Facebook Growth Slower Than Thought, Not "The Next Google"

Kara Swisher listened in on a Facebook company conference call in which CEO Mark Zuckerberg helpfully provided detailed financial information for the company. The bottom line? Unless Zuckerberg is being intentionally conservative, Facebook's growth is far slower than people thought. It's also nothing like Google's was.

The key data:

Revenue:  
2007:    $150 million (Same number that was given in August--i.e., no upside)
2008:    $300-$350 million, up 100%+

Is a $300-$350 million a lot of revenue for a young company? Sure. But Facebook is often referred to as "The Next Google," so its worth recalling Google's early revenue ramp:

2000:   $19 million
2001:   $86 million
2002:   $440 million, up 411%
2003:   $1.5 billion, up 240%
2005:   $3.2 billion

Google jumped from $86 million to $440 million and then to $1.5 billion. Unless Facebook majorly skedaddles, therefore, any comparison between the two companies is an insult to Google.

Profitability

Here, Facebook looks even worse. Kara says the company will generate $50 million of EBITDA in 2008 and spend $150 million on capital expenditures, for a total "free cash flow" of -$100 million. Translation? On a cash basis, Facebook will still be losing a lot of money on $300-$350 million of revenue.

Google, meanwhile, generated more than $200 million of free cash flow in 2002 on $440 million, nearly a 50% free cash flow profit margin. From a profitability perspective, therefore, the two companies aren't even in the same league.

Conclusion

A Kara source suggests that Mark's 2008 projection does not include a successful Beacon-style social-network-advertising product. Rather, it just includes plain vanilla display advertising.  If this is true, and if Facebook can finally get Beacon working right, perhaps it will yet be able to tap into a Google-like revenue stream. If not, however, it's time to stop talking about Facebook being "the next Google" -- because it isn't.