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Facebook sales rise, profit slips; shares valued at $30.89

April 23, 2012|By Jessica Guynn
  • A collage of profile pictures makes up a wall in the break room at the new Facebook Data Center on April 19, 2012, in Forest City, N.C.
A collage of profile pictures makes up a wall in the break room at the new Facebook… (Rainier Ehrhardt / Getty…)

Facebook, on the verge of the largest initial public stock offering in Silicon Valley history, generated more than $1 billion in sales in the first quarter, a jump of 45%, but its first-quarter net income slipped year over year.

Its net income dropped 12% to $233 million from $205 million as expenses soared, the social networking giant said in a regulatory filing Monday.

Facebook's first-quarter revenue also declined 6% from the fourth quarter. Facebook blamed the decline on seasonal patterns. Marketers typically make bigger ad buys to reach holiday shoppers in the fourth quarter.

A decline from the fourth quarter to the first quarter is not uncommon in the U.S. online ad market. The overall market declined 3.2% to $8.9 billion in the first quarter, says research firm EMarketer. But, said analyst Debra Williamson, Facebook's first-quarter results fell below her estimates.

"Looking at what Facebook did in the first quarter, that was below our expectations. Facebook definitely has its work cut out for it if it's going to meet our estimate of $5 billion for ad revenue this year," Williamson said.

Research firm EMarketer expects Facebook to generate $6.1 billion in total revenue in 2012, up from $3.7 billion in 2011.

The regulatory filing also disclosed details of Facebook's agreement to buy Instagram. The company paid for the $1-billion deal with $300 million in cash and 23 million shares. Facebook placed a value of $30.89 apiece on its shares as of Jan. 31. Facebook said it would pay Instagram $200 million in cash if the government blocked the $1-billion deal.

Facebook’s advertising revenue rose 37% and payments and other fees rose 98%. Facebook attributed the increased revenue to continued growth and engagement. Facebook’s total monthly active users now exceed 900 million. It’s expected to reach 1 billion users this year. It now has 500 million mobile users. Daily active users increased 41% to 526 million.

Facebook also confirmed that it will list on the Nasdaq Stock Market. Facebook said its average revenue per user rose 6% to $1.21.

Facebook is expected to hold the largest Internet IPO in history next month, raising as much as $10 billion and achieving a valuation that could top $100 billion.

Expenses rose in the first quarter, with a jump in sales and marketing as well as in research and development. The company said costs grew as data centers expanded. Facebook had 3,539 employees at the end of March, an increase of 46%.

Facebook makes most of its money from online ads and could be toppled from its perch as the top dog in U.S. display ad revenue next year to Google, according to EMarketer. Facebook has rolled out new types of ads to take on Google and Yahoo. It’s looking to add mobile ads and new ads that target users on its website.

Earlier Monday, Facebook said it would pay about $550 million in cash for the majority of a patent portfolio that Microsoft bought from AOL. 

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