Facebook Passes 900 Million User Mark But Q1 Profits Fall

An updated SEC filing from Facebook has revealed that the social networking giant has now passed 900 million monthly active users, with growth trends suggesting that it will hit one billion by the end of the year.

Facebook’s user base, which grew 33 percent since March 2011, has also become increasingly mobile, with 488 million users logging in from smartphones or tablets in the last month alone.

Profit worries

Though these statistics confirm that Facebook is still in the ascendancy in terms of site population, potential investors looking forward to the company’s forthcoming IPO will have cause for concern regarding the company’s profitability.

Despite earning revenues of $1.06 billion (£657m) in the first three months of 2012, a 45 percent increase compared to Q1 2011, profits decreased from $233 million (£145m) to $205 million (£127m) year-on-year. The figures show that costs and expenses incurred in the first quarter were significantly higher than for the same period last year, particularly in marketing & sales, research & development, and general & administrative departments.

Facebook said that quarterly decline was partly driven by “seasonal trends” in advertising, which accounted for 82 percent of income for Q1 2012. This is down from 98 percent in 2009, 95 percent in 2010 and 87 percent for Q1 2011. The filing also revealed that Zynga contributed approximately 15 percent of Facebook’s revenue so far this year, derived from processing fees and advertising. Facebook said that a change in relationship between itself and Zynga or Zynga and Facebook’s users could have a notable impact on financial results.

Regarding the costs of the user base, the filing explains that as more people create accounts, costs can be expected to rise.

“Providing our products to our users is costly and we expect our expenses to continue to increase in the future as we broaden our user base, as users increase the number of connections and amount of data they share with us, as we develop and implement new product features that require more computing infrastructure, and as we hire additional employees.

“In addition, we may increase marketing, sales, and other operating expenses in order to grow and expand our operations and to remain competitive.”

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