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BizReport : Social Marketing : April 27, 2012

Facebook profits drop ahead of IPO

As Facebook prepares for an initial public offering in May, news is out that the social network has reported its first profit decrease in at least two years, despite a rise in revenues. Some believe the IPO timing is disastrous, while others think it has been planned according to seasonal advertising trends.

by Helen Leggatt

As the social networking giant prepares to go public in what could be the biggest ever Internet IPO it has reported first quarter financials. They show a decrease in profit of $28 million from Q1 2011 and 6% decrease from Q4 2011.

The company blames the dip on seasonal advertising trends and, indeed, figures show that Q1 and Q3 have been traditionally slow periods of the year for the social network.

This makes more sense of Facebook's IPO timing. If it is to be in mid-May, as rumors suggest, the first quarter earnings after the IPO will make for good reading for investors, seeing as it will be a strong advertising quarter.

"Facebook's results over the last two years show a consistent pattern: Advertising revenue surges in the second and fourth quarters, respectively, yet slows or even weakens in the first and third calendar periods," says MarketWatch tech columnist John Shinal.

"In 2011, for example, advertising revenue surged more than 18% in the fourth quarter compared with the third, and likewise rose almost 22% in the second period compared with the first."

Tags: Facebook, financial data, initial public offering, investment, social network

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