Facebook's Revenue up on Last Year and down on Last Quarter

By Steve Anderson April 23, 2012

It's an unexpected combination of ups and downs for Facebook as they filed their updated S-1 documents today. Their IPO is still upcoming, but the documents they're releasing ahead of same are showing a side of Facebook many had never expected to see.

Basically, the news is quite good for Facebook over last year, with revenues up 45 percent over the previous year. But where things get a bit unusual is in the discovery that Facebook's revenues have fallen fully six percent from just last quarter.

Facebook pinned the blame for the drop in revenues on rising costs, and that's a perfectly logical thing to blame. Anyone who's been to the grocery store lately knows things aren't cheaper now than they were this time last year. But what's got some investors concerned is that the decline in earnings is so pronounced and over such a short term. It's a case of five steps forward, and one step back; it's one thing for a business' growth to slow. In a bad economy like this one, it's almost expected. But for a company whose numbers have climbed so far so fast to start seeing negative growth can be unnerving.

Facebook, however, was being downright rational about the whole thing, expressing the belief that, indeed, their user growth and revenue growth would decline over time. Pointing to past history, Facebook noted that their revenue had climbed 154 percent between 2009 and 2010, 88 percent from 2010 to 2011, and now, the 45 percent number we've seen for the 2011 to 2012 corridor. Basically, the more people that join Facebook, the fewer people there are to join Facebook in the future.

With Facebook making more hiring -- full-time employees went up 46 percent over the course of the last year -- and costs in the market going up, some slowing in revenue growth will simply be part of the normal operations. Facebook isn't taking this lightly, though, with the recent purchase of Instagram and the purchase of several patents from Microsoft. It's clear Facebook has its eyes on the future, and development -- and the associated costs therein -- will be part and parcel of that future for some time to come.

Edited by Rich Steeves

Contributing TechZone360 Writer

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