Facebook IPO: How does Facebook make its money?

Facebook’s IPO filing shows that the company brought in about $3.7 billion in revenue and made $1 billion in profit in 2011.

Advertising makes up the lion’s share of the company’s revenue — $3.1 billion — though payments and other fees have been making up for a larger percentage of revenue over the past two years.

Sixty-six percent of Facebook’s total revenue from 2011 was made in the U.S., but non-domestic sources have accounted for an increasing amount of the company’s revenue in the past two years. In 2009, non-domestic sources brought in around one-third of the company’s revenue; in 2011, it was 44 percent.

That’s in line with estimates, said technology analyst Joe Magyer. What is interesting about the financial information revealed in the filing, he said, is that Facebook appears to make about the same per user as Zynga does.

“You would think that because Facebook has so much mind share and eats up so much of our time, that it would be higher,” he said. “It’s pretty far behind the likes of Google; that speaks to the organization being pretty immatures from a business standpoint.”

On the bright side, however, Magyer said that Facebook still has a long way to grow.

Right now, he thinks that a valuation of $75 to $100 billion is a bit ridiculous, given that it’s over 20 times the company’s sales.

“It’s a beautiful business, but the valuation will just be sky-high,” he said. “They’re going to have to deliver on all the amazing things that people think they might do in order to justify the valuation.”

Hayley Tsukayama covers consumer technology for The Washington Post.

business

technology

Success! Check your inbox for details. You might also like:

Please enter a valid email address

See all newsletters

Comments
Show Comments
Most Read Business

business

technology

Success! Check your inbox for details.

See all newsletters

To keep reading, please enter your email address.

You’ll also receive from The Washington Post:
  • A free 6-week digital subscription
  • Our daily newsletter in your inbox

Please enter a valid email address

I have read and agree to the Terms of Service and Privacy Policy.

Please indicate agreement.

Thank you.

Check your inbox. We’ve sent an email explaining how to set up an account and activate your free digital subscription.