Facebook Revenues Up to $700M, On Track Towards $1.1B | Hacker News Reader

Facebook Revenues Up to $700M, On Track Towards $1.1B

insidefacebook.com

23 pointsALee26 comments

My suspicion is that Facebook revenues could be much higher than they are letting on. I say that as a non-Facebook user and a fairly neutral outside observer. If they were being coy because revenues were actually too good, it wouldn't be the first company to do so. Google was coy about its revenue in the 2002-3 timeframe, and it surprised a lot of people when it was later revealed just how much they were making.

Here is my theory: Facebook's traffic, measured in terms of users or page views is about even with Yahoo. Facebook has the added advantage that every single page view is a from a logged in user, who has provided Facebook with a fair amount of personal information, far, far more than what Yahoo has. Facebook has considerable information from the users' profiles as well as their various activity streams that Facebook tracks. This should enable Facebook to target its ads more precisely than Yahoo can, and therefore achieve at least as much revenue as Yahoo. From an advertiser perspective, it would seem like Facebook, with its vastly superior knowledge of user behavior, should be a better bet than old-school Yahoo. Of course, Facebook probably hasn't pushed its sales efforts as hard as mature Yahoo; still, I would expect Facebook to be doing a goodly fraction of Yahoo's revenue, which is running north of $6 billion per year.

If you buy my theory, long term, Facebook should overtake Yahoo in revenue; in fact a lot of Facebook revenue will likely come by stealing advertisers from Yahoo. So the company with the most to fear from Facebook is not Google but Yahoo.

Maybe facebook will be one of those powerhouse private technology corps like SAS that make money hand over fist but stays private to do whatever the hell it feels like in terms of personnel benefits and R&D expenditure.

To me the number's Facebook put out seem reasonable. I haven't seen evidence that Facebook's targeting capabilities have been yielding significantly higher CPC's for their ad network (and thus huge revenues). I've done some smaller buys, and yes you can control who views your ad on several grains (age, gender, location, etc.), however even with really great ad copy, CTR's are still surprisingly low given the boost you would expect from their targeting. They'll continue to refine their product but it still has a ways to go and targeting doesn't seem to be a huge competitive advantage at this point. I'd say that the big boost as of late (which was alluded to by other comments) was the loosening of their ad policies last year.

To the point about Yahoo, clearly they'll be less relevant going forward, but I don't think the comparison is completely fair. Keep in mind that they are still pretty much the king of display with an huge US reach (180MM Americans - http://www.comscore.com/Press_Events/Press_Releases/2010/1/c...).

>The company has been roughly doubling its revenues every year — 2007 came in at $150 million. We expect that trend to continue for the foreseeable future, making Facebook a multi-billion dollar company within the next few years. The question is becoming how Facebook can hit the inflection point where its revenues increase much more quickly.

Um, doubling every year sounds pretty good. Can they, or any company that's hit that size and revenue level (it's easy to 10x or 100x your revenue when starting from near 0) really hope to do much more than double revenue yearly?

Something has always bothered me about companies like Facebook and Google that generate such a high percentage of their revenue from advertising. They strike me as quite vulnerable.

Why? Advertising has been around for hundreds of years, and is involved in nearly every medium of communication. I'd wager that a high percentage of HN users who own businesses are advertising on Google or Facebook.

Well, my main issue is that for said companies, ads are essentially the only source of revenue. So what would happen if that source of revenue was cut off? Perhaps an ad blocker becomes wildly popular. Well, that destroys Facebook and Google's revenue model.

But it's also the nature of ads. I've never intentionally clicked on an ad. Anecdotally speaking, I've observed that the more sophisticated a user is, the less likely s/he is to click an ad. So in my opinion, a revenue model based solely on ads doesn't seem to bode well in an increasingly tech-savvy society.

I'm a pretty sophisticated web user and I have intentionally clicked on ads while doing Google searches. Why? Because I was looking to purchase something and I was looking for merchants. The organic listings were either equivalent or less relevant. Perfect example: Sending my mom flowers for Mother's day. I really don't have a favorite retailer I go to. I just go to Google.

Many people make this argument that the only thing Google has really made money from is ads. I take it to be FUD. Many business do extremely well by being really, really good at one thing.

And yet: http://i.imgur.com/3HM89.png

http://techcrunch.com/2009/09/15/facebook-crosses-300-millio...

While I didn't find anything newer (in about 20 seconds of googling), facebook was profitable, and I see no reason that it wouldn't still be so. If someone feels like putting in the effort of finding newer information which proves this wrong, please do; I would love to be proven wrong (well, not really; but if I am wrong, I would like to know about it).

People have to use various non-straightforward meanings of "profitable" to define Facebook as such.

"Cash flow positive" sounds pretty straight-forward to me (would you care to explain how it is not?); sure, it may not have been profitable over its entire lifespan (which is perhaps your definition?), but once your cash flow in a given period of time becomes positive, if it stays positive you'll make up for any historical loss eventually.

Cash flows aren't exclusively tied to operational activities. You can lose tons of money on the operational side, but make up for it in investments and debt, thus making your company cash flow positive. I'm not saying that's the case with Facebook, but it's entirely possible that on the operational side they are losing money but still remaining cash flow positive.

The term "cash flow positive" generally refers to cash flow from operations. A company that closes a round of financing would end the year with more cash in the bank, but no one would call such a company "cash flow positive."

An example...

Gross receipts: $1bn. Invoices paid: $300m.

Increase in account credit with vendors: $1.2bn.

Cash flow: +$700m. (Positive cash flow.) Net profit: -$500m.

Cash flow accounting comparisons are generally only an appropriate measure when expenses generally relate to the period in question OR when expenses stay the same from period to period. Both of those seem to be pretty questionable assumptions wrt a growing technology company.

eh, amazon was losing a billion a year at age 6. I'm sure facebook isn't losing even a 1/5th of that. They may even be near even money year over year at this point.

Yeah, boy, Facebook sure is in trouble.

So no one here thinks Facebook will go the way of MySpace within 1-3 years?

3-5. Way too many competitive threats for it to stay on top forever, but Facebook needs time to ossify and get slow.

On track to win my bet with jacquesm:

http://news.ycombinator.com/item?id=689993 :)

I'll take jacquesms position on that bet. You game to double down?

My bad, I'm with you gojomo. Thought you were taking the bet against growth.

As someone who actually spends a lot of money on Facebook ads and thus has a little more insight on where those revenues are coming from, I'll take jaquems side too.

A significant portion of that increase in revenues is due to ad policy changes and deals with branders rather than any type of growth that could be sustainable in the future.

I'm happy to take more action. (It's like a few shares of Facebook stock!)

Same amount, same terms? (FB revenue>$2B for 2014 I win, <$2B revenue you win, murky situations go to an HN poll?)

I don't think FB has yet found their revenue-rocket equivalent to AdWords -- current ads are not it -- but I think they will.

Allright, I'm down for $100 for the same terms, my email is in my profile so you know how to reach me.

What happens to the bet if FB is acquired?

On the original jacquesm bet, I suggested we use the apparent revenues of Facebook-as-a-division. That might be tricky to measure depending on the acquirer's reporting and integration plans, but as I suspect any acquirer will be -- (1) a giant public company with detailed quarterly reporting; and (2) eager to keep 'Facebook' as a separate brand/division -- I think it's ultimately resolvable to sufficient confidence for someone to concede (or defer to a poll result). However, if you prefer for an acquisition to mean "bet's off (no action)", I'd be OK with that, too.

Just express a preference before an acquisition happens, or my preference -- calculate it as a division -- should stand. (I like FB to make this revenue target standalone; I like them as part of Google/MSFT/Apple/Disney/etc.; I like them in a box, I like them with a fox; I like them in a house, I like them with a mouse.)

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