Why Facebook financial report disappointed investors and analysts

The assumptions of a number of experts were confirmed - the first financial report of Facebook as a public company, published on the night of July 26-27, 2012, did not cause shock. However, a number of investors and analysts disappointed. In general, the impression can be characterized by the phrase "good, but not enough."

The first losing quarter in 2.5 years

Unpleasantly surprised investors a significant increase in costs. And it’s not only the enormous amount of compensation that Facebook paid to its employees - 1.1 billion dollars. Other expenses increased significantly. For example, the company spent 7 times more money on releasing new products than last year, and the cost of marketing and administrative needs quadrupled. In total, the cost is $ 1.93 billion, which is 4 times higher than in the second quarter of last year.

The company's revenue increased by almost a third and amounted to 1.18 billion dollars. But the actual profit turned out to be significantly lower than expected - only 295 million (during the IPO the numbers sounded - 104 billion). And then, one can speak about profit only conditionally - except for the compensations paid to employees. And since you still need to count them, there is only a bitter result: the net loss of the company is 157 million US dollars.

Thus, in the period from April to June, Facebook for the first time in the last 2.5 years worked "minus". For comparison, the financial result of the second quarter of 2011 was a profit of $ 240 million.

No predictions for the future

The surprise of investors and analysts was also caused by the absence of any specific financial forecasts. And not for the coming reporting periods, nor in the long term. Facebook’s chief financial officer, David Ebersman, only stated that revenue growth is extremely difficult to predict. Such uncertainty does not add to the attractiveness of further investment.

According to several analysts, a little optimistic forecasts in the quarterly report would only benefit companies. Moreover, in general, things are going well for Facebook. The number of social network users is growing, and people spend a lot of time on the site. The presence of advertising on the pages did not scare away visitors to mobile versions of the site, namely, the monetization of mobile services was considered the main risk in the IPO of Facebook. Social advertising of the Sponsored Stories format allowed the company to receive 84% of revenue in the reporting quarter. And in the future, the company management intends to develop this revenue item.

So Facebook has a few months ahead to confirm its success in monetization. This means that even despite the declining stock price, the newly-minted public company has prospects.

Facebook's first financial report disappoints investors and analysts