Thursday, September 17, 2009

Facebook Hits 300 M User and Becomes Cash Flow Positive

Facebook has two very big pieces of news that they just announced this week.

  1. They have crossed 300 million users worldwide now, extending their lead as the biggest social network.
  2. They are now cash flow positive. Yes, from this point forward, Facebook is making money.

300 million is the obvious big news. But really, it was always just a matter of time before Facebook was going to hit the milestone. They hit 250 million back in July. Really, the much bigger news is the second item.

Earlier thus year, it was noted that while the company has been EBITDA profitable for several quarters in a row, they weren’t expecting to go cash flow positive on an operating basis until 2010. Back in 2008, there was roughly a $200 million gap between Facebook being cash flow positive and their EBITDA numbers. So why was it going to take another 2 years to close that gap? It’s likely because Facebook has been spending a lot of money over the past couple years on things like servers, but accounting rules allowed them to spread those costs over time. But the amount of money they’re pulling in has either eclipsed those costs earlier than expected or it isn’t spending as much. (Equipment spending for big storage servers tend to be lumpy).

Undoubtedly, projects like Haystack, which aim to cut the costs of sharing photo storage on Facebook have helped quite a bit. Aside from being the biggest social network, Facebook is also the largest photo-sharing site as well.

Source: TechCrunch