Facebook now cash flow positive from operations

The world’s largest social network Facebook has hit an important milestone.

The company founder Mark Zuckerberg announced in a blog post that Facebook was cash flow positive in the last quarter ended in June.

The company previously forecasted it would become cash flow positive sometime in 2010.

However, many material costs were not considered in the analysis. Only costs required to keep the site operational, such as server costs and other capital expenses, were considered. Acquisition costs, such as the most recent $50 million FriendFeed acquisition were not considered. Facebook also said that private investment cash was not considered. Other costs that can have a material impact are not considered as well, such as accounting charges, interest, and taxes.

Facebook traditionally, and arguably still does, mainly focus on getting as many people signed up on the service to fuel it’s growth. This approach has raised concerns over the significant costs required to keep the service running with the mounting media users post on the site.

About six months ago, Facebook was reportedly seeking up to $100 million in debt financing to cover operational costs related to technologies that support the site such as servers.

The announcement that Facebook is now cash flow positive, at least from an operational standpoint, indicates the company is now supporting additional users at lower costs; that is, economies of scale is actually working for the company.

There were no indications as to a Facebook IPO, however, Zuckerberg most recently last May did mention that an IPO was still a few years away.

The most recent $200 million investment for a 2-percent stake from Digital Sky Technologies last May valued Facebook’s preferred shares at $10 billion.

Facebook also announced that the company had added 50 million new users to the site in merely the last two months – bringing the total number of users on the site to 300 million.


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Peggy holds a Bachelor Arts degree with honors in Economics from York University in Toronto, Canada. She is a Certified Management Accountant (CMA). She has also passed Level I of the Chartered Financial Analyst (CFA) Program. She is also a realtor. Write to peggy@business2press.com
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  • http://richardmclaughlin.biz/ McLaughlin

    IPO? Heck, Mark turned down 1.6 billion from Yahoo! He will keep it private until it is the #1 site on the net. They are #2 today, just behind Google. If they pass Google and BingHoo! (MS & Yahoo!) buys it, they will just build a search feature into the tool and wham, google loses search.

  • http://business2press.com Hercules K

    lol, I don't think its that easy for them to just that with search, they just don't got the technology to do that + all those patents the powerhouses have.

    Facebook could venture into a lot of other stuff, like kill iGoogle or something with gadgets/startpages

    I'm personally don't think I would buy into an IPO, but for sure its coming.

  • Chris

    they just can't make money – all they got is a massive user base they can't even leverage, ads are not good enough to make money and we all know that today, especially how plugins disable all ads for people nowadays anyway

  • http://richardmclaughlin.biz/ McLaughlin

    IPO? Heck, Mark turned down 1.6 billion from Yahoo! He will keep it private until it is the #1 site on the net. They are #2 today, just behind Google. If they pass Google and BingHoo! (MS & Yahoo!) buys it, they will just build a search feature into the tool and wham, google loses search.

  • Hercules K

    lol, I don’t think its that easy for them to just that with search, they just don’t got the technology to do that + all those patents the powerhouses have. rnrnFacebook could venture into a lot of other stuff, like kill iGoogle or something with gadgets/startpagesrnrnI’m personally don’t think I would buy into an IPO, but for sure its coming.

  • Chris

    they just can’t make money – all they got is a massive user base they can’t even leverage, ads are not good enough to make money and we all know that today, especially how plugins disable all ads for people nowadays anyway

  • markmontoya

    It was only a matter or time before they were profitable… I just thought it would take an IPO to do it.

  • Jon

    my stance is this, if I want to buy into a company that only sells ads basically as its business model – I think I'd rather invest in Google.

  • Anonymous

    It was only a matter or time before they were profitable… I just thought it would take an IPO to do it.

  • Jon

    my stance is this, if I want to buy into a company that only sells ads basically as its business model – I think I’d rather invest in Google.

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