Source Reveals Facebook Is Swimming In Cash

A well-placed mole has forwarded us the Silicon Valley equivalent of hard-core pornography: an explicit look at Facebook's finances. They're even more staggering than we expected. A gusher of profits has left the social network with a cash hoard to rival established companies like 3M, eBay and Yahoo.

Below, you can pore over raw numbers of where Facebook stood as of September, provided by a source with knowledge of Facebook's finances. The big picture is this: Facebook's income is blowing up, and the company will likely come close to earning a full billion dollars in profit this year, more than double what it reportedly made a year ago and quadruple what it is believed to have made two years ago. There have been news reports elsewhere on prior Facebook financial periods; our numbers from the latest quarter show the money keeps pouring in.

Beyond that, Facebook's billions in assets, including gobs of cash, constitute a war chest that can be used to buy other tech companies. That helps explain why the company raised $1.5 billion through Goldman Sachs in January, even though it was already very profitable by then. The company's growing bank balance puts it in a position to initiate more, and more substantial, acquisitions
should it decide to do so.

See the chart here to put Facebook's $3.5 billion cash in context. The company's wallet might only be about a tenth of true giants like Apple and Google, but it's the sort of hoard other tech companies spend decades accumulating. Adobe and Yahoo, for example, will eye Facebook's cash with envy.

And the balance sheet is expected to balloon; our source echoed prior reports that Facebook is considering raising $10 billion at a $100 billion valuation in an initial public offering. That IPO is widely expected to come at some point next year.

It might seem obvious that Facebook would make huge amounts of money, particularly if you're a user. Media brands, particularly those we see several times a day, loom disproportionately in our minds. But having tons of users isn't the same thing as having tons of money. Just ask MySpace, which made only "a few million dollars" in profit when it was a very buzzy, popular site just acquired by News Corp. Its valuation was later decimated after it lost a key advertising deal. Google, meanwhile, is believed to have sunk huge resources into its new Google Plus social network, and profitability is by no means considered inevitable. The struggles of Facebook's competitors make the figures below all the more impressive.

Facebook By The Numbers

Jan. 2011 – Sept. 2011

Assets: $5.6 billion
Cash/cash equivalents: $3.5 billion
Debt: $0
Shareholder equity: $4.5 billion

Operating cashflow: $1 billion
Revenue: $2.5 billion
Operating income: $1.2 billion
Net income: $714 million

Ownership: Employees 30%, Mark Zuckerberg 24%, Digital Sky Technologies 10%, Accel Partners 8% (had 10% but sold 2%), Dustin Moskowitz 6%, Eduardo Saverin 5%, Sean Parker 4%, Goldman Sachs clients 3%, Microsoft 1.3%, Peter Thiel and/or Clarium Capital 3%, Greylock Partners 1.4%, Meritech Capital Partners 1.6%, Chris Hughes 1 %, Li Ka-shing .75%, Interpublic Group .50%,, Goldman Sachs .8%,

[Source: All figures via a source with knowledge of Facebook's finances.]

Facebook is clearly drowning in success. CEO Mark Zuckerberg could fill that saltwater lap-lane pool behind his house with hundred dollar bills many times over. If only he'd achieved this success without systematically screwing over ordinary people, constantly misappropriating private data, and without having to issue a steady stream of halfhearted apologies to aggrieved user. At least now critics - not to mention admirers - have a sum for the monetary rewards of all that mischief.