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They aren’t and, yet, Facebook still managed to beat Wall Street’s expectations for revenue growth while meeting earnings estimates in its first-ever quarterly report as a public company:
|Metric||Estimate||Actual||Last Year||Y-o-Y Growth|
|Revenue||$1.15 billion||$1.18 billion||$895 mil.||32.3%|
Sources: Yahoo! Finance, Facebook press release.
Investors aren’t thrilled with the performance, and understandably so:
- After three years of generating hundreds of millions in free cash flow, Facebook is back to burning cash to fund growth. The social network consumed $171 million in net capital in Q2.
- Average Revenue Per User, or ARPU, a key metric that describes how well Facebook is monetizing its massive user base, rose just $0.02 to $1.28 per user.
- In what seems to be a nod to cloud computing peer salesforce.com, share-based compensation (read: employee stock options) accounted for $1.1 billion of Facebook’s $1.93 billion in second quarter operating expenses.
- Finally, payments and other fees brought in just $192 million in revenue during the quarter, essentially flat from last quarter and the quarter prior. All of which explains why Zynga (Nasdaq: ZNGA ) fell so far short of Q2 estimates.
Earlier this month, I predicted that Facebook would disappoint. But not because of missing profits or elusive cash flow. Rather, I said that an exodus of unique visitors could damage the social network’s efforts to make good on Wall Street’s revenue targets. I was wrong.
As it turns out, Facebook has proven as adept as Google (Nasdaq: GOOG ) at milking relationships with its advertisers. Good thing, too, given Zynga’s shrinking contribution to the profit pie. Longer term, everything -- and I do mean everything -- depends on Facebook’s ability to better target ads.
Do you agree? Disagree? Either way, Facebook is but one of many companies embracing the shift to the online world, creating a trillion dollar opportunity for the Rule Breaking investors who buy in early. Want details? Find everything you need in a new online special report -- it’s 100% free for a limited time so check it out now.