Business

Facebook flops

Among the biggest surprises of Facebook’s filing: its first-quarter revenue slowed by six percent from the prior quarter.

Among the biggest surprises of Facebook’s filing: its first-quarter revenue slowed by six percent from the prior quarter. (AP)

Why the muck, Zuck?

Facebook posted its first-ever quarter-over-quarter revenue decline in the first three months of the year — despite its best efforts to bolster its ad business ahead of its upcoming public offering.

Or as one analyst put it: Its most important quarter ever, blown.

Mark Zuckerberg’s social network saw revenue slip to $1.06 billion in the latest quarter from $1.3 billion in the last three months of 2011, according to a regulatory filing yesterday. Facebook’s first-quarter revenue a year ago was level with the holiday quarter at $731 million.

“Your first-ever drop,” said Sam Hamadeh, CEO of research firm PrivCo. “That’s the last thing investors need to see before your IPO.”

The amended SEC filing also gave new details about Zuckerberg’s $1 billion Instagram buy and his deal with Microsoft to buy $550 million worth of patents.

Both deals surprised some Facebook watchers, who wondered why Zuckerberg needed to go on an acquisition spree ahead of the public debut. The negotiations — for Instagram, especially — highlighted just how much control Zuckerberg wields at his social networks.

Zuckerberg has consolidated even more power, filings show. In a restatement of the company’s founding incorporation documents from 2004, Zuckerberg has implemented a change that would avoid any dilution of his shares in future acquisitions and dividends.

The move borrowed from Google, which this month orchestrated a stock split that created a new class of non-voting shares so that the co-founders, Larry Page and Sergey Brin, would not lose voting power.

The quarterly results recast Facebook’s super-growth story into one of a company that is now subject to seasonal trends.

“The rapid growth in our business may have partially masked these seasonal trends to date, and the seasonal impacts may be more pronounced in the future,” Facebook said.

Analysts said the results were lower than expected. Emarketer had predicted Facebook would top $6.1 billion in revenue for the year, which looks doubtful.

The filings also revealed that Instagram CEO Kevin Systrom worked out a deal that could prove more lucrative than $1 billion. Facebook will pay $300 million in cash and 23 million shares, each worth about $30 at a $75 billion valuation.