Facebook stock falls, results good, but costs higher

Facebook had their annual and fourth quarter numbers yesterday. Like Amazon.com this is a company that is on a crazy upward trajectory, so sometimes it might be difficult for some to judge the stock reaction. Both the instant numbers (which is a little like drinking instant coffee, you can tell, I am a snob in this department), top line and bottom line beat expectations, but there was a marked surge in costs. Costs that were increased by adding more infrastructure as well as more staffers in order to be able to continue to innovate. Because ultimately that is what you are buying here. Costs and expenses increased a whopping 82 percent in the quarter. The company on a GAAP basis made nothing last year, on a per share basis it clocked one cent. A penny for 2012. On a non-GAAP basis the company earned 56 US cents per share. So, basically the multiple is infinite. For the time being.


What folks were looking at were ad revenues from their mobile business (remember the angst around that) and that had grown 40 percent plus. As you were. Facebook Reports Fourth Quarter and Full Year 2012 Results, is where you can find the nice blue and white layout. Nobody wants anything from you, there are no ads there, it just lays out the basics. More and more people are using their mobiles to access Facebook, 680 million in total, a massive 57 percent year-over-year increase. That was pretty telling. It of course means that folks have also upgraded their handsets across the globe. And not really to the Blackberry, which has lost market share. I do hear that the Facebook app on the old generation Blackberrys did not work that well either.


The most difficult question to answer is how do you value a company like this? Uniquely, Facebook knows more about their audience than anybody else out there. They know what you like, where you have been, who your friends are, what photos you post, who is in those photos, what your activity is, what mood you are in, who you are in a relationship with, your birthday, and the list goes on. The simple burning question is, how do you monetize a user base of one billion plus people? One billion folks use their Facebook accounts at least once a month, "active accounts" according to the company. The market is paying roughly 67 Dollars per user, the market cap of Facebook of course is one billion times that. I suspect that people who are really active, committed to the platform types are going to make all the difference. There are 618 million active daily users, roughly one in 11 folks on the planet. An advertisers dream. Like the ebook adoption, advertisers and payers for the services of targeted groups alike will take time to adapt to the platform. I suspect that the classified section in future will almost likely appear on this platform.