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A Look At Facebook IPO

And yes, it's finally came! That's the reaction from the world of investors, analysts and others who have interests in Facebook. Facebook has filed for IPO yesterday with expecting to raise $5 billion from the public. However the company remained silent on the number of shares that are floated for IPO. Also, no break-up of users by country is available in the filing.

The numbers seem really promising and as expected. Revenues were $3.7 billion in 2011, an increase of 88% from previous year. Profits stood at $1 billion (~27% profit margin). Number of Facebook users jumped to 845 million at the end of 2011, up by 39% Y-o-Y.

Industry estimates put the valuation to be in the range of $75-100 billion. Well, these are all on the positive side of Facebook. Let's have a look at some other numbers as well that may be really worth considering for investors and followers of Facebook.

1. Sales growth has been on decline since 2009 (sales growth in 2009 was 186% over 2008, but it was 88% in 2011 over 2010)
2. Total expenses have been steadily increasing since 2008 and it was up by 100% Y-o-Y in 2011
3. Net income was increased by 65% in 2011 and was at $1 billion (don't know whether Mark wanted it as a rounded/exact figure!)
4. Cash and cash equivalents were at around $4 billion at the end of 2011
5. Number of monthly users were around 845 million as on Dec 31, 2011, increased by 39% Y-o-Y; the same number witnessed an increase of 69% in 2010; this shows that Facebook is nearing maturity in terms of adding people; this may not be an issue if it considers other unexplored markets like China;
6. Daily active users were around 483 million in 2011
7. Advertising is still the major source of income for Facebook with around 85% of its total revenues come from that segment, but note that it was 95% in the previous year
8. Revenues from the US market has been on decline. Around 56% of its total revenues were from the US in 2011, it was 62% in 2010.
9. Every Facebook member generates ~ $4.5 in sales for Facebook and adds ~$1.2 in profit to the company
10. Expected offer price will be in the range of $40-53 per share
11. Around 12% of its revenues come from Zynga

So, everything seems to have been well for Facebook. But that may not be the case in future. The issues that may affect the company's growth in coming years could be,

- data privacy regulations from the government
- increase in marketing expenses to sustain the revenues growth
- find out a mobile strategy that would help Facebook to explore new markets and people
- marketing strategies that help Facebook to retain members base (with innovative products/services)
- exploring new markets (e.g China)
- explore new avenues for generating revenues than depending only on advertising

Let's wish Facebook all the best with this fund raising in the new year!