Facebook Q2 2012 Earnings | Hacker News Reader

Facebook Q2 2012 Earnings

investor.fb.com

35 pointsfaramarz38 comments

  Second Quarter 2012 Financial Summary
        In millions, except percentages and per share amounts Q2'12      Q2'11
        Revenue                                               $ 1,184    $  895
        Income (Loss) from Operations
        GAAP                                                  $  (743)   $  407
        Non-GAAP                                              $    515   $  477
        Operating Margin
        GAAP                                                  (63%)      45%
        Non-GAAP                                              43%        53%
        Net Income (Loss)
        GAAP                                                  $  (157)   $  240
        Non-GAAP                                              $    295   $  285
        Diluted Earnings (Loss) per Share (EPS)
        GAAP                                                  $ (0.08)   $ 0.11
        Non-GAAP                                              $   0.12   $ 0.12

Monthly active users (MAUs) were 955 million as of June 30, 2012, an increase of 29% year-over-year.

Daily active users (DAUs) were 552 million on average for June 2012, an increase of 32% year-over-year.

Mobile MAUs were 543 million as of June 30, 2012, an increase of 67% year-over-year.

Stock down c.10% after hours so far. That's after an 8.5% fall already today.

How did you get the formatting like that?

Edit: please don't downvote, just asking a question

Double-space and then it's ASCII time. And I pasted the results from a wire service.

You don't need to double space -- you need to prepend each line with 4 spaces

    Like
    This

Edit: downvote? really? What was incorrect about the statement?

http://news.ycombinator.com/formatdoc

This was a really important number. No matter what happened, FB had to at least come out and match the streets expectations of earnings per share (which they did). After the ZNGA plummet of 40%~ Facebook took the ripple of about 5-7%.

Since IPO, ZNGA is down 70% http://i.imgur.com/kiXss.png (courtesy of henryw in another thread) and despite having 1.2B "in the bank" I don't see much life left in them. Not when you come out blaming shortfallings on "UI changes". Total BS. (Not to mention the backlash Pincus is going to get on taking $200M)

GRPN also down 50% since their IPO. (The only notable increase is LNKD ).

FB need to come out and show that they aren't dependent on ZNGA's earnings (which they aren't). Facebook's worth is their "market", which we know is rapidly approaching 1B~, and Zynga's market cap seems to wane based entirely on their daily active users (DAU) - Take a look at their P/E, it's ridiculous. Zynga's user base is comprised entirely of casual gamers, built on a platform which is looking for long term growth and isn't afraid to make UI changes which they know will damage a company who accounted for 15% of their previous quarters earnings...

Anyway, this was clearly an important announcement, if I had the money, I would happily buy FB.

"FB had to at least come out and match the streets expectations of earnings per share (which they did)"

The quarter-to-quarter revenue numbers are suggesting a major slowdown ...

This may all turn out to be a joke if the guidance is good, but that'll have to wait for the conference call

GRPN is at the moment 68% off its $20 IPO price and 79% off its all-time-high of $31.14.

At $24 FB is looking more promising. However without a real indication of how well their current strategy of monetizing will work for them it is still a little early to really jump on the stock. If Advertisers don't see a real gain from the sponsored ads then their revenue will stagnate or fall and so will their stock price.

By contract AdWords for GOOG has at this point a well proven track record of ROI making their platform much less vulnerable to advertisers jumping ship.

Interesting to see that Google's Y/Y revenue growth beats Facebook's for Q2 2012.

(Edit : Google's Y/Y revenue growth was 35% and Facebook's 32%. In contrast, Google's market cap is about two times that of $FB)

That is not a good statistic - I was at MSFT when every few months an exec would trot out and talk about how GOOG/APPL's entire revenue fit inside some small MSFT division's numbers.

And then they had to stop.

The only thing that matters is growth.

I am talking about growth, not numbers. Google's Y/Y revenue growth was 35% and Facebook's is around 32.

...every few months an exec would trot out and talk about how GOOG/APPL's entire revenue fit inside some small MSFT division's numbers.

When was that?

Not if you exclude Motorola which wasn't part of Google 1 year ago.

This is the key. Facebook is still supposed to be in rapid growth mode, and they're getting beat by "old" competitors? Not a good sign.

32% Y/Y growth isn't rapid ?

And how is Google an old competitor when they were founded only 6 years prior to Facebook ?

>"32% Y/Y growth isn't rapid ?"

Not fast enough. Apparently the market agrees.

>"And how is Google an old competitor when they were founded only 6 years prior to Facebook ?"

That means Google has been around twice as long as Facebook. You don't consider that a long time in the tech world?

And your point is what exactly. That Google is far more diversified with its income than Facebook. That Google doesn't break out Google+ P/L so we can't do a direct comparison. That search advertising has different dynamics to social advertising.

I mean did you also want to compare Facebook with Exxon Mobile or Starbucks ?

Google is a direct competitor to Facebook when it comes to Ads. It doesn't really matter if the advertising is search based or social. They are vying for a piece of the same pie.

The really high valuation of Facebook is partly because investors expect it to grow substantially, at least in the short term. The fact that it's growth is lower than that of it's direct competitors (who have a much lower P/E) is not a good sign for the stock in days to come.

But again. Google is diversified beyond just advertising whilst Facebook isn't. It seems illogical to just blindly compare total revenues.

Why not compare Facebook/Google to Apple then since they are also vying for the same piece of the pie ? Or News Corp ? Or Vogue magazine ? Or Playboy ?

The way that valuation of a company works is that the multiple of market cap over annual revenue is supposed to reflect (mainly) expectations of growth. This multiple for Google is less than Facebook's by a LOT, because Google, as a relatively mature company working off of a larger revenue base, is expected to grow more slowly percentage-wise, all else held equal (this has been borne out by the vast majority of companies, and is pretty much common sense, as doubling sales is a lot harder to do when one is already doing tens of billions of dollars in sales). The fact that Facebook is growing more slowly than a company with much lower expectations of growth instead of living up to its expectations of hypergrowth (as implied by the valuation) is a signal that the current growth expectations (as implied by the valuation) are too high (hence the "all else held equal" part of the last paragraph: if a company isn't performing as well as it should, then it's of course possible that it'll grow more slowly than a larger competitor with lower expectations of growth). This of course ignores the possibility that FB comes up with an amazing revenue-boosting innovation like AdWords and begins to fulfill their expected growth rate. Things like "search advertising has different dynamics to [sic] social advertising" can't just be completely removed from consideration. They're precisely what determine if Facebook is inaccurately valued or if the huge growth expected from it will occur/continue.

Google's market cap is $200B vs Facebook's $57B. It's closer to 4x than 2x. They also make significantly more profit than Facebook does revenue.

> Facebook now has independent ROI data from more than 60 advertising campaigns using a variety of third-party methodologies like panels and marketing mix models. The results show that 70% of campaigns resulted in a return on ad spend of 3x or better, and 49% of campaigns showed a return on ad spend of 5x or better.

This has pretty much been my experience in CPA and CPS on FB for 3+ years (in the 5x bracket most of the time). I'm glad to see this data finally backed up by Facebook.

RE: The stock being down ~10% in after-hours.

I think there's a real divide between the people who use Facebook, for whom it is (often) a serious part of their social life and, those who comment on FB in the media and invest in FB on the public market.

Being 19 Facebook is a critical part of finding out what's going on, organising events and, keeping in touch with everyone (whether I see them every day or once a year). I'm not unique in this, it's true for all my friends and pretty much anyone I meet, of my age, around the (western?) world.

Obviously, the market thinks FB is over-valued; I'm not commenting on whether it is or isn't. I'm just interested at what the market might value FB at if the people buying its stock used it as much and in the same way as younger generations. (As far as I see it, it's like a single private company owning the whole "phone system" for young people. What would that be valued at?)

"Facebook is a critical part of finding out what's going on"

" I'm just interested at what the market might value FB at if the people buying its stock used it as much and in the same way as younger generations"

A good company doesn't necessarily make a good stock. There's a real possibility that FB will become the next MySpace, especially if another firm figures out how to build a mobile social network and doesn't sell out to FB or Google.

For me, the valuation of FB is closer to a TV channel with an audience of c. 500m people for 30mins every day of the week. And one which shows ads to people based on their own interests. What's that worth? I'm not sure.

The comparison with a phone network isn't quite right because I can't see FB ever being able to charge for service.

But I agree with your point. I think Linkedin is far more likely to be wiped out than Facebook, but the market thinks different.

I like the TV analogy, it's perhaps more apt. Surely the point of any TV network is to show ads based on their viewers interests? Just FB is able to be much more targeted (at the same time they also have to compete with the huge over-supply of online display-ads, are my eyeballs worth more on facebook.com vs. joes-blog.com? I don't think so, which is the major issue with their current monetization strategy (EDIT: and they haven't shown that their targeting is significantly better than Google Adwords as of yet)).

I am confident though that they will find a way to make FB a seriously viable business. The list of things I use FB for is just so long, I don't see how they couldn't find at least one v. profitable workflow to tap into (organising a night out, checking-in on the night out, posting photos the next day, etc.).

There are things like adblock which allow you to fully experience facebook sans ads.

Yes, there is tivo etc, but you have to pay extra to get out of the ad experience (and it doesnt always work). TV ads are much more intrusive than FB ads, and I'd imagine TV-style facebook ads (like some websites that force you to sit through an ad) most likely will kill the platform.

TV networks are not worth much.

Are you sure about that re LinkedIn? Given its narrower customer base and usage model, LinkedIn is already employing a freemium model and charging for a higher service level. Their actual users do constitute a revenue stream in a way that Facebook's never could.

How much money would you say FB makes off of you? Serious question.

I don't know. Obviously this matters in determining how much FB is worth. It probably isn't much right now but, I see the potential for huge future earnings, they haven't found their adwords yet, I'm confident they will.

The question isn't whether it's useful to a lot of people or not but rather how can FB make money from all these people? The infrastructure to support almost a billion users costs a lot of money. If FB was a subscription service with such a large user base, I think it would be valued quite a bit differently than it is as a free service.

Of course there's a divide.

Users are using a free service that they enjoy and want to continue to be free. Those who invest in Facebook want to make money because they're risking money. You have faith that they'll figure out their adwords, but are you putting your money where your mouth is - are you (or your friends) risking thousands or millions of dollars on your faith?

This really isn't anything new or unique to Facebook though. Customer satisfaction doesn't automatically make something a good investment.

It looks like most of the expenses (1.3 billion of 1.93 billion) were from "$1.3 billion of share-based compensation [RSU's] and related payroll tax expenses." If it weren't for that, then it doesn't look that bad. P/E is still in the 60's though.

Their Non-GAAP numbers exclude the share based compensation. Taking that into account, growth appears to be slowing drastically.

Net Income, first half 2011: $531 2012: $582

For those not wanting to open the PDF, $743 million GAAP loss.

Understanding that number requires some context:

"share-based compensation expense related to pre-2011 restricted stock units (RSUs) was not recognized in advance of the initial public offering, and as a result of the initial public offering during the second quarter, the company recognized $1.3 billion of share-based compensation and related payroll tax expenses"

and

"Excluding share-based compensation and related payroll tax expenses, non-GAAP income from operations for the second quarter was $515 million, compared to $477 million for the second quarter of 2011."

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