Facebook’s first result since its IPO has generally met the expectations of analysts, who previously the social network could conveniently ignore. In the current climate, meeting expectations counts as a win, particularly for Facebook which has been rightly slammed for the conduct of its float.
Business Insider summed up the sentiment with its headline “Facebook modestly beats Wall Street’s low expectation, stocks tank anyway”.
First, to the numbers: The headline number was a loss of $157 million compared to a profit of $240 million last year. That looks ugly, until you adjust for things like the cost of the IPO and other extraordinary items. The underlying result looks much more favourable — a profit of $295 million or 12 cents a share.
<i>The New York Times</i> in its report noted that the revenue growth was strong, but customer growth was tepid which shows you how unfair the world is. Normally, dotcoms get beaten up for bragging about user growth and ignoring the dollars. The Money Bags were anticipating ad revenue growth of just below 20 per cent and the company deliver on 29 per cent.
The New York Times noted that while analysts may have been satisfied, the punter’s themselves where unimpressed wiping 8.5 per cent of the value of the company in very short order as this rather unpleasant Nasdaq chart illustrates . For the optimists, there were encouraging signs on Facebook’s one great weakness — its inability to monetise mobility.
<i>Techcrunch</i> noted that with sponsored feeds Facebook is now generating $1 million a day in new incremental revenues of which about half is coming from mobiles. “Many have questioned how Facebook would be able to sell ads successfully on mobile, considering that ads on mobile sites and apps tend to do worse than the web — and because Apple and Google have their own ad networks. Because Sponsored Stories run within the news feed across all of its mobile properties, Facebook is still able to show ads to its 543 million mobile monthly users”, according to Techcrunch.
For its part, <i>Business Insider</i> compares Facebook’s result with Google’s — and it’s not pleasant viewing for fans of The Book. “By comparison, Google’s business grew 21 per cent from a much larger base (~$40 billion annual revenues) during the second quarter. Its revenue multiple is only 5X. It is laughable that people were recently saying this company would be bigger than Google. If it ever does become that big (an increasingly absurd notion) it won’t be because of its current ads business, that's for sure.”
In his commentary, Zuckerberg also punctured the notion of a Facebook phone. BI records that CEO Mark Zuckerberg talked up the importance of mobility, the growth in Facebook’s audience and the initial success of sponsored stories. But importantly Zuckerberg also said that Facebook does not need to build its own phone.
Andrew Birmingham is the CEO of Silicon Gully Investments. Follow him on Twitter @ag_birmingham.