Facebook user numbers up but profits slide | Business| Economy and finance news from a German perspective | DW | 24.04.2012
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Business

Facebook user numbers up but profits slide

Facebook has posted its first quarter-to-quarter revenue fall in two years as income from advertising dropped at the beginning of 2012. The decline was due to 'seasonal factors' because user numbers are growing.

The social network's revenue declined 6 percent in the first quarter of 2012, falling to a total of $1.06 billion (805 million euros) compared with about $1.12 billion in the last quarter of 2011, Facebook announced Monday.

Profits were also down, sliding 12 percent to $205 million from $233 million logged in the previous quarter, the California-based social network added.

In a statement, Facebook attributed the income slide mainly to a slowdown in its advertising business which was "typical" for that period of the year, and may have been "partially masked" by the rapid advertising growth it had experienced in the past months.

As Facebook is preparing to raise at least $5 billion in an initial public offering (IPO) planned for May, the revenue slowdown was faster than expected by market analysts.

"For a company that is perceived as growing so rapidly, to slow down so much will be somewhat concerning to investors if faced with a lofty valuation," Brian Wieser, an analyst with Pivotal Research Group told Reuters news agency.

However, investors growth concerns may be allayed by Facebook's latest user numbers, also announced Monday. The company said that the number of active monthly users in the first quarter surpassed 900 million for the first time ever.

In addition, year-on-year revenue had nearly doubled, the company said, soaring to $3.7 billion over the whole of 2011.

Patent arsenal beefed up

Facebook also announced that it has struck a deal with Microsoft worth $500 million to acquire crucial patents held by the software giant.

Earlier this month, Microsoft paid $1.1 billion in an auction for 925 patents held by AOL, and has now sold 650 of them on to Facebook, while licensing the remaining 275 to the social network.

The deal is said to include technology for messaging, search, imaging and Internet telephony, and was described by Facebook as "another significant step in our ongoing process of building an intellectual property portfolio to protect Facebook's interests over the long term."

In addition, Facebook disclosed that it had agreed to a deal with Instagram, paying the start-up company $200 million for using its photo sharing software if US regulators should object to the recent buy-up of the firm by Facebook.

uhe/slk (Reuters, dpa, AFP)