Wait a Second -- Facebook Actually Missed Its Revenue Projections by $500M

A lot of people got excited about Facebook doubling its first half year revenue compared to last year. Quite the coup. They were so taken with the growth rate that they forgot to see if it would actually justify the company valuations that have flown about after some high-profile public placements. But it turns out there's something else people missed.

Companies measure revenue and earnings against what they expected to do. By that yardstick, Facebook's results were close to a foot short. As PrivCo, an analyst firm following private companies, points out, Facebook missed its own forecasts by about 25 percent, or nearly $500 million. How does the company know about the forecasts? They were included in the prospectus for the Goldman Sachs (GS) placement to its private clients back in January.

Facebook expected to do better
Although PrivCo CEO Sam Hamadeh did not have a copy of the prospectus, he said in an interview with BNET that he had spoken to multiple people who had the prospectus in hand and verified the numbers. Facebook had projected first half year sales in 2011 of more than $2 billion and full year revenue of $4 billion, and that was based solely on ad revenue. Add what the company expected to make through Facebook credits, its online payment system, and Hamadeh says the yearly amount jumps to about $4.5 billion. (I emailed Facebook's PR team but haven't heard back yet.)

Hamadeh thinks that the leak of revenue made to Reuters was an intentional PR move -- and, frankly, the approach of one important metric slipping from someone who had to be in upper management or at a VC to a single press source is a familiar one in Silicon Valley. That's because Facebook has seen its valuation drop as of late.

Valuation dropping while many cheerlead

Peak valuations were based on private placements reported at $35 or $36 a share. But according to a SharesPost recent auction of 100,000 shares of Facebook stock, the clearing price was $33 a share.

An even bigger drop came when marketing company Interpublic Group sold half of its Facebook shares. People focused on how Interpublic bought the shares in question at $2 million and sold at $133 million. Hamadeh points out that the recent transaction meant a share price of $27.60, down from $33 in mid-August. (SharesPost did note that another 50,000 shares had a clearing price of $33 on August 31.)

So why all the positive news? "You have insiders leaking positive financials while trying to sell stock," Hamadeh says. "There are so many shareholders and venture capitalists. There are so many people who are cheerleaders."

Related:

• Has Facebook Been Cooking the Ad Books?
• Facebook's Financial Burlesque: Tucking Groupon's Dollars In Its Garter?
• Why Facebook's Revenue Growth Won't Justify a $70B Valuation
• Twitter and Facebook Must Really Be Hungry for Revenue
• Facebook Desperation Watch: Zuckerberg Looks Over His Shoulder
• LinkedIn Pushes Its Users Into Ads Because It Can (and Wants That Money)
• Social Marketing "Experts" Don't Know Jack About Facebook, Twitter, and Their Kin
• How LinkedIn Turns a Profit when "Users" Don't Use the Site
• Twitter Rents Itself Out -- Selling to Come Later
• Biz Stone Quits Twitter -- the Last Co-Founder to Go