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Facebook Profit Falls On Higher Expenses

Facebook Profit Falls On Higher Expenses
4/23/2012 8:45 PM ET

Social networking giant Facebook Inc. said in a regulatory filing Monday that its first quarter profit fell from last year, as costs and expenses outpaced revenue growth.

The company generates substantially all of its revenue from advertising and from fees associated with its payments infrastructure that enables users to purchase virtual and digital goods from its platform developers.

Total costs and expenses for the quarter nearly doubled to $677 million from $342 million a year earlier, with marketing expenses up 134% and research and development expenses up 168%.

Facebook had 901 million monthly active users as if March 31, 2012, up 33% from March 31, 2011. The company had reported 845 million active users as of the end of 2011.

Mobile monthly active users increased by 69% to 488 million as of March 31, 2012 from 288 million as of March 31, 2011.

Average revenue per user or ARPU for the first quarter rose 6% from last year, but decline 12% from the previous quarter to $1.21. The company attributed the sequential decline to seasonal trends..

Net income for the first quarter end ed March 31 fell to $205 million from $233 million in the year-ago quarter. On a per share basis, first quarter earnings fell to $0.09 from $0.11 in the prior year quarter.

Total revenue for the first quarter rose 45% to $1.06 billion from $731 million in the same quarter last year, due mainly to a 37% increase in advertising revenue to $872 million.

In the first quarter, videogame maker Zynga directly accounted for about 11% of Facebook's revenue.

Earlier this month, Facebook agreed to buy Instagram, a photo-sharing app for smartphones, for about $1 billion in cash and stock. The company revealed in the regulatory filing Monday that the purchase price for Instagram would consist of about 23 million shares and $300 million in cash. The company also said it has agreed to pay Instagram a $200 million termination fee if governmental authorities permanently enjoin or otherwise prevent the completion of the merger or if either party terminates the agreement after December 10, 2012.

Earlier Monday, Microsoft Corp. (MSFT: ) said it has agreed to sell a portion of the patent portfolio it recently agreed to acquire from AOL Inc. (AOL: ) to social networking giant Inc. for $550 million in cash.

Menlo Park, California-based Facebook is in the process of going public in an initial public offering that could value it at up to $100 billion. The company said in the regulatory filing Monday that it has applied to list its Class A common stock on the Nasdaq Global Select Market under the symbol "FB."

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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