Phantom Maelstrom

I don't know if the majority of people using Facebook cares about how much Facebook earns for this absolutely free service. But for tech guys and online entrepreneurs like us (I'm one of them), I am always curious of how much this giant is earning.

According to Gawker.com, their source forwarded them an explicit look at Facebook's finances, and they say it's more staggering than they expected. A gusher of profits has left the social network with a cash hoard to rival established companies like 3M, eBay and Yahoo.

Facebook Profits from January 2011 to September 2011

Assets: $5.6 billion
Cash/cash equivalents: $3.5 billion
Debt: $0
Shareholder equity: $4.5 billion
Operating cashflow: $1 billion
Revenue: $2.5 billion
Operating income: $1.2 billion
Net income: $714 million

Ownership: Employees 30%, Mark Zuckerberg 24%, Digital Sky Technologies 10%, Accel Partners 8% (had 10% but sold 2%), Dustin Moskowitz 6%, Eduardo Saverin 5%, Sean Parker 4%, Goldman Sachs clients 3%, Microsoft 1.3%, Peter Thiel and/or Clarium Capital 3%, Greylock Partners 1.4%, Meritech Capital Partners 1.6%, Chris Hughes 1%, Li Ka-shing 0.75%, Interpublic Group 0.50%, Goldman Sachs 0.8%

~Gawker's source; with knowledge of Facebook's finances.

Here's the explanation made by Ryan Tate of Gawker:

The big picture is this: Facebook's income is blowing up, and the company will likely come close to earning a full billion dollars in profit this year, more than double what it reportedly made a year ago and quadruple what it is believed to have made two years ago.

Beyond that, Facebook's billions in assets, including gobs of cash, constitute a war chest that can be used to buy other tech companies. That helps explain why the company raised $1.5 billion through Goldman Sachs in January, even though it was already very profitable by then. The company's growing bank balance puts it in a position to initiate more, and more substantial acquisitions, should it decide to do so.

The company's wallet might only be about a tenth of true giants like Apple and Google (see here), but it's the sort of hoard other tech companies spend decades accumulating. Adobe and Yahoo, for example, will eye Facebook's cash with envy. And the balance sheet is expected to balloon; Gawker's source echoed prior reports that Facebook is considering raising $10 billion at a $100 billion valuation in an initial public offering. That IPO is widely expected to come at some point next year.

Ryan added that it might seem obvious that Facebook would make huge amounts of money, particularly if you're a user. Media brands, particularly those we see several times a day, loom disproportionately in our minds. But having tons of users isn't the same thing as having tons of money. MySpace made only a few million dollars in profit when it was a very buzzy, popular site just acquired by News Corp. It's valuation was later decimated after it lost a key advertising deal. Google, meanwhile, is believed to have sunk huge resources into its new Google Plus social network, and profitability is by no means considered inevitable. The struggles of Facebook's competitors make the figures all the more impressive.