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Quarterly Earnings SlidesQ3 2012
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Safe Harbor
This presentation contains forward-looking statements, which are subject to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts
contained in this presentation, including statements regarding our estimates of future stock-basedcompensation expense, are forward-looking statements. These forward-looking statements are only
predictions and may differ materially from actual results due to a variety of factors, including variations in the
future price of our common stock as well as future grants and forfeitures of equity awards. In addition, please
note that the date of this presentation is October 23, 2012, and any forward-looking statements contained
herein are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation
to update these statements as a result of new information or future events.
In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These
non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance
prepared in accordance with U.S. GAAP. A reconciliation of non-GAAP financial measures to the corresponding
GAAP measures is provided in the appendix to this presentation. Please also see the appendix to this
presentation for information concerning limitations of our key user metrics.
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3
Monthly Active Users (MAUs)
Please see Facebook's Form 10-Q for the quarter ended September 30, 2012 for definitions of user activity used to determine the number of our MAUs, DAUs andmobile MAUs. The number of MAUs, DAUs, and mobile MAUs do not include Instagram users unless such users would otherwise qualify as MAUs, DAUs, and
mobile MAUs based on activity that is shared back to Facebook.
In June 2012, we discovered an error in the algorithm we used to estimate the geographic location of our users that affected our attribution of certain userlocations for the first quarter of 2012. The first quarter of 2012 user metrics reflect a reclassification to more correctly attribute users by geographic region.
144 154 163 169 176 179 183 186 189
167 183201 212
221 229 239 246253
113138
156174
196 212234 255
277
126133
161
183207
225245
268288
550
608
680
739
800845
901
9551,007
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Millions of MAUs
Rest of WorldAsia
Europe
US & Canada
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Daily Active Users (DAUs)
92 99 105 117124 126 129 130 132
94 107120
127 135143 152 154 160
5464
72 85
98 105119 129
141
5458
74
87100
109126
139152
293327
372
417
457483
526552
584
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
DAUs / MAUs
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
53% 54% 55% 56% 57% 57% 58% 58% 58%
Millions of DAUs
Rest of WorldAsia
Europe
US & Canada
Please see Facebook's Form 10-Q for the quarter ended September 30, 2012 for definitions of user activity used to determine the number of our MAUs, DAUs andmobile MAUs. The number of MAUs, DAUs, and mobile MAUs do not include Instagram users unless such users would otherwise qualify as MAUs, DAUs, and
mobile MAUs based on activity that is shared back to Facebook.For non-worldwide DAU user numbers presented for the periods marked March 31, 2012 and June 30, 2012, the figures represent an average of the first 25 daysof the period and the last 27 days of the period, respectively, due to the algorithm error described in the MAU note on slide 3. These average numbers do notmeaningfully differ from the average numbers when calculated over a full month.
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Mobile Monthly Active Users (Mobile MAUs)
Millions of Mobile MAUs
Please see Facebook's Form 10-Q for the quarter ended September 30, 2012 for definitions of user activity used to determine the number of our MAUs,DAUs and mobile MAUs. The number of MAUs, DAUs, and mobile MAUs do not include Instagram users unless such users would otherwise qualify as MAUs,
DAUs, and mobile MAUs based on activity that is shared back to Facebook.
196
245288
325376
432
488
543
604
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
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Payments and other feesAdvertising
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Revenue
Millions of Dollars
$450
$655 $637$776 $798
$943$872
$992$1,086
$17
$76 $94
$119$156
$188$186
$192
$176
$467
$731 $731
$895$954
$1,131$1,058
$1,184$1,262
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
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Rest of WorldAsia
Europe
US & Canada
7
Revenue by User Geography
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a
revenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements whererevenue is geographically apportioned based on the location of the advertiser or developer.
Millions of Dollars
$271
$412 $394 $471 $482
$567
$525
$590 $637$134
$218 $229
$275 $290
$361$328
$346$341
$37
$58 $62
$82$104
$115
$118
$135$154
$25
$43 $47
$65$78
$87
$87
$113$130
$467
$731 $731
$895$954
$1,131$1,058
$1,184
$1,262
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
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Rest of WorldAsia
Europe
US & Canada
8
Advertising Revenue by User Geography
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform arevenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements whererevenue is geographically apportioned based on the location of the advertiser or developer.
$260$359 $332 $394 $395
$462$419
$479$538
$130
$201$206
$245 $245
$306$274
$294
$295
$36
$53 $56
$74 $88
$95
$99
$115
$133
$24
$41
$44
$61 $71
$79
$79
$104$120
$450
$655$637
$776$798
$943
$872
$992
$1,086
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Millions of Dollars
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Rest of WorldAsia
Europe
US & Canada
9
Payments & Other Revenue by User Geography
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform arevenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements whererevenue is geographically apportioned based on the location of the advertiser or developer.
$11
$53$62 $77
$87$105 $106 $111 $99
$17
$23
$30
$45
$55 $54$52
$46
$5
$6
$8
$16
$20 $19 $20
$21
$2
$3
$4
$7
$8 $8 $9$10
$17
$76
$94
$119
$156
$188 $186$192
$176
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Millions of Dollars
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Payments Revenue Recognition Timing
Therefore starting in Q4, we expect to recordall Payments revenues in the month thetransaction occurs, net of estimated refunds orchargebacks. We anticipate that thischange will result in a one-time increasein Payments revenue in the fourthquarter as we recognize revenue from an
extra month of payments transactions(those occurring in September throughDecember.)
In Q3 and prior, due to insufficient transactionhistory, Payments revenues have been recognizedafter the claim period lapses.
For example, transactions occurring in Juneare recognized as revenue 30 days later, inJuly, and included in Q3 revenue. So Q3revenue reflects transactions that occurred
during the months of June, July and August.
In Q4 we will have 24 months of historicaltransactional information at which time we believewe will be able to reasonably estimate futurerefunds and chargebacks.
Q 3 2012 Q 4 2012 Q1 2013
June Jul Aug Sept Oct Nov Jan MarFebDec
Payments terms and conditions provide for a 30-day claim period following aPayments transaction during which the customer may dispute the transaction.
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Average Revenue per User (ARPU)
$0.36
$0.46$0.43
$0.50
$0.56 $0.56 $0.53 $0.55$0.58
Q3'10Q4'10Q1'11Q2'11Q3'11Q4'11Q1'12Q2'12Q3'12
Asia
$1.93
$2.77$2.49
$2.84 $2.80
$3.20$2.90
$3.20$3.40
Q3'10Q4'10Q1'11Q2'11Q3'11Q4'11Q1'12Q2'12Q3'12
US & Canada& Canada
$0.84
$1.25 $1.19$1.33 $1.34
$1.60
$1.40 $1.43 $1.37
Q3'10Q4'10Q1'11Q2'11Q3'11Q4'11Q1'12Q2'12Q3'12
Europe
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform arevenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements where
revenue is geographically apportioned based on the location of the advertiser or developer. The ARPU amount for US & Canada region in Q12012 reflects an adjustment based on the reclassification of certain users between geographical regions to more correctly attribute users bygeographic region.
$0.90
$1.26$1.14
$1.26
$1.24
$1.38
$1.21
$1.28 $1.29
Q3'10Q4'10Q1'11Q2'11Q3'11Q4'11Q1'12Q2'12Q3'12
Worldwide
$0.22
$0.33$0.31
$0.38$0.40
$0.41
$0.37
$0.44$0.47
Q3'10Q4'10Q1'11Q2'11Q3'11Q4'11Q1'12Q2'12Q3'12
Rest of the World
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Share-Based Compensation Expense
$25$58 $59 $74 $97
$113 $138$135
$986
$28 $30
$4 $6 $7
$64 $70 $76$103
$1,106
$179 $190
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12E
~
Millions of Dollars
Pre-2011 RSUsPost-2011 RSUs
Options & Other
Q4 2012 expenses are estimates and exclude any potential impact of future acquisitions.
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Expenses as a % of Revenue
11% 9% 12% 11% 12%
12% 11%14%
33%
13%
Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Marketing & Sales
24% 22%26% 25% 25%
25%22%
26%
31%
26%
Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Cost of Revenue
8% 7% 9% 9%11%
11% 11%14%
60%
19%
Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Research & Development
6% 7% 8% 11% 10%
9% 8% 10%
39%
12%
Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
General & Administrative
We have reclassified certain prior period amounts in marketing and sales to general and administrative expense to conform to our current
period presentation. These reclassifications did not affect revenue, total costs and expenses, income (loss) from operations, or net (loss)income.
Share-based compensation + Payroll tax related to share-based compensation All other expenses
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GAAP Income (Loss) from Operations & Margin
$216$437 $388 $407 $414
$548$381
$(743)
$377
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Income (Loss) from Operations ($M)
46%60% 53% 45% 43% 48% 36%
(63%)
30%
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Operating Margin
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Effective Tax Rate
Q2 and Q3 effective tax rates were influenced by significant share-based compensation expense resulting from our initial publicoffering, a portion of which is not tax-deductible. A combination of tax benefits recorded in Q2 and tax provisions in Q1 andQ3 result in an approximately 0% effective tax rate in the year-to-date period.
(in millions) Q1 Q2 Q3
2012 2012 2012 2012
Revenue 1,058$ 1,184$ 1,262$ 3,504$
Costs and expenses:
Cost of revenue 277 367 322 967
Research and development 153 705 244 1,102
Marketing and sales 143 392 168 703
General and administrative 104 463 151 717
Total costs and expenses 677 1,927 885 3,489
Income from operations 381 (743) 377 15
Interest and other income (expense), net
Interest expense (13) (10) (11) (35)
Other income (expense), net 14 (12) 6 9
Income (loss) before provision for income taxes 382 (765) 372 (11)
Provision for (benefit from) income taxes 177 (608) 431 -
Net income (loss) 205$ (157)$ (59)$ (11)$
Effective Tax Rate 46% 79% 116% 0%
YTD
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GAAP Net Income (Loss)
$131
$251$233 $240 $227
$302
$205
$(157)
$(59)
Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12
Millions of Dollars
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Non-GAAP Net Income
Millions of Dollars
Non-GAAP net income excludes share based compensation expense, payroll tax expenses related to share-based compensation, and relatedincome tax adjustmentssee the Appendix for a reconciliation of this non-GAAP measure to GAAP net income.
Quarterly YTD
$273$311
$804
$890
Q3 2011 Q3 2012 YTD '11 YTD '12
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Capital Investments
Millions of DollarsProperty and equipment acquired
under capital leases
Purchases of property
and equipment
Annual YTD
$33$293
$606
$421
$1,037
$56
$217
$473
$393
$251
$89
$510
$1,079
$814
$1,288
2009 2010 2011 YTD'11 YTD'12
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Period-end Headcount
19
Employees
Annual YTD
1,218
2,127
3,200
2,958
4,331
2009 2010 2011 YTD'11 YTD'12
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Appendix
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Reconciliations
2011 2012 2011 2012
GAAP net income (loss) 227$ (59)$ 698$ (11)$
Share-based compensation expense 70 179 141 1,388
Payroll tax expenses related to share-based compensation - (31) 7 122
Income tax adjustments (24) 222 (42) (609)
Non-GAAP net income 273$ 311$ 804$ 890$
September 30, September 30,Three Months Ended Nine Months Ended
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Limitations of Key Metrics
The numbers of our MAUs and DAUs and average revenue per user (ARPU) are calculated using internal
company data. While these numbers are based on what we believe to be reasonable estimates of our user
base for the applicable period of measurement, there are inherent challenges in measuring usage of our
products across large online and mobile populations around the world. For example, there may be
individuals who maintain one or more Facebook accounts in violation of our terms of service, despite our
efforts to detect and suppress such behavior. We estimate, for example, that duplicate accounts (an
account that a user maintains in addition to his or her principal account) may have represented
approximately 4.8% of our worldwide MAUs as of June 30, 2012. We also seek to identify false accounts,
which we divide into two categories: (1) user-misclassified accounts, where users have created personal
profiles for a business, organization, or non-human entity such as a pet (such entities are permitted on
Facebook using a Page rather than a personal profile under our terms of service); and (2) undesirable
accounts, which represent user profiles that we determine are intended to be used for purposes that violate
our terms of service, such as spamming. As of June 30, 2012, for example, we estimate user-misclassified
accounts may have represented approximately 2.4% of our worldwide MAUs and undesirable accounts
may have represented approximately 1.5% of our worldwide MAUs. We believe the percentage ofaccounts that are duplicate or false is meaningfully lower in developed markets such as the United States
or Australia and higher in developing markets such as Indonesia and Turkey. However, these estimates
are based on an internal review of a limited sample of accounts and we apply significant judgment inmaking this determination, such as identifying names that appear to be fake or other behavior that appears
inauthentic to the reviewers. As such, our estimation of duplicate or false accounts may not accurately
represent the actual number of such accounts. We are continually seeking to improve our ability to identifyduplicate or false accounts and estimate the total number of such accounts, and such estimates may be
affected by improvements or changes in our methodology.
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Limitations of Key Metrics (continued)
Our metrics are also affected by applications on certain mobile devices that automatically contact our
servers for regular updates with no user action involved, and this activity can cause our system to count
the user associated with such a device as an active user on the day such contact occurs. For example, we
estimate that less than 5% of our estimated worldwide DAUs as of December 31, 2011 and 2010 resulted
from this type of automatic mobile activity, and that this type of activity had a substantially smaller effect on
our estimate of worldwide MAUs and mobile MAUs. The impact of this automatic activity on our metrics
varies by geography because mobile usage varies in different regions of the world. In addition, our data
regarding the geographic location of our users is estimated based on a number of factors, such as the
users IP address and self-disclosed location. These factors may not always accurately reflect the users
actual location. For example, a mobile-only user may appear to be accessing Facebook from the location
of the proxy server that the user connects to rather than from the users actual location. The
methodologies used to measure user metrics may also be susceptible to algorithm or other technical
errors. For example, in early June 2012, we discovered an error in the algorithm we use to estimate the
geographic location of our users that affected our attribution of certain user locations for the period ended
March 31, 2012. While this issue did not affect our overall worldwide MAU number, it did affect ourattribution of users to different geographic regions. We estimate that the number of MAUs as of March 31,
2012 for the United States and Canada region was overstated as a result of the error by approximately 3%
and these overstatements were offset by understatements in other regions. In addition, our estimates for
revenue by user location are also affected by these factors. We regularly review and may adjust our
processes for calculating these metrics to improve their accuracy. In addition, our MAU and DAU estimates
will differ from estimates published by third parties due to differences in methodology. For example, somethird parties are not able to accurately measure mobile users or do not count mobile users for certain user
groups or at all in their analyses.
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