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Summary:

As Goldman Sachs lines up investors for its Facebook fund, numbers are beginning to leak out about the social network’s finances. Based on the growth in revenue and in the bottom line, Facebook could stand to pull in close to $1 billion in profit this year.

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As Goldman Sachs lines up private investors for its Facebook fund, which appears to have already closed due to high demand, numbers are beginning to leak out about the social network’s financial picture, including — for the first time — credible reports of how much the company is making in profits. Based on the growth in revenue and in the bottom line, Facebook could stand to pull in close to $1 billion in profit this year. While that may not justify the $50 billion market value that Goldman’s investment ascribes to the network, it is another sign of just how huge the company has become, and how much further it could grow as it gobbles up an even larger share of online advertising.

Both the Wall Street Journal and the New York Times appear to have gotten their hands on some of Facebook’s internal financial results as part of the offering documents that Goldman has been giving to high-net-worth investors in its new fund. The Journal says Facebook had net income (i.e. profit) of $200 million in 2009, and revenue of $777 million. While figures for last year weren’t disclosed, the Journal adds, “analysts have said the company’s revenue last year could be as much as $2 billion, fueled by advertising growth.”

The New York Times, meanwhile, has similar figures in its report for 2009, based on sources close to the Goldman offering, but it says those same sources confirmed the $2-billion revenue figure for 2010, and the financial documents provided also showed a profit for the year of $400 million. That puts the company’s profit margin at about 20 percent for last year, down somewhat from 25 percent the year before, but still sharply higher than many analysts have been projecting for the social network.

Estimating financial results for a fast-growing company like Facebook is always difficult, since so much is unknown, but if the figures provided by the WSJ and the NYT are correct, then the network saw its revenues climb by about 160 percent in 2010, and its profits doubled. Continuing that kind of growth would result in revenue of more than $5 billion this year, and assuming the profit margins stay at 20 percent result in profits close to $1 billion. Could Facebook continue growing at that rate and maintain its margins? Some believe it could — and clearly Goldman Sachs is betting that it will, if it has decided to pump $1.5 billion into the company and possibly take it public.

Piper Jaffray analyst Gene Munster says Facebook is continuing to take advertising revenue away from Google, as advertisers look to the social network as a way to reach the demographic they are after by using the “social graph.” And Scott Galloway — a professor of marketing at New York University’s Stern School of Business, who appeared with Munster in a Bloomberg TV special report on Facebook Wednesday night — said if anything, he sees the interest in the social network accelerating. Galloway said he “can’t think of a single major advertiser” he’s met with that isn’t increasing their spending on Facebook, and some are boosting it by five or even 10 times, he said.

That could fuel some substantial growth for the company, not to mention make things stickier for Google, which has been the online advertising leader for much of the past decade.

Related GigaOM Pro content (sub req’d):

Post and thumbnail photo courtesy of Flickr user Franco Bouly

  1. 1B in profit?! I feel very happy for them.

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  2. very interesting graphic here breaks down the revenue per unique user for many high profile sites. Facebook is at the bottom of the list with $4 per unique user http://read.bi/fwpHX6

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    1. Thanks, Karl — yes, the site doesn’t generate a lot of income per user compared to many others. That is just one of the challenges it faces, I think.

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  3. “Facebook could stand to pull in close to $1 billion in profit this year.

    Operative would being “could”, like “It could rain on March 1st, 2012.”

    Currently, Facebook’s only profitable business is selling advertising space to the dregs of the world ( male enhancement, Slap Chop, etc. ) which has been around since 1995 – not exactly “innovative”.

    /end wet blanket

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  4. 2010 full year profit is expected to be 500m. 1 billion in 2011 is 100% YTY growth in profit, how did they arrive at that figure? It’s VERY optimistic.

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  5. A DailyKix Top Story – Trackback from DailyKix.com…

    Facebook Could Rack Up $1B in Profit This Year…

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  6. [...] from Facebook, which is not only growing rapidly and now has a -billion market value, but is also seen to be attracting increasing interest from the advertisers who represent Google’s bread and butter. Search results and user loyalty are about the only [...]

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  7. Yes…becuase you know how these things work. Gotcha. THEY are stupid…you are smart. Even though they are experts and have done all the research and you are an idiot and have ZERO facts and figures to go on.

    Not to mention…check out Google’s value versus profit per year and get back to me on overvaluation. (And Google’s revnue is not growing NEARLY as fast as Facebook’s.)

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  8. Yes, profit figures really blow out on the fact that FaceBook has lot of scope. But it has to look into various innovative factors that are gaining better scope in the market.

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  9. [...] Consider the environment in which Facebook operates. It is a land grab, with fluid business models and changing consumer desires. New entrants hit the market seemingly every day. Facebook operates in a relatively unstable environment, and treats process accordingly. There is a strong exploration orientation. Note that the engineer’s post is from 2009, it’s possible more process has been introduced since then as Facebook grows, establishes the default social network operating model, generates real revenue and profit, and eyes an IPO. [...]

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