Facebook’s ‘Cost Of Revenue’ In 2012 Is 26.8 Percent Of Revenue. Why?

January 31, 2013 6:29 am

We spotted this, from Facebook’s results:

1. Facebook’s ‘Cost of Revenue’, as a percentage of Revenue, was 23.17 percent for the year ending Dec 31, 2011. It has shot up, to 26.80 percent of Revenue, for the year ending Dec 31, 2012.

2. For the quarter ending Dec 31, 2011, the ‘Cost of Revenue’, as a percentage of Revenue, was just 21.83 percent. For the quarter ending Dec 31, 2012, this has shot up to 25.11 percent.

There is good reason to believe that Facebook has already hit the point on the curve where additional traffic comes at a higher incremental cost. Are we missing something?

(As a comparison, this number for LinkedIn is generally in the 13 – 14 percent range)

If Facebook is buying traffic at these rates, that is an indication of bigger issues. But wait a minute. Facebook has a huge problem anyways. And do have a look at Mark Zuckerburg’s new hoodie.

The more we look at monetization challenges at Facebook, we more we think about how Mark’s bar will make money, ever.

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