Facebook first quarter profits down – what does this indicate?

Social networking giant Facebook recently released its first quarter revenues, and for the first time since 2010, there has been a down slide. Even though total revenue increased, due to higher expenses the net income for the first 3 months of 2012 fell to $205 million, from $233 million in 2011.

With the date for Facebook’s IPO set for May 18, many have begun speculating whether this is a sign of Facebook’s downturn. There have been concerns from various advertisers  and investors about whether they will get their money’s worth. The company reported that their advertising revenues for the first quarter rose 37% to $872 million from a year ago, but were down 7.5% from the previous three months.

Facebook blamed this downslide on seasonal advertising trends, saying that advertising spending is traditionally strong in the fourth quarter of each year, but the rapid growth in its business may have ‘partially masked’ the seasonal impact on the first quarter to date.

However, another point of view is that in the Internet world, nothing has infinite longevity. A recent Forbes article suggests that all Web 2.0 companies like Facebook, LinkedIn and Groupon might soon disappear, making way for a new generation of companies that will be mobile-focused, such as Instagram. Mobile is where the growth is currently, and those companies that are able to adapt to the new medium will be the ones that last.

Do you think that these trends indicate the slowdown of Facebook and other Web 2.0 companies ? Share your thoughts with us.

  • http://www.facebook.com/profile.php?id=100003139438502 Niti Joshi

    Can Facebook build a moneymaking engine as ruthlessly efficient as its social-networking products? That question will be top of mind for investors in the weeks and months following May 18, when the company is expected to raise in the neighborhood of $100 million in an IPO.