have a direct connection to the peoples on their website.