Facebook Initiating Report

Company Report
May 7, 2012
Facebook, Inc.
Facebook - Initiating Coverage with a Buy Rating and $46 PT
Buy
FB Price NA Price Target $46.00
Our Call Ahead of Facebooks (FB) highly anticipated IPO on Friday, May 18 (expected price range of $28 - $35), we are initiating coverage with a Buy rating. Our 1year/2-year target prices are $46 (30x 2013 EBITDA estimate of $3.8B) and $59 (30x 2014 EBITDA estimate of $5.0B), respectively. The Next Google? FBs highly coveted Reach, Engagement, Relevance and Social Context. Just like Google did less than a decade ago, we believe Facebook is disrupting the worldwide advertising market (~$600B), particularly its $68B subsegment of online advertising (a market that is expected to reach $120B by 2015 or CAGR of 13%). Driven by 1) Facebooks leadership position in social media; 2) its unparalleled reach (900 monthly active users); 3) highly engaged audience (526M daily active users); 4) growing ARPU (average revenue per user); 5) mobile monetization potential; and 6) the wild cardChina, we think FB can more than triple its revenue and EBITDA over the next 4 to 5 years. Our estimates would be achievable if FB increases its share of online advertising by only 300bps from 5% in 2011 to close to 8% by 2016. In addition, we have very little contribution from mobile and China modeled currently and as such our estimates could prove conservative. Together, Mobile and China could add $1.5B in incremental revenue and $600 million in incremental EBITDA by 2015. Additionally, the market for virtual/digital goods is expected to reach $14B by 2016, up from $9B in 2011 (CAGR of 9%), according to NPD In-Stat. For advertisers, FB differentiates itself with its ability to provide a highly targeted audience (with 90% to 95% accuracy) and in a social context, which are highly desirable features. Mobile advertising and China opportunities. The mobile advertising market is currently relatively small (was $1.5B in 2010) but is expected to grow rapidly and reach $18B by 2015 or a CAGR of 64%, according to IDC. With 488M users accessing FB through mobile devices, the company already has the reach on mobile. Facebook was the most downloaded app on Android and iPhone in the month of January 2012. We see mobile monetization as a significant long-term growth opportunity for FB, but with some initial challenges. In addition, if FB is able to enter China, which has 23% of the worlds internet users, its growth could accelerate. The potential China opportunity is not reflected in our estimates but we think could add $400 to $600M in incremental revenue and $125M to $300M in incremental EBITDA. That said, clearly this opportunity is neither a given nor without its own unique set of challenges/hurdles.
Interactive Entertainment / Internet

Arvind Bhatia, CFA (214) 702-4001
abhatia@sterneagee.com
Brett Strauser (214) 702-4009

bstrauser@sterneagee.com
Company Data
Rating Price Price Target 52-Week Range Market Capitalization (M) Avg. Daily Vol. (000) Dividend Buy NA $46.00 NA - NA NA NA $0.00
Revenue ($M) 2011A 2012E 2013E

FY 3,711.0 5,007.6 6,297.0
EBITDA (M) 2011A 2012E 2013E

FY 2,297.0 2,871.4 3,772.8
Price Performance FYE Dec

EPS ($) Q1 (Mar) Q2 (Jun) Q3 (Sept) Q4 (Dec) FY EPS
2011A (Curr)
-
2012E (Curr)
0.13A 0.13 0.13 0.17 0.56
2013E (Curr)
0.14 0.17 0.17 0.21 0.69
Chart Data Not Available
Source: FactSet
Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification, Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section. 800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500
Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
May 7, 2012
TABLE OF CONTENTS FINANCIAL MODELING FRAMEWORK..3 VALUATION ANALYSIS...5 KEY INVESTMENT POSITIVES..6 KEY INVESTMENT RISKS.16 COMPANY OVERVIEW..19 FINANCIAL STATEMENTS23 TRENDS..27
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IPO Details
Facebook is expected to sell 337.4M shares in its IPO at a price range of $28 to $35 per share. This includes 180M new shares and 157M existing insider shares. The company expects to receive $5.6B at the midpoint of the potential price range. If the IPO is priced at the upper end of the price range and the over- allotment option is exercised (an additional 6M new shares, 44.6M existing shares), the gross proceeds to the company could be $6.5 billion. Founder and CEO Mark Zuckerberg will exercise outstanding stock options of 60M shares, and of this, he will sell 30.2M shares to satisfy taxes related to the above option exercise. We estimate the total number of shares outstanding (fully diluted) post the IPO will be 2.74 billion. In other words, the companys post-money market capitalization based on the IPO price range is $77B to $96B.
Risks
Key risks to FB include 1) slower-than-expected growth; 2) competitive threats from companies like Google; 3) regulatory risks; 4) risks associated with entering new international markets, etc.; 5) regulatory/legislative changes that may limit Facebooks ability to provide user information to advertisers, etc. In addition, we have not had a chance to interact with management prior to this report, and as such, the report relies heavily on publicly available data and our industry contacts. Also, IPOs are inherently risky given the stock has no history of trading publicly. Our Financial Modeling Framework
We believe over the next five years, FB can grow its revenue at a CAGR of at least 25% and adjusted EBITDA (ex stock-based compensation) 25% to 30%. Additionally, we note our model assumes only modest leverage on fixed costs. For the most part, our total operating costs (ex stock-based compensation) are assumed to grow in line to slightly higher than revenue growth. This is because we believe FB will continue to invest heavily in the coming years to continually improve user experience. Said differently, we believe the underlying earnings power and growth rates are somewhat muted by the near to intermediate investments. Our 5-year (2011-2016) revenue CAGR of 25% is based on traffic (MAUs) increasing 12% on average and the rest from higher ARPU over time.
Our financial modeling framework assumes:
A) Increasing internet user penetration worldwide. B) Increasing Facebook penetration of internet users. C) Increasing engagement of Facebook users. D) Higher ARPU E) Modest leverage on fixed costs.
The tables below show that at the end of 2011, Facebook had a worldwide penetration rate of roughly 48% of internet users, including 66% in the U.S., 46% in Europe, 42% in Asia and 47% in the rest of the world. First, we expect the worldwide internet user base to grow at a CAGR of 8% in the next 5 years. Second, we expect Facebook to achieve greater penetration in each of its markets. We believe Facebook could achieve a worldwide penetration rate of 57% by 2016 (up 900 bps versus 2011), including 76% in the U.S., 56% in Europe, 52% in Asia and 57% in the rest of the world.
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Combining the increased internet user base and the higher market penetration rates discussed above implies Facebook can grow its MAUs to 1.5 billion by 2016, up from 845 million at the end of 2011 or a CAGR of 12%. This is slower than the historical MAU growth simply due to the law of large numbers. Facebooks MAU growth in the past three years has averaged 80%, including 148% in 2009, 69% in 2010 and 39% in 2011. Revenue growth over the same period has averaged 139%. This has been result of several factors including the ability to generate more ads, charge higher prices per ad and the benefit of payment and fee revenue from developers since the implementation of the 30% tax on developers since 2010, etc.
Facebook Penetration Rates: Dec 31, 2011

Internet Total Population MM 347 816 2542 1887 5593 1337 Internet Users MM 273 501 504 477 1754 513 Facebook users MM 179 229 212 225 845 0 user Penetration % 79% 61% 20% 25% 31% 38% FB Penetration Of Internet users-- 2011 % 66% 46% 42% 47% 48% 0%
US & Canada Europe Asia (Ex China) Rest of World Total China Source:
1. http://www.internetworldstats.com/stats.htm 2. Facebook 3. Sterne Agee Estimates
Facebook Penetration Rate Estimates: Dec 31, 2016

Internet Total Population MM 365 858 2672 1984 5878 1% 1371 Internet Users MM 305 591 930 799 2624 8% 595 Facebook users MM 231 329 484 457 1501 12% 0 user Penetration % 84% 69% 35% 40% 45% 43% FB Penetration Of Internet users-- 2016 % 76% 56% 52% 57% 57%
US & Canada Europe Asia (Ex China) Rest of World Total 5 Yr CAGR China Source:
1. http://www.internetworldstats.com/stats.htm 2. Facebook 3. Sterne Agee Estimates
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Facebook MAUs (millions): 2004 - 2016)

1,600 1,415 1,400 1,200 1,027 1,000 800 608 600 400 200 1 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 6 12 145 58 360 845 1,175 1,301 1,501
Source: Company Reports and Sterne Agee Estimates Valuation 1-Year Target Price of $46; 2-Year Target Price of $59
We believe over the next 12 months, FB shares can trade at 30x our 2013 adjusted EBITDA estimate of $3.8B, which implies Enterprise Value of $114B and market cap of $124B (including $10B in estimated pro-forma cash post IPO) and value per share of $46 (using proforma shares outstanding of 2.7B). Extending this same exercise another year (30x our 2014 EBITDA estimate of $5B), yields a 2-year target price of $59. Our forward EBITDA multiple is clearly a premium to the companys peer group. However, we believe investors will be willing to pay this premium as FB is still in the early stages of disrupting a $600B market.
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KEY INVESTMENT POSITIVES
Large Addressable Market for Worldwide Advertising We believe Facebook is in the early innings of revolutionizing the $600 billion worldwide advertising market, particularly the sub-segment of online advertising. Online advertising spending is expected to reach $120B by 2015, up from $68B in 2010 or a CAGR of 12%. This growth rate is 3x the expected growth rate of traditional advertising during the same period due to the ongoing secular shift from offline to online advertising. Furthermore, social media is quickly gaining share within online advertising as marketers see value in reaching their audiences in a more relevant and social context. As the leading social network worldwide, Facebook is well positioned to address this large and rapidly growing market.
Worldwide Advertising Market

2010 Online Advertising ($BB) Offline Advertising ($BB) Total ($BB) Online % Share of Total Source: Facebook 68 520 588 12% 2015E 120 630 750 16% 5 Yr CAGR 2010-2015E 12% 4% 5%
Facebooks highly coveted Reach, Relevance, Engagement and Social Context With more than 900 million monthly active users (MAUs) as of March 31, 2012, FB is the worlds largest online social network and the worlds most trafficked website, according to Comscore (SCOR - $19.10 - Not Rated) Media Metrix, followed by Google (GOOG $596.97 Not Rated) and Microsoft (MSFT - $30.98 - Not Rated). MAUs were up a strong 33% Y/Y and 7% sequentially at the end of 1Q12. FBs stated goal is to reach almost every one of the nearly 2 billion people on the Internet. While FBs reach is clearly enormous, its engagement metrics are even more impressive. During 1Q12, FB averaged 526 million daily active users (DAU), up 41% Y/Y and 9% sequentially. Average DAUs as a % of average MAUs, which is another measure of engagement, were up 250bps Y/Y and 150 bps sequentially, reaching 60.3% in 1Q. Additionally, nearly 76% of these daily users were active on FB for at least six of the last seven days during March 2012. Yet another way to measure engagement, in January, 2012, FB users spent on average 20 minutes daily on the website, up 14% Y/Y. The total minutes per day on FB increased 57% Y/Y to 10.5 billion minutes in January 2012. There are 3.2B likes and comments posted on FB daily, which also shows how involved and engaged the audience is. In terms of relevance, FB is able to provide target audience to advertisers with 90% to 95% accuracy given that users identity on FB is mostly authentic (5% to 6% of accounts are estimated to be fake/duplicates). This is significantly higher than the industry average of 30%. We believe this is an important reason FB will be able to increase its ARPU, going forward. In terms of social context, FB has been able to show a 50% increase in ad recall for targeted ads, based on 79 different advertising campaigns conducted on Facebook.
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Facebook's Reach
Worldwide MAUs (millions)

1000
901 900
845 800 738 681 608
800 700 600 500 400 305 300

200
550 482 432 360 242 196
100 0
Mar '09 Jun '09 Sep '09 Dec '09 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
Source: Company Reports and Sterne Agee
Worldwide MAU Mix

1000 900 800 700 600 500 400 300 200 Rest of World Asia Europe
US & Canada
100
0 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar '09 '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12
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Worldwide MAU Growth

300 250 200 US & Canada 150 100 50 0 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar '09 '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12 Europe Asia Rest of World
User Engagement
Worldwide DAUs (millions)

600 526 500 416 400 328 300 235 200 145 100 93 108 185 294 257 371 483 457
0 Mar '09 Jun '09 Sep '09 Dec '09 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
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Worldwide DAU Mix

600 500 400 Rest of World 300 Asia Europe
200
100 0 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar '09 '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12
US & Canada
Worldwide DAU Growth

160 140
120
100 80 60 40 20 0 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar '09 '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12 US & Canada Europe Asia Rest of World
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Worldwide User Engagement (DAU as % of MAU)

70%
65%
60%
55%
50%
45%
40% Jun '09 Sep '09 Dec '09 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
User Engagement by Region (DAU as % of MAU)

75%
70% 65% 60% 55% 50% 45% 40% 35%

30%
US & Canada Europe Asia Rest of World
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12
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Mobile Advertising Opportunity According to IDC, the global market for mobile advertising will reach nearly $18B by 2015, up from $1.5B in 2010 or a CAGR of 64%. With 488 million MAUs using Facebook mobile products in the month of March 2012, FB clearly has the reach on mobile platforms as well. Furthermore, the Facebook mobile app was the most downloaded app on Android and iPhone in the month of January 2012, according to Neilsen. Facebook has only just begun showing sponsored stories in Facebook users mobile News Feeds and mobile advertising could be a significant opportunity for Facebook in the future, especially as smartphone use continues to grow rapidly. We see mobile monetization as a significant long-term growth opportunity for FB, but with some initial challenges. For example, it is not yet clear if most of the mobile advertising growth will be incremental or will cannibalize online advertising. Still, if the mobile advertising market develops, as anticipated, and FB garners a 5% share by 2015, it could generate incremental revenue of ~$1B and incremental EBITDA of $300-$500M.
Facebook's Mobile Advertising Opportunity 2010 2015 (Est.) CAGR $1.5 $18.0 64% 0% $0.0 5% $0.9
Market Size ($BB) FB Market Share FB Mobile Advertising Revenue
Source: Company Reports, IDC, and Sterne Agee
Worldwide Mobile MAUs (millions)

600
488 432
500
400 325 300 245

200 129
376
288
196 155 101 75 35 50
100
0 Mar '09 Jun '09 Sep '09 Dec '09 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
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Increasing Mobile MAU penetration

1000 900 800 700 600 500 400 300 200 100 0 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar '09 '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12 Mobile MAUs
China Facebook is currently not in China, which has 23% of the worlds internet users. The potential China opportunity is not reflected in our current estimates but we think could add $400$600M in incremental revenue and $125M to $300M in incremental EBITDA. This is based on the assumption that FB could penetrate 42% of Chinas estimated 500M internet users, a penetration rate similar to that in other parts of Asia. Furthermore, it assumes relatively low annual ARPU of $2.00 to $3.00, again similar to ARPU rates in other parts of Asia and much lower than the West, where annual ARPUs are in the $12 (US/Canada) to $6 (Europe) range. Clearly, this opportunity is neither a given nor without its own unique set of challenges/hurdles. However, the potential opportunity is large and lucrative.
Facebook's China Potential

FB User Base Potential in China 2011 Total Total Internet Population Users (MM) (MM) 1337 513 Potential FB Penetration (%) 42% Potential FB Users (MM) 216
Internet Penetration (%) 38%
FB Revenue/EBITDA Potential in China ARPU Revenue EBITDA Margin ($) ($MM) (%) Low High Sources: $2.00 $3.00 $432 $648 30% 50%
EBITDA ($MM) $130 $324
http://www.internetworldstats.com/stats.htm Company Reports, Sterne Agee Estimates
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Virtual Goods Market provides diversification In the most recent quarter, while 82% of FBs revenue was generated through advertising, the other 18% was from payments from its developer partners such as Zynga (ZNGA - $8.33 Underperform), which pay FB a 30% cut of their revenue. This provides diversification to the FB business model. The market for virtual/digital goods (think virtual seeds in Farmville) is expected to reach $14B by 2016, up from $9B in 2011 (CAGR of 9%). Currently, most of the revenue in this segment is generated from payments from social game developers, and in particular from Zynga. FB takes a 30% cut of revenue generated by Zynga and other developers on FB. In 1Q12, Zynga represented 11% of FBs revenue, down from 13% in the year-ago period. The agreement between Zynga and Facebook expires in May 2015. We expect FBs revenue from Payments to grow at a CAGR of 20% over the next five years.
Revenue by Segment (millions)

1000 900 800 700 600 500 400 300 200 100 0 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12 Advertising Payments and other fees
Revenue Mix by Segment

1200
1000
800
600
Payments and other fees Advertising
400
200
0 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
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Revenue by Region
600
500
400 US & Canada 300 Europe Asia 200 Rest of World
100
Revenue Mix by Region

1200
1000
800 Rest of World 600 Asia Europe 400 US & Canada
200
Geographic Diversification In the most recent quarter, FB generated 50% of its total revenue from the U.S./Canada. Europe generated 31% of total revenue while Asia/Rest of the World accounted for 11%/8%, respectively, of total revenue. In terms of advertising revenue alone, FB generated less than half (48%) of its advertising revenue in the U.S./Canada. Another 31% of advertising revenue was generated in Europe, followed by Asia at 11% and Rest of the World at 9%. Over the next five years, we expect revenues to continue to diversify further. By the end of 2016, we think U.S. will likely represent only 35% of total revenue, Europe 28%, Asia 21% and the Rest of the World 16%. We note that ARPU (average revenue per user) is much higher in the
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May 7, 2012 West. For the most recent 12 months, ARPU was nearly $12 in the US/Canada, nearly $6 in Europe, $2 in Asia and $1.50 in the Rest of the World. We expect traffic growth to be faster outside the U.S. and we expect ARPU to be up in each territory over time. We note ARPU trends in Europe have been under some pressure lately due to the ongoing recession.
Third-party integration Facebook continues to make major investments to enable developers to create applications and websites that integrate with the Facebook Platform. This integration allows third-party developers to reach more users by tapping into the viral aspects of such an integration. Additionally, an increasing number of businesses manage a Facebook fan page, which creates a free, direct communication channel with customers. Facebooks impressive web penetration across multiple sectors of the global economy has allowed it to further entrench itself and has given strength to the platforms network effect.
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KEY INVESTMENT RISKS Potential Hurdles for Facebook in China As the experience of other U.S. internet companies such as eBay (EBAY - $39.44 - Not Rated), Amazon (AMZN - $223.99 - Not Rated) and Google has shown, entering China can be treacherous. Challenges range from compliance with regulatory authorities to failing to address the cultural nuances of the Chinese market. eBay entered China in 2003 through the acquisition of EachNet, which was a leading B2C company in China at the time. Subsequently, EachNet lost most of its market share even as other local players were able to grow significantly. Amazon entered China through the acquisition of Joyo and has had some success but arguably not as much as some had hoped. Google, of course, ran into issues with Chinese regulatory authorities due to its unwillingness to censor searches. In addition to the inherent challenges of entering a new market, Facebook will also have to contend with the multiple licensing authorities such as Ministry of Culture, General Administration of Press and Publication (GAPP), The Ministry of Information Industry etc. Hyper Growth is over Facebook is clearly going to face the law of large numbers when it comes to traffic. Facebook already has 901M MAUs or nearly 1 of every 2 internet users. While we expect Facebook to benefit from an increasing base of internet users and to be able to achieve higher penetration rates of internet users, the hyper growth of past years is unlikely to be matched simply due to the law of large numbers. For example, we have modeled MAUs to increase 26% in 2012 versus 48% in 2011 and 88% in 2010. However, we believe Facebook will be able to grow its revenue above its traffic growth rate, as a result of higher ARPU, driven by more ads and higher prices per ad, etc. Recent sequential decline in revenue FB reported Y/Y revenue growth of 45% in 1Q12 (March), which was a slowdown from Y/Y growth of 55% in 4Q11 and 104% in 3Q11. Sequentially, 1Q12 revenue declined 6%, including advertising revenue, which declined 8% sequentially. This has understandably raised concerns. However, we attribute this to a seasonal slowdown, particularly after a very strong December quarter when revenue increased 19% sequentially. We note that in 1Q11 FB also saw a seasonal dip in advertising revenue, which declined 3% sequentially followed by strong momentum in the June quarter when advertising revenue was up 22% sequentially.
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Seasonality in Monetization Trends

Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12 Advertising Payments Total Y/Y % Chg Advertising Payments Total Sequential % Chg Advertising Payments Total $0.86 $0.01 $0.87 $0.93 $0.87 $0.02 $0.03 $0.94 $0.91 $1.13 $0.13 $1.26 $0.99 $0.15 $1.14 $1.09 $1.04 $0.17 $0.20 $1.26 $1.24 $1.15 $0.23 $1.37 $1.00 $0.21 $1.21
16% 1055% 31%
18% 19% 995% 512% 34% 37%
1% 72% 9%
1% 47% 7%
8% 21% 8%
-6% 115% -4%
30% 304% 39%
-12% 10% -10%
10% 15% 11%
-5% 20% -1%
10% 13% 11%
-13% -6% -12%
Seasonality & Mix

Source: Company reports and Sterne Agee Estimates
Seasonality & Mix
Recent decline in Payments & Other Fees revenue For the first time since Facebook implemented the Facebook credits system, revenue from its Payments and Other Fees segment declined sequentially. Since this revenue stream comes from the fee Facebook retains on Facebook Credit transactions, and since the majority of these transactions to date have been for purchasing virtual goods in social games by publishers such as Zynga, a sequential decline in revenue from this segment could signal a slowdown in social gaming. However, we think any declines in social gaming-related revenues will be offset as more developers begin to accept Facebook credits as a payment mechanism for their products and services. Increasing competition Facebook competes with other social networking and traditional websites for a share of users time, and ultimately, a share of overall internet marketing expenditures. Additionally, FB faces competition regarding hiring and retaining talented employees. Any website with a large user base, high engagement, and high average time spent on the site would be considered a competitor to Facebook. Some of Facebooks key U.S. competitors are Google+, Linkedin (LNKD - $117.30 Not Rated) Twitter, Pinterest, Tumblr, and to a certain extent, Microsoft (although MSFT is also an investor in FB). Overseas, FBs main competitors are Mixi in Japan, Orkut in India and Brazil, Cyworld in Korea and vKontakte in Russia. In China, once FB enters the market, it will face competition from established players such as RenRen (RENN - $6.70 - Not Rated), Sina and Tencent. Below, we show a comparison of FB with GOOG.
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FB vs. GOOG Revenue Growth GOOG IPO year: 2004 FB IPO year: 2012
$25,000
$20,000
$15,000 $10,000 $5,000 $0
Google Facebook
Year Before IPO
IPO
Year 2
Year 3
Year 4
Year 5
Source: Company Reports and Sterne Agee Note: FB Revenue for IPO year through year 5 is based on Sterne Agee Estimates. Google is based on actuals
FB vs. GOOG EBITDA Growth GOOG IPO year: 2004 FB IPO year: 2012
$9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0
Google Facebook
Year Before IPO
IPO
Year 2
Year 3
Year 4
Year 5
Source: Company Reports and Sterne Agee Note: FB EBITDA for IPO year through year 5 is based on Sterne Agee Estimates. Google is based on actuals
Competition for Users Time The likelihood of a direct FB competitor becoming successful is low. However, much of Facebooks value comes from the amount of time users spend on the platform. Pinterest and Instagram have shown us that the barriers to entry are low for a developer to create a disruptive platform that takes market share in terms of a users time. Also, Vertical-specific social networks may compete for user hours and may have higher marketing ROI/easier to measure ROI, which means more marketing $ spent on competing niche networks and less on FB.
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COMPANY OVERVIEW
Background Founded in 2004, Facebook is a social network that allows its users to connect with their friends, family, acquaintances, favorite brands, organizations, and public figures, and allows them to share and express their lives in various ways. Other beneficiaries of Facebooks services include developers and advertisers. Developers can integrate with the Facebook platform through use of developments tools and APIs to build personalized, social, and engaging products and tap into Facebooks more than 900M users. Upon the successful integration of a third-party application or website with Facebook, developers can leverage Facebooks social distribution channels to drive traffic to their own products. Facebook created a consistent payment mechanism for developers, giving users a single payment account to be used for the purchase of virtual and physical goods offered by third parties on the Facebook Platform. We believe the ease of use and security offered by Facebooks payment infrastructure increases a users propensity to purchase from a third party, thereby increasing the total number of transactions on the Facebook platform. In exchange for offering this payment mechanism, Facebook retains a negotiated fee from developers (Roughly 30%, or similar to Apples iTunes/AppStore model [AAPL - $565.25 Buy, WU]). Advertisers can engage with subsets of users on Facebook based on information users have provided such as their age, location, gender, interests, and more. Advertisers can increase the relevancy of their advertisements by leveraging the information users have provided to Facebook. Facebooks robust advertising engine allows advertisers to be highly specific regarding their target audience. Advertisers can also incorporate social context into their advertisements such as an endorsement from a users friend. Users may be more receptive to a particular advertisement if they see that a friend is a fan of the brand or product being offered. Advertisers also benefit from managing a Facebook Page, which provides a free, direct communication channel with customers or potential customers. When an advertiser creates content on its Facebook Page, users who have liked the page will receive the content on their news feed. Facebook is free for its users and generates revenue through advertising and through retaining a portion of revenue generated by third-party developers on the platform. FB derived 82% of its revenue from advertising in the most recent quarter, down from 87% in the year-ago period. The other 18% was derived from payments from its partners such as Zynga and other. FB received a 30% cut of its partners gross revenue generated on the FB platform. Zynga represented 11% of the overall revenue for FB in the most recent quarter, down from 13% in the year-ago period.
Key Products for Users Timeline. Timeline is the name of the new and improved Facebook Profile page. The types of information displayed on the timeline include a users interests, photos, education, work history, relationship status, and contact information. A user can control the information share, and with whom they want to share it. News Feed. This is the continuously updated aggregation of stories about friends, business or other pages a user is connected to on Facebook. It organizes updates chronologically. Types of updates shown on a news feed include posts, photos, event updates, etc. Photos and Videos. Facebook and its subsidiary, Instagram, are the most popular photo uploading services on the web. Users can upload an unlimited number of high resolution photos, create photo albums, and share them with the audience of their choosing. Users can also upload and share videos. Users have control over privacy settings for uploaded content,
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May 7, 2012 making them visible to everyone or only select people. Users can tag friends in their photos and videos, which then appends that photo or video to the tagged persons profile.
Messages. Facebooks messaging products include email, chat, and text messaging. Groups. Facebook groups are shared pages for groups of users to discuss common interests, post photos, or engage in other shared activities. Groups can control privacy settings to specify whether the group is public or private. Lists. Lists allow users to sub-divide and categorize their friend groups. This allows users to reach or exclude certain people when they share information on Facebook. Events. Events allow users to organize gatherings, manage invitations, and send event notifications and reminders to their friends. Places. This allows users to share their current location and see where their friends are. Users can let their friends know where they are by checking in to places and tagging friends who are with them. Users can also view comments their friends have made about places they visit. Subscribe. Similar to Twitter, Subscribe allows users to follow the updates from people not included in their list of friends, including celebrities and other public figures. Ticker. Ticker is a live stream of the real-time activities of a users friends and the pages to which a user is connected. Notifications. This is Facebooks alert system, informing a user of a new friend request, message, or that they have been tagged in a photo, etc. Notifications are a key engagementdriver for Facebook users. Facebook Pages. A Facebook page is as public profile that allows anyone including artists, public figures, businesses, brands, organizations, and charities to create a presence on Facebook and engage with the Facebook community. Key Products for Developers
Open Graph. The open graph gives developers a way to allow users of their app or website to share their activities with their Facebook friends. An example of this integration is the way Spotify gives users the option of letting their Facebook friends see what music theyre listening to. Social Plugins. Social plugins are another way for developers to integrate their sites/apps with Facebook to benefit from the viral effects such an integration can provide. The term plugin refers to the ease of development integration (i.e. plugins require developers to incorporate only a single line of HTML code).
Like button. Gives users a 1-click method for sharing content from a third-party website to Facebook for their friends to see. Recommendations. This allows a website to display to Facebook users what their friends have recommended. Single sign-on registration and log-in. This allows users to long onto third-party websites using their FB login credentials, eliminating the need to remember multiple usernames and passwords.
Comments. This allows users to post their views, questions, and critiques on any piece of content on a website.
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May 7, 2012 Payments. Facebook provides developers with an efficient and secure online payment infrastructure. In exchange for offering this service, Facebook retains a 30% fee on all transactions. To date, the majority of Facebooks payments revenue has been generated by the purchase of virtual goods in social games.
Apps on Facebook. The Facebook Platform has enabled social apps to facilitate the sharing and discovery of games, music, news, television programming, and everyday interests such as cooking, fitness, and travel. Desktop Apps. Developers can build applications that run directly on the users PC. Developers can add a social element by integrating with Facebook. Mobile Apps. Developers can integrate their mobile apps with Facebooks social and personalization capabilities. Platform-Integrated websites. Websites can integrate with Facebook using simple social plug-ins such as the Like button, recommendations, and more. Facebook integration has proven to be an effective strategy for new websites to gain popularity. Key Products for Advertisers Facebook Ads. Facebook has a simple, self-service advertising engine. Facebook gives marketers the ability to concentrate their ads to a particular segment of the Facebook userbase, or they can launch more broadly targeted advertisements. Facebook ads have a standard format on Facebook, providing consistency for users and advertisers. Sponsored Stories. Sponsored stories allow marketers to more broadly promote stories they publish to their Facebook page , and also to amplify the reach of stories created by users interactions with the page. Facebook Ad System. Advertisers can create campaigns to target Facebook users based on their age, location, gender, relationship status, educational history, workplace, and interests. Ad Analytics and FB Insights. FB gives advertisers the ability to track and optimize their campaign performance. These analytics allow advertisers to see which ads were displayed and clicked on. FB Insights allows advertisers with FB pages to view information about the performance of their page and related posts, such as which posts generated the highest user engagement via clicks, likes, or shares. Management Mark Zuckerberg (27) CEO, Founder, Controlling Stockholder Mark Zuckerberg is the companys founder and has served as its CEO and as a member of the board of directors since July 2004. Mr. Zuckerberg has served as Chairman of the board of directors since January 2012 and is the companys largest and controlling stockholder. Mr. Zuckerberg attended Harvard University where he studied computer science. Sheryl K. Sandberg (42) Chief Operating Officer Sheryl Sandberg has served as the companys Chief Operating Officer since March 2008. From November 2001 to March 2008, Ms. Sandberg served in various positions at Google, Inc., most recently as Vice President, Global Online Sales & Operations. Ms. Sandberg also is a former Chief of Staff of the U.S. Treasury Department and previously served as a consultant with McKinsey & Company, a management consulting company, and as an economist with The World Bank. In addition, Ms. Sandberg has been a member of the board of directors of the Walt Disney Company since December 2009. Ms. Sandberg holds an A.B. in economics from Harvard University and an M.B.A. from Harvard Business School.
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May 7, 2012
David A. Ebersman (42) CFO David Ebersman has served as the companys Chief Financial Officer since September 2009. Prior to joining Facebook, Mr. Ebersman served in various positions at Genentech, Inc., a biotechnology company, including as its Chief Financial Officer from March 2005 and as an Executive Vice President from January 2006 until April 2009, following Genentechs acquisition by F. Hoffmann-La Roche Ltd. in March 2009. Prior to joining Genentech, Mr. Ebersman was a research analyst at Oppenheimer & Company, Inc., an investment company. In addition, Mr. Ebersman has been a member of the board of directors of Ironwood Pharmaceuticals, Inc. since July 2009. Mr. Ebersman holds an A.B. in economics and international relations from Brown University. David B. Fischer (39) VP of Marketing and Business Partnerships David Fischer joined the company in April 2010 and serves as its Vice President, Marketing and Business Partnerships. From July 2002 to March 2010, Mr. Fischer served in various positions at Google, including most recently as its Vice President, Global Online Sales & Operations. Prior to joining Google, Mr. Fischer served as Deputy Chief of Staff of the U.S. Treasury Department and was an associate editor at the U.S. News World Report, L.P., a news magazine company. Mr. Fischer holds a B.A. in government from Cornell University and an M.B.A. from the Stanford University Graduate School of Business. Mike Schroepfer (37) VP of Engineering Mike Schroepfer has served as the companys Vice President of Engineering since September 2008. From December 2005 to August 2008, Mr. Schroepfer served as Vice President of Engineering at Mozilla Corporation, an Internet company. Prior to Mozilla, Mr. Schroepfer served in various positions at Sun Microsystems, Inc., an information technology company, including as Chief Technology Officer of its data center automation division. He also cofounded CenterRun, Inc., a developer of application provisioning software, which was acquired by Sun Microsystems. In addition, Mr. Schroepfer has been a member of the board of directors of Ancestry.com Inc. since January 2011. Mr. Schroepfer holds a B.S. and an M.S. in computer science from Stanford University. Theodore W. Ullyot (44) VP, General Counsel, and Secretary Theodore Ullyot has served as the companys Vice President, General Counsel, and Secretary since October 2008. From May 2008 to October 2008, Mr. Ullyot was a partner at Kirkland & Ellis LLP, a law firm. From October 2005 to April 2008, Mr. Ullyot served as Executive Vice President and General Counsel of ESL Investments, Inc., a private investment firm. Prior to joining ESL Investments, Mr. Ullyot served in the federal executive branch under President George W. Bush, including as Chief of Staff at the U.S. Justice Department and as a Deputy Assistant to the President. Earlier in his career, Mr. Ullyot was an associate general counsel at AOL Time Warner, Inc. and served as a law clerk for U.S. Supreme Court Justice Antonin Scalia and for Judge Michael Luttig of the U.S. Court of Appeals for the Fourth Circuit. Mr. Ullyot holds an A.B. in History from Harvard University and a J.D. from the University of Chicago.
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INCOME STATEMENT ($ In Millions) - FY End: December
Facebook Annual Earnings Model: Sterne Agee

Arvind Bhatia, CFA (214) 702 - 4001 Advertising Revenue Payments and other fees revenues Revenue ($MM) Y/Y % Chg-- Advertising Revenue Y/Y % Chg-- Payments Revenue Y/Y % Chg-- Revenue Sequential Change -- Advertising Revenue Sequential Change -- Payments Revenue Sequential Change -- Revenue Costs and Expenses Cost of revenue Gross Profits Gross Margin YOY Chg (bps) Marketing and sales % of Revenue Research and development % of Revenue General and administrative Total Operating Expenses Income from operations (EBIT) Dep & Amort costs included in costs above Adjusted EBITDA (ex Stock based comp) % Y/Y Growth % Sequential Growth Adjusted EBITDA Margin Incremental Adjusted EBITDA Margin Other expense, net Interest expense Other income (expense), net ProForma Pre Tax Income (ex SBC) Assumed Normalized Taxes (Tax Rate of 35%) Pro Forma Net Income (Ex SBC) ProForma Fully Diluted Shares Outstanding Pro Forma Fully Diluted EPS (ex SBC)
Source: Company Reports and Sterne Agee Estimates
2010A 2011A 2012E $ 1,869 $ 3,154 $ 4,145 $ 106 $ 557 $ 863 $ 1,975 $ 3,711 $ 5,008 69% 31% 425% 55% 88% 35%
2013E 2014E 2015E $ 5,238 $ 6,562 $ 8,173 $ 1,059 $ 1,189 $ 1,295 $ 6,297 $ 7,751 $ 9,469 26% 25% 25% 23% 12% 9% 26% 23% 22%
2016E $ 10,070 $ 1,372 $ 11,442 23% 6% 21%
493 1,482 75% 374 184 9% 134 7% 113 431 1,051 139 $ 1,190
851 2,860 77.1% 203 384 10% 274 7% 228 886 1,974 323 $ 2,297 93% 62% 64% 42 (19) 1,913 670 1,243
1,247 3,761 75.1% (197) 644 13% 457 9% 378
1,522 4,775 76% 73 812 13% 632 10% 498
1,762 5,989 77% 144 972 13% 742 10% 578 2,292 3,696 1,260 $ 4,956 31% 64% 81% -100 0 3,796 1,329 2,468 2,797 $0.88
2,102 7,367 78% 54 1,102 12% 822 9% 658
2,502 8,940 78% 33 1,214 11% 902 8% 738
1,479 1,942 2,281 2,833 590 940 $ 2,871 $ 3,773 25% 31% 57% 44% -50 0 2,331 816 1,515 2,698 $0.56 60% 70% -100 0 2,933 1,026 1,906 2,769 $0.69
2,582 2,854 4,785 6,086 1,480 1,640 $ 6,265 $ 7,726 26% 23% 66% 76% -100 0 4,885 1,710 3,175 2,825 $1.12 68% 74% -100 0 6,186 2,165 4,021 2,854 $1.41
60% 69% 22 (2) 1,027 359
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INCOME STATEMENT ($ In Millions) - FY End: December
Facebook Quarterly Earnings Model: Sterne Agee

Arvind Bhatia, CFA (214) 702 - 4001 Advertising Revenue Payments and other fees revenues Revenue ($MM) Y/Y % Chg-- Advertising Revenue Y/Y % Chg-- Payments Revenue Y/Y % Chg-- Revenue Sequential Change -- Advertising Revenue Sequential Change -- Payments Revenue Sequential Change -- Revenue Costs and Expenses Cost of revenue Gross Profits Gross Margin YOY Chg (bps) Marketing and sales % of Revenue Research and development % of Revenue General and administrative Total Operating Expenses Income from operations (EBIT) Dep & Amort costs included in costs above Adjusted EBITDA (ex Stock based comp) % Y/Y Growth % Sequential Growth Adjusted EBITDA Margin Incremental Adjusted EBITDA Margin Other expense, net Interest expense Other income (expense), net ProForma Pre Tax Income (ex SBC) Assumed Normalized Taxes (Tax Rate of 35%) Pro Forma Net Income (Ex SBC) ProForma Fully Diluted Shares Outstanding Pro Forma Fully Diluted EPS (ex SBC)
2010A 1Q:11A 2Q:11A 3Q:11A 4Q:11A 2011A 1Q:12A 2Q:12E $ 1,869 $ 637 $ 776 $ 798 $ 943 $ 3,154 $ 872 $ 1,021 $ 106 $ 94 $ 119 $ 156 $ 188 $ 557 $ 186 $ 194 $ 1,975 $ 731 $ 895 $ 954 $ 1,131 $ 3,711 $ 1,058 87% 83% 77% 44% 69% 37% 1780% 1388% 818% 147% 425% 98% 112% 107% 104% 55% 88% 45% -3% 22% 3% 18% -8% 24% 27% 31% 21% -1% 0% 22% 7% 19% -6% 493 1,482 75% 374 184 9% 134 7% 113 431 1,051 139 $ 1,190 167 564 77% 614 68 9% 53 7% 48 169 395 51 $ 446 207 688 77% 257 92 10% 64 7% 61 217 471 233 721 76% 363 108 11% 75 8% 54 237 484 244 851 887 2,860 78% 77.1% (105) 203 116 10% 82 7% 65 263 624 384 10% 274 7% 228 886 1,974 323 $ 2,297 $ 93% 62% 64% 42 (19) 1,913 670 1,243 273 785 74% (296) 136 13% 93 9% 72 301 484 110 594 $ 1,215 32% 63% 36% 17% 4% 15% 303 912 75% (181) 156 13% 108 9% 92 356 556 130 $ 686
3Q:12E $ 1,044 $ 227 $ 1,271 31% 45% 33% 2% 17% 5% 328 943 74% (139) 171 13% 123 10% 102 396 547 160 $ 707
4Q:12E 2012E $ 1,208 $ 4,145 $ 256 $ 863 $ 1,464 $ 5,008 28% 31% 36% 55% 29% 35% 16% 13% 15% 343 1,247 1,121 3,761 77% 75.1% (186) (197) 181 12% 133 9% 112 426 695 190 $ 885 644 13% 457 9% 378 1,479 2,281 590 $ 2,871 25% 57% 44% -50 0 2,331 816 1,515 2,698 $0.56
1Q:13E $ 1,123 $ 243 $ 1,367 29% 31% 29% -7% -5% -7% 358 1,009 74% (39) 188 14% 143 10% 117 448 561 205 $ 766 29% -13% 56%
2Q:13E $ 1,288 $ 240 $ 1,528 26% 23% 26% 15% -1% 12% 373 1,155 76% 52 198 13% 153 10% 122 473 682 225 $ 907 32% 18% 59%
3Q:13E 4Q:13E $ 1,321 $ 1,506 $ 276 $ 299 $ 1,597 27% 22% 26% 3% 15% 5% 388 1,209 76% 152 208 13% 163 10% 127 498 711 245 $ 956 35% 5% 60% $ 1,805 25% 17% 23% 14% 8% 13% 403 1,402 78% 111 218 12% 173 10% 132
2013E $ 5,238 $ 1,059 $ 6,297 26% 23% 26%
1,522 4,775 76% 73 812 13% 632 10% 498
60% 69% 22 (2) 1,027 359
56% 45% (12.5) 497 174 323 2,558 $0.13
56%
56%
60%
523 1,942 879 2,833 265 940 $ 1,144 $ 3,773 29% 31% 20% 63% 60% 70% -25 904 316 588 2,780 $0.21 -100 0 2,933 1,026 1,906 2,769 $0.69
(12.5) 569 199 370 2,738 $0.13
(12.5) 559 196 364 2,745 $0.13
(12.5) 707 247 460 2,752 $0.17
-25 0 586 205 381 2,759 $0.14
-25 0 707 247 459 2,766 $0.17
-25 0 736 258 479 2,773 $0.17
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FACEBOOK BALANCE SHEET FY End: December ($ in millions) 2010A Assets Current assets Cash and equivalents Marketable securities Accounts Receivable Prepaid expenses Total current assets Property and equipment, net Goodwill and intagible assets, net Other assets Total assets Liabilities and stockholder's equity Current liabilities Accounts payable Platform partners payable Accrued expenses and other current liabilities Deferred revenue and deposits Current portion of capital lease obligations Total current liabilities Capital lease obligations, less current portion Long-term debt Other liabilities Total liabilities 2011A 1Q:12A
1,785 $ 373 88 2,246 574 96 74 2,990 $
1,512 $ 2,396 547 149 4,604 1,475 162 90 6,331 $
1,282 2,628 482 302 4,694 1,855 189 121 6,859
29 75 137 42 106 389 117 250 72 828 $
63 171 296 90 279 899 398 135 1,432 $
129 178 337 93 302 1,039 404 144 1,587
Stockholders' equity Convertible preferred stock Common stock Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total stockholders' equity Total liabilities and stockholders' equity
Source: Company Reports
615 947 (6) 606 2,162 2,990 $
615 2,684 (6) 1,606 4,899 6,331 $
615 2,853 (7) 1,811 5,272 6,859
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FACEBOOK STATEMENT OF CASH FLOWS FY End: December ($ in millions) 2009A Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Loss on write-off of equipment Share-based compensation Tax benefit from share-based award activity Excess tax benefit from share-based award activity Changes in assets and liabilities: Accounts receivable Prepaid expenses and other current assets Other assets Accounts payable Platform partners payable Accrued expenses and other current liabilities Deferred revenue and deposits Other liabilities Net cash provided by operating activities $ 2010A 606 139 3 20 115 (115) 2011A $ 1,000 323 4 217 433 (433) 1Q:12A $ 205 110 1 103 54 (54) 65 (28) (32) (3) 7 2 3 8 441
229 $ 78 1 27 50 (51) (112) (30) (59) (7) 27 1 1 155 $
(209) (174) (38) (31) 17 (32) 12 6 75 96 20 38 37 49 16 53 698 $ 1,549 $
Cash flows from investing activities Purchases of property and equipment Purchases of marketable securities Maturities of marketable securities Sales of marketable securities Investments in non-marketable equity securities Acquisitions of business, net of cash acquired, and purchases of intangible and other assets Change in restricted cash and deposits Net cash used in investing activities $ Cash flows from financing activities Net proceeds from issuance of convertible preferred stock Net proceeds from issuance of common stock Proceeds from exercise of stock options Proceeds from (repayments of) long-term debt Proceeds from sale and lease-back transactions Principal payments on capital lease obligations Excess tax benefit from share-based award activity Net cash provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period
Source: Company Reports
(33) (293) (606) (3,025) 516 113 (3) 3 (22) (24) (32) (9) 6 (62) $ (324) $ (3,023) $
(453) (876) 567 69 (1) (25) (1) (720)
200 9 31 (48) 51 243 $ 336 297 633
500 998 6 28 250 (250) 170 (90) (181) 115 433 781 $ 1,198 $ (3) 3
5 62 (71) 54 50 (1)
1,152 633 $ 1,785
(273) (230) 1,785 1,512 $ 1,512 $ 1,282
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May 7, 2012
TRENDS
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1Q:09A 2Q:09A 3Q:09A 4Q:09A 1Q:10A 2Q:10A 3Q:10A 4Q:10A 1Q:11A 2Q:11A 3Q:11A 4Q:11A EOP MAUs US & Canada Europe Asia (Ex China) Rest of World Total Net Sequential MAUs Adds US & Canada Europe Asia (Ex China) Rest of World Total Sequential MAU % Growth US & Canada Europe Asia Rest of World Total Source of Sequential MAU Growth US & Canada Europe Asia Rest of World Total EOP MAU YOY % Growth US & Canada Europe Asia Rest of World Total EOP MAU Mix US & Canada Europe Asia Rest of World Total Average MAUs YOY % Growth US & Canada Europe Asia Rest of World Total Full Year MAU % Growth Y/Y
Source: Company reports and Sterne Agee estimates
1Q:12A 188 241 230 242 901 9 12 18 17 56 5% 5% 8% 8% 7% 16% 21% 32% 30% 100% 15% 20% 47% 50% 32% 21% 27% 26% 27% 100% 16% 22% 50% 59% 35%
68 71 22 35 196
81 85 32 44 242 13 14 10 9 46 19% 20% 45% 26% 23% 28% 30% 22% 20% 100%
99 101 48 57 305 18 16 16 13 63 22% 19% 50% 30% 26% 29% 25% 25% 21% 100%
112 117 62 69 360 13 16 14 12 55 13% 16% 29% 21% 18% 24% 29% 25% 22% 100%
130 138 81 83 432 18 21 19 14 72 16% 18% 31% 20% 20% 25% 29% 26% 19% 100% 91% 94% 268% 137% 120%
137 151 96 98 482 7 13 15 15 50 5% 9% 19% 18% 12% 14% 26% 30% 30% 100% 69% 78% 200% 123% 99% 28% 31% 20% 20% 100% 79% 85% 228% 129% 109%
144 167 113 126 550 7 16 17 28 68 5% 11% 18% 29% 14% 10% 24% 25% 41% 100% 45% 65% 135% 121% 80% 26% 30% 21% 23% 100% 56% 71% 161% 122% 89%
154 183 138 133 608 10 16 25 7 58 7% 10% 22% 6% 11% 17% 28% 43% 12% 100% 38% 56% 123% 93% 69% 25% 30% 23% 22% 100% 41% 61% 128% 106% 74% 88%
163 201 156 161 681 9 18 18 28 73 6% 10% 13% 21% 12% 12% 25% 25% 38% 100% 25% 46% 93% 94% 58% 24% 30% 23% 24% 100% 31% 51% 106% 93% 63%
169 212 174 183 738 6 11 18 22 57 4% 5% 12% 14% 8% 11% 19% 32% 39% 100% 23% 40% 81% 87% 53% 23% 29% 24% 25% 100% 24% 43% 86% 90% 55%
176 221 196 207 800 7 9 22 24 62 4% 4% 13% 13% 8% 11% 15% 35% 39% 100% 22% 32% 73% 64% 45% 22% 28% 25% 26% 100% 23% 36% 77% 74% 49%
179 229 212 225 845 3 8 16 18 45 2% 4% 8% 9% 6% 7% 18% 36% 40% 100% 16% 25% 54% 69% 39% 21% 27% 25% 27% 100% 19% 29% 63% 67% 42% 48%
35% 36% 11% 18% 100%
33% 35% 13% 18% 100%
32% 33% 16% 19% 100%
31% 33% 17% 19% 100%
30% 32% 19% 19% 100%
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Reach
2Q:12E 3Q:12E 4Q:12E EOP MAUs US & Canada Europe Asia (Ex China) Rest of World Total Net Sequential MAUs Adds US & Canada Europe Asia (Ex China) Rest of World Total Sequential MAU % Growth US & Canada Europe Asia Rest of World Total Source of Sequential MAU Growth US & Canada Europe Asia Rest of World Total EOP MAU YOY % Growth US & Canada Europe Asia Rest of World Total EOP MAU Mix US & Canada Europe Asia Rest of World Total Average MAUs YOY % Growth US & Canada Europe Asia Rest of World Total Full Year MAU % Growth Y/Y
1Q:13E 203 271 290 300 1064 3 6 15 13 37 1% 2% 5% 5% 4% 8% 16% 41% 35% 100% 8% 12% 26% 24% 18% 19% 25% 27% 28% 100% 10% 14% 28% 26% 20%
2Q:13E 206 277 305 313 1101 3 6 15 13 37 1% 2% 5% 4% 3% 8% 16% 41% 35% 100% 7% 11% 24% 22% 17% 19% 25% 28% 28% 100% 8% 12% 25% 23% 17%
3Q:13E 209 283 320 326 1138 3 6 15 13 37 1% 2% 5% 4% 3% 8% 16% 41% 35% 100% 7% 10% 23% 20% 16% 18% 25% 28% 29% 100% 7% 11% 24% 21% 16%
4Q;13E 212 289 335 339 1175 3 6 15 13 37 1% 2% 5% 4% 3% 8% 16% 41% 35% 100% 6% 9% 22% 18% 14% 18% 25% 29% 29% 100% 6% 10% 22% 19% 15% 16%
1Q:14E 215 293 350 349 1207 3 4 15 10 31.5 1% 1% 4% 3% 3% 8% 13% 48% 32% 100% 6% 8% 21% 16% 13% 18% 24% 29% 29% 100% 6% 9% 21% 17% 14%
2Q:14E 217 297 365 359 1238 3 4 15 10 31.5 1% 1% 4% 3% 3% 8% 13% 48% 32% 100% 5% 7% 20% 15% 12% 18% 24% 29% 29% 100% 6% 8% 20% 15% 13%
3Q:14E 220 301 380 369 1270 3 4 15 10 31.5 1% 1% 4% 3% 3% 8% 13% 48% 32% 100% 5% 6% 19% 13% 12% 17% 24% 30% 29% 100% 5% 7% 19% 14% 12%
4Q:14E 222 305 395 379 1301 3 4 15 10 31.5 1% 1% 4% 3% 2% 8% 13% 48% 32% 100% 5% 6% 18% 12% 11% 17% 23% 30% 29% 100% 5% 6% 18% 12% 11% 12%
1Q:15E 224 309 408 389 1330 2 4 13 10 28.5 1% 1% 3% 3% 2% 5% 14% 46% 35% 100% 4% 5% 17% 11% 10% 17% 23% 31% 29% 100% 4% 5% 17% 12% 10%
2Q:15E 225 313 421 399 1358 2 4 13 10 28.5 1% 1% 3% 3% 2% 5% 14% 46% 35% 100% 4% 5% 15% 11% 10% 17% 23% 31% 29% 100% 4% 5% 16% 11% 10%
3Q:15E 227 317 434 409 1387 2 4 13 10 28.5 1% 1% 3% 3% 2% 5% 14% 46% 35% 100% 3% 5% 14% 11% 9% 16% 23% 31% 29% 100% 3% 5% 15% 11% 9%
4Q:15E 228 321 447 419 1415 2 4 13 10 28.5 1% 1% 3% 2% 2% 5% 14% 46% 35% 100% 3% 5% 13% 11% 9% 16% 23% 32% 30% 100% 3% 5% 14% 11% 9% 9%
1Q:16E 229 323 457 429 1438 1 2 10 10 22.8 0% 1% 2% 2% 2% 3% 9% 44% 44% 100% 2% 5% 12% 10% 8% 16% 22% 32% 30% 100% 3% 5% 13% 10% 8%
2Q:16E 229 325 467 439 1461 1 2 10 10 22.8 0% 1% 2% 2% 2% 3% 9% 44% 44% 100% 2% 4% 11% 10% 8% 16% 22% 32% 30% 100% 2% 4% 11% 10% 8%
3Q:16E 230 327 477 449 1483 1 2 10 10 22.8 0% 1% 2% 2% 2% 3% 9% 44% 44% 100% 2% 3% 10% 10% 7% 16% 22% 32% 30% 100% 2% 4% 10% 10% 7%
4Q:16E 231 329 484 457 1501 0 2 7 8 17.7 0% 1% 2% 2% 1% 3% 11% 42% 44% 100% 1% 3% 8% 9% 6% 15% 22% 32% 30% 100% 1% 3% 9% 9% 7% 7%
192 249 245 257 943 4 8 15 15 42 2% 3% 7% 6% 5% 10% 19% 36% 36% 100% 14% 17% 41% 40% 28% 20% 26% 26% 27% 100% 14% 19% 44% 45% 30%
196 257 260 272 985 4 8 15 15 42 2% 3% 6% 6% 4% 10% 19% 36% 36% 100% 11% 16% 33% 31% 23% 20% 26% 26% 28% 100% 12% 17% 36% 36% 25%
200 265 275 287 1027 4 8 15 15 42 2% 3% 6% 6% 4% 10% 19% 36% 36% 100% 12% 16% 30% 28% 22% 19% 26% 27% 28% 100% 12% 16% 31% 29% 22% 26%
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Engagement
1Q:09A 2Q:09A 3Q:09A 4Q:09A 1Q:10A 2Q:10A 3Q:10A 4Q:10A 1Q:11A 2Q:11A 3Q:11A 4Q:11A DAUs US & Canada Europe Asia Rest of World Total Sequential Growth US & Canada Europe Asia Rest of World Total DAU Mix US & Canada Europe Asia Rest of World Total DAU % of Avg MAU US & Canada Europe Asia Rest of World Total 35 35 9 14 93 40 39 13 16 108 14% 11% 44% 14% 16% 38% 38% 10% 15% 100% 51% 49% 41% 40% 47% 37% 36% 12% 15% 100% 54% 50% 48% 41% 49% 53 50 20 22 145 33% 28% 54% 38% 34% 37% 34% 14% 15% 100% 59% 54% 50% 44% 53% 64 63 29 29 185 21% 26% 45% 32% 28% 35% 34% 16% 16% 100% 61% 58% 53% 46% 56% 82 79 39 35 235 28% 25% 34% 21% 27% 35% 34% 17% 15% 100% 68% 62% 55% 46% 59% 85 85 45 42 257 4% 8% 15% 20% 9% 33% 33% 18% 16% 100% 64% 59% 51% 46% 56% 92 94 54 54 294 8% 11% 20% 29% 14% 31% 32% 18% 18% 100% 65% 59% 52% 48% 57% 99 107 64 58 328 8% 14% 19% 7% 12% 30% 33% 20% 18% 100% 66% 61% 51% 45% 57% 105 120 72 74 371 6% 12% 13% 28% 13% 28% 32% 19% 20% 100% 66% 63% 49% 50% 58% 117 127 85 87 416 11% 6% 18% 18% 12% 28% 31% 20% 21% 100% 70% 62% 52% 51% 59% 124 135 98 100 457 6% 6% 15% 15% 10% 27% 30% 21% 22% 100% 72% 62% 53% 51% 59% 126 143 105 109 483 2% 6% 7% 9% 6% 26% 30% 22% 23% 100% 71% 64% 51% 50% 59% 1Q:12A 129 152 119 126 526 2% 6% 13% 16% 9% 25% 29% 23% 24% 100% 70% 65% 54% 54% 60.3%
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May 7, 2012
Engagement
2Q:12E 3Q:12E 4Q:12E DAUs US & Canada Europe Asia Rest of World Total Sequential Growth US & Canada Europe Asia Rest of World Total DAU Mix US & Canada Europe Asia Rest of World Total DAU % of Avg MAU US & Canada Europe Asia Rest of World Total 135 161 132 139 567 5% 6% 11% 10% 8% 24% 28% 23% 24% 100% 70% 65% 54% 54% 61.5% 138 166 140 147 591 2% 3% 6% 6% 4% 23% 28% 24% 25% 100% 70% 65% 54% 54% 61.3% 141 172 149 156 618 2% 3% 7% 6% 5% 23% 28% 24% 25% 100% 70% 65% 54% 54% 61% 143 176 159 163 642 2% 3% 6% 5% 4% 22% 27% 25% 25% 100% 70% 65% 55% 54% 61% 145 181 169 171 666 2% 3% 6% 5% 4% 22% 27% 25% 26% 100% 71% 65% 55% 55% 62% 148 185 179 179 691 2% 2% 6% 5% 4% 21% 27% 26% 26% 100% 71% 65% 56% 55% 62% 150 190 189 187 716 2% 2% 6% 4% 4% 21% 27% 26% 26% 100% 71% 66% 56% 55% 62% 152 193 199 194 738 1% 2% 5% 3% 3% 21% 26% 27% 26% 100% 71% 66% 57% 55% 62% 154 196 209 200 760 1% 2% 5% 3% 3% 20% 26% 28% 26% 100% 71% 66% 57% 56% 62% 156 200 220 206 782 1% 2% 5% 3% 3% 20% 26% 28% 26% 100% 71% 66% 58% 56% 62% 158 203 230 213 804 1% 2% 5% 3% 3% 20% 25% 29% 26% 100% 71% 66% 58% 56% 63% 159 206 240 220 825 1% 2% 4% 3% 3% 19% 25% 29% 27% 100% 71% 67% 59% 56% 63% 161 209 250 226 846 1% 2% 4% 3% 3% 19% 25% 30% 27% 100% 71% 67% 59% 57% 63% 162 213 260 233 867 1% 2% 4% 3% 3% 19% 25% 30% 27% 100% 71% 67% 60% 57% 63% 163 216 270 240 889 1% 2% 4% 3% 2% 18% 24% 30% 27% 100% 72% 67% 60% 57% 63% 164 218 278 247 907 0% 1% 3% 3% 2% 18% 24% 31% 27% 100% 72% 67% 61% 57% 64% 165 220 286 253 925 0% 1% 3% 3% 2% 18% 24% 31% 27% 100% 72% 68% 61% 58% 64% 165 222 295 260 943 0% 1% 3% 3% 2% 18% 24% 31% 28% 100% 72% 68% 62% 58% 64% 166 224 302 266 958 0% 1% 2% 2% 2% 17% 23% 32% 28% 100% 72% 68% 62% 58% 64% 1Q:13E 2Q:13E 3Q:13E 4Q;13E 1Q:14E 2Q:14E 3Q:14E 4Q:14E 1Q:15E 2Q:15E 3Q:15E 4Q:15E 1Q:16E 2Q:16E 3Q:16E 4Q:16E
Page 31
May 7, 2012
Monetization
Advertising ARPU US & Canada Europe Asia Rest of World Total YoY $ Chg Advtg ARPU US & Canada Europe Asia Rest of World Total Payments ARPU US & Canada Europe Asia Rest of World Total YoY $ Chg Payments ARPU US & Canada Europe Asia Rest of World Total Total ARPU US & Canada Europe Asia Rest of World Total YoY $ Change in ARPU US & Canada Europe Asia Rest of World Total $ per DAU US & Canada Europe Asia Rest of World Total
ARPU = Revenue/Average MAU for the period 1Q:09A 2Q:09A 3Q:09A 4Q:09A 1Q:10A 2Q:10A 3Q:10A 4Q:10A 1Q:11A 2Q:11A 3Q:11A 4Q:11A $ $ $ $ 1.73 0.75 0.31 0.16 $ $ $ $ 1.82 0.89 0.35 0.23 $ $ $ $ 1.85 0.82 0.34 0.21 $ 2.41 $ 1.15 $ 0.42 $ 0.32 $ 1.13 $ $ $ $ 2.09 1.07 0.38 0.30 $ 2.37 $ 1.19 $ 0.45 $ 0.35 $ 1.09 $ 0.55 $ 0.30 $ 0.10 $ 0.12 $ 0.17 $ 0.46 $ 0.15 $ 0.05 $ 0.02 $ 0.17 $ 0.42 $ 0.14 $ 0.05 $ 0.02 $ 0.15 $ 2.84 $ 1.33 $ 0.50 $ 0.38 $ 1.26 $ 0.97 $ 0.44 $ 0.15 $ 0.15 $ 0.32 $ 1.13 $ 2.17 $ 0.96 $ 0.75 $ 2.15 $ 2.29 $ 1.13 $ 0.48 $ 0.36 $ $ $ $ 2.60 1.36 0.47 0.37 1Q:12A $ $ $ $ 2.28 1.17 0.45 0.34
$ 0.86
$ 0.93
$ 0.87
$ 0.99 $ $ $ $ 0.37 0.32 0.07 0.14
$ 1.04 $ 1.15 $ 1.00 $ 0.44 $ 0.31 $ 0.13 $ 0.15 $ $ $ $ 0.19 0.21 0.04 0.05 $ $ $ $ 0.19 0.09 0.07 0.04
$ 0.13 $ $ $ $ 0.04 $ $ $ $ 0.04 0.01 $ $ $ $ 0.08 0.03 0.01 0.01 $ 0.36 $ 0.10 $ 0.04 $ 0.02 $ 0.13 $ $ $ $ 0.39 0.12 0.04 0.02
$ 0.17 $ 0.02 $ 0.01 $ 0.50 $ 0.21 $ 0.09 $ 0.04 $ $ $ $ 0.59 0.24 0.10 0.04 $ $ $ $ 0.58 0.23 0.09 0.03
$ 0.01
$ 0.02
$ 0.03
$ 0.15 $ $ $ $ 0.35 0.12 0.04 0.02
$ 0.20 $ 0.23 $ 0.21 $ 0.43 $ 0.18 $ 0.08 $ 0.03 $ $ $ $ 0.24 0.15 0.06 0.02 $ $ $ $ 0.19 0.11 0.05 0.01
$ 0.13 $ $ $ $ 1.77 0.75 0.31 0.16 $ $ $ $ 1.87 0.89 0.35 0.23 $ $ $ $ 1.93 0.84 0.35 0.22 $ 2.77 $ 1.25 $ 0.46 $ 0.33 $ 1.26 $ $ $ $ 2.49 1.19 0.42 0.32
$ 0.17 $ 0.10 $ 0.07 $ 2.79 $ 1.34 $ 0.56 $ 0.40 $ $ $ $ 3.19 1.60 0.56 0.40 $ $ $ $ 2.86 1.40 0.53 0.37
$ 0.87
$ 0.94
$ 0.91
$ 1.14 $ $ $ $ 0.72 0.44 0.11 0.16
$ 1.24 $ 1.37 $ 1.21 $ 0.87 $ 0.50 $ 0.21 $ 0.18 $ $ $ $ 0.43 0.36 0.10 0.07 $ $ $ $ 0.38 0.20 0.11 0.05
$ 0.27 $ $ $ $ $ 2.61 1.22 0.56 0.34 1.46 $ $ $ $ $ 0.97 1.52 0.69 0.50 1.67 $ $ $ $ $ 0.92 1.43 0.69 0.46 1.59 $ 1.26 $ 2.04 $ 0.91 $ 0.74 $ 2.23 $ $ $ $ $ 1.06 1.91 0.86 0.64 1.97
$ 0.34 $ 0.11 $ 0.08 $ 1.05 $ 2.15 $ 1.06 $ 0.78 $ 2.09 $ $ $ $ $ 1.17 2.52 1.10 0.80 2.34 $ $ $ $ $ 4.07 2.16 0.99 0.69 2.01
Page 32
May 7, 2012
Monetization
2Q:12E 3Q:12E 4Q:12E Advertising ARPU US & Canada Europe Asia Rest of World Total YoY $ Chg Advtg ARPU US & Canada Europe Asia Rest of World Total Payments ARPU US & Canada Europe Asia Rest of World Total YoY $ Chg Payments ARPU US & Canada Europe Asia Rest of World Total Total ARPU US & Canada Europe Asia Rest of World Total YoY $ Change in ARPU US & Canada Europe Asia Rest of World Total $ per DAU US & Canada Europe Asia Rest of World Total
1Q:13E $ $ $ $ 2.50 1.29 0.54 0.41
2Q:13E $ $ $ $ 2.79 1.41 0.62 0.47
3Q:13E $ $ $ $ 2.73 1.38 0.67 0.50
4Q;13E $ $ $ $ 3.06 1.63 0.68 0.52
1Q:14E $ $ $ $ 2.76 1.45 0.68 0.52
2Q:14E $ $ $ $ 3.06 1.59 0.77 0.59
3Q:14E $ $ $ $ 3.01 1.56 0.83 0.63
4Q:14E $ $ $ $ 3.35 1.82 0.85 0.66
1Q:15E $ $ $ $ 3.06 1.66 0.86 0.67
2Q:15E $ $ $ $ 3.37 1.80 0.96 0.75
3Q:15E $ $ $ $ 3.32 1.78 1.02 0.80
4Q:15E $ $ $ $ 3.68 2.05 1.05 0.84
1Q:16E $ $ $ $ 3.40 1.90 1.08 0.85
2Q:16E $ $ $ $ 3.72 2.05 1.18 0.95
3Q:16E $ $ $ $ 3.68 2.05 1.26 1.01
4Q:16E $ $ $ $ 4.05 2.33 1.30 1.06
$ $ $ $
2.56 1.28 0.52 0.39
$ 2.49 $ 1.23 $ 0.55 $ 0.41
$ $ $ $
2.81 1.47 0.55 0.42
$ 1.11 $ $ $ $ 0.19 0.09 0.07 0.04
$ 1.08 $ 1.20 $ 1.07 $ 1.19 $ 1.18 $ 1.30 $ 1.19 $ 1.32 $ 1.32 $ 1.45 $ 1.36 $ 1.49 $ 1.51 $ 1.64 $ 1.57 $ 1.71 $ 1.74 $ 1.88 $ 0.20 $ 0.10 $ 0.08 $ 0.05 $ $ $ $ 0.21 0.11 0.09 0.06 $ $ $ $ 0.22 0.12 0.10 0.07 $ $ $ $ 0.23 0.13 0.11 0.08 $ $ $ $ 0.24 0.14 0.12 0.09 $ $ $ $ 0.25 0.15 0.13 0.10 $ $ $ $ 0.26 0.16 0.14 0.11 $ $ $ $ 0.27 0.17 0.15 0.12 $ $ $ $ 0.28 0.18 0.16 0.13 $ $ $ $ 0.29 0.19 0.17 0.14 $ $ $ $ 0.30 0.20 0.18 0.15 $ $ $ $ 0.31 0.21 0.19 0.16 $ $ $ $ 0.32 0.22 0.20 0.17 $ $ $ $ 0.33 0.23 0.21 0.18 $ $ $ $ 0.34 0.24 0.22 0.19 $ $ $ $ 0.35 0.25 0.23 0.20 $ $ $ $ 0.36 0.26 0.24 0.21 $ $ $ $ 0.37 0.27 0.25 0.22
$ 0.02 $ $ $ $ 0.62 0.23 0.06 0.02
$ 0.04 $ 0.06 $ 0.08 $ 0.08 $ 0.10 $ 0.10 $ 0.12 $ 0.13 $ 0.14 $ 0.15 $ 0.17 $ 0.17 $ 0.19 $ 0.19 $ 0.21 $ 0.21 $ 0.23 $ 0.23 $ 0.63 $ 0.28 $ 0.10 $ 0.04 $ $ $ $ 0.70 0.30 0.10 0.04 $ $ $ $ 0.66 0.28 0.09 0.04 $ $ $ $ 0.69 0.27 0.06 0.03 $ $ $ $ 0.70 0.32 0.10 0.04 $ $ $ $ 0.74 0.33 0.10 0.04 $ $ $ $ 0.69 0.30 0.09 0.04 $ $ $ $ 0.71 0.29 0.06 0.03 $ $ $ $ 0.72 0.34 0.10 0.04 $ $ $ $ 0.77 0.35 0.10 0.04 $ $ $ $ 0.72 0.32 0.09 0.04 $ $ $ $ 0.74 0.31 0.06 0.03 $ $ $ $ 0.75 0.34 0.10 0.04 $ $ $ $ 0.80 0.35 0.10 0.04 $ $ $ $ 0.74 0.32 0.09 0.04 $ $ $ $ 0.77 0.31 0.06 0.03 $ $ $ $ 0.78 0.34 0.10 0.04 $ $ $ $ 0.82 0.35 0.10 0.04
$ 0.21 $ $ $ $ 0.16 0.08 0.02 0.00
$ 0.24 $ 0.25 $ 0.23 $ 0.22 $ 0.25 $ 0.26 $ 0.23 $ 0.22 $ 0.25 $ 0.26 $ 0.23 $ 0.22 $ 0.24 $ 0.25 $ 0.23 $ 0.22 $ 0.24 $ 0.25 $ 0.13 $ 0.07 $ 0.01 $ 0.00 $ $ $ $ 0.11 0.06 0.01 0.00 $ $ $ $ 0.09 0.05 0.00 0.00 $ $ $ $ 0.07 0.04 0.00 0.00 $ $ $ $ 0.07 0.04 0.00 0.00 $ $ $ $ 0.05 0.03 0.00 0.00 $ $ $ $ 0.03 0.02 0.00 0.00 $ $ $ $ 0.03 0.02 0.00 0.00 $ $ $ $ 0.03 0.02 0.00 0.00 $ $ $ $ 0.03 0.02 0.00 0.00 $ $ $ $ 0.03 0.02 0.00 0.00 $ $ $ $ 0.03 0.02 0.00 0.00 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ $ $ $ $ $ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ $ $ $ 4.08 2.12 1.12 0.84 $ $ $ $ 4.48 2.41 1.16 0.88 $ $ $ $ 4.14 2.22 1.16 0.89 $ $ $ $ 4.48 2.36 1.25 0.98 $ $ $ $ 4.46 2.38 1.36 1.05 $ $ $ $ 4.87 2.68 1.40 1.10
$ 0.04 $ $ $ $ 3.18 1.50 0.58 0.42
$ 0.03 $ 0.03 $ 0.02 $ 0.01 $ 0.01 $ 0.00 $ 3.12 $ 1.51 $ 0.65 $ 0.45 $ $ $ $ 3.51 1.78 0.66 0.46 $ $ $ $ 3.17 1.57 0.63 0.44 $ $ $ $ 3.48 1.68 0.69 0.50 $ $ $ $ 3.42 1.70 0.77 0.54 $ $ $ $ 3.80 1.96 0.78 0.56
$ (0.00) $ (0.00) $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ $ $ $ 3.45 1.75 0.77 0.55 $ $ $ $ 3.77 1.87 0.83 0.62 $ $ $ $ 3.73 1.90 0.92 0.67 $ $ $ $ 4.12 2.17 0.95 0.70 $ $ $ $ 3.78 1.97 0.95 0.70 $ $ $ $ 4.11 2.10 1.02 0.78
$ 1.32 $ $ $ $ 0.35 0.17 0.08 0.04
$ 1.32 $ 1.45 $ 1.31 $ 1.41 $ 1.43 $ 1.56 $ 1.43 $ 1.54 $ 1.57 $ 1.71 $ 1.59 $ 1.72 $ 1.75 $ 1.90 $ 1.80 $ 1.93 $ 1.98 $ 2.13 $ 0.33 $ 0.17 $ 0.09 $ 0.05 $ $ $ $ 0.32 0.17 0.09 0.06 $ $ $ $ 0.31 0.17 0.10 0.07 $ $ $ $ 0.30 0.17 0.11 0.08 $ $ $ $ 0.31 0.18 0.12 0.09 $ $ $ $ 0.30 0.18 0.13 0.10 $ $ $ $ 0.29 0.18 0.14 0.11 $ $ $ $ 0.30 0.19 0.15 0.12 $ $ $ $ 0.31 0.20 0.16 0.13 $ $ $ $ 0.32 0.21 0.17 0.14 $ $ $ $ 0.33 0.22 0.18 0.15 $ $ $ $ 0.34 0.23 0.19 0.16 $ $ $ $ 0.35 0.22 0.20 0.17 $ $ $ $ 0.36 0.23 0.21 0.18 $ $ $ $ 0.37 0.24 0.22 0.19 $ $ $ $ 0.38 0.25 0.23 0.20 $ $ $ $ 0.39 0.26 0.24 0.21 $ $ $ $ 0.40 0.27 0.25 0.22
$ 0.06 $ $ $ $ $ 4.48 2.29 1.04 0.75 2.14
$ 0.08 $ 0.08 $ 0.10 $ 0.09 $ 0.11 $ 0.11 $ 0.12 $ 0.13 $ 0.14 $ 0.15 $ 0.17 $ 0.18 $ 0.18 $ 0.19 $ 0.20 $ 0.21 $ 0.22 $ 0.23 $ 4.39 $ 2.30 $ 1.17 $ 0.81 $ 2.15 $ $ $ $ $ 4.94 2.70 1.17 0.83 2.37 $ $ $ $ $ 4.46 2.38 1.12 0.80 2.13 $ $ $ $ $ 4.89 2.54 1.21 0.89 2.29 $ $ $ $ $ 4.81 2.56 1.34 0.96 2.31 $ $ $ $ $ 5.34 2.95 1.36 1.00 2.52 $ $ $ $ $ 4.84 2.64 1.32 0.98 2.30 $ $ $ $ $ 5.28 2.81 1.42 1.09 2.48 $ $ $ $ $ 5.22 2.85 1.57 1.18 2.52 $ $ $ $ $ 5.75 3.25 1.60 1.23 2.73 $ $ $ $ $ 5.28 2.94 1.58 1.23 2.54 $ $ $ $ $ 5.73 3.13 1.69 1.35 2.72 $ $ $ $ $ 5.68 3.14 1.84 1.46 2.78 $ $ $ $ $ 6.23 3.55 1.89 1.52 2.99 $ $ $ $ $ 5.77 3.28 1.89 1.54 2.83 $ $ $ $ $ 6.23 3.47 2.01 1.68 3.02 $ $ $ $ $ 6.19 3.50 2.17 1.79 3.09 $ $ $ $ $ 6.76 3.92 2.24 1.88 3.32
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May 7, 2012
Revenue
1Q:09A 2Q:09A 3Q:09A 4Q:09A 1Q:10A 2Q:10A 3Q:10A 4Q:10A 1Q:11A 2Q:11A 3Q:11A 4Q:11A 1Q:12A $ 419 $ 106 $ 525 26% 71% 33% 80% 20% 100% -9% 1% -7% $ 274 $ 54 $ 328 33% 135% 43% 84% 16%
US & Canada
Advertising Payments and other fees Total YOY Growth Advertising Payments and other fees Total Mix Advertising Payments and other fees Total Sequential Growth Advertising Payments and other fees Total 59% 62% 1140% 1183% 84% 89% 98% 2% 100% 98% 2% 100% 16% 20% 16% $ 96 $ $ YOY Growth Advertising Payments and other fees Total Mix Advertising Payments and other fees Total Sequential Growth Advertising Payments and other fees Total Asia Advertising Payments and other fees Total YOY Growth Advertising Payments and other fees Total Mix Advertising Payments and other fees Total Sequential Growth Advertising Payments and other fees Total Rest of World Advertising Payments and other fees Total YOY Growth Advertising Payments and other fees Total Mix Advertising Payments and other fees Total Sequential Growth Advertising Payments and other fees Total
$ 209 $ 5 $ 214
$ 243 $ 260 $ 359 $ 332 $ 394 $ 395 $ 6 $ 11 $ 53 $ 62 $ 77 $ 87 $ 249 $ 271 $ 412 $ 394 $ 471 $ 482 52% 691% 78% 82% 18% 100% 0% 13% 2%
$ 462 $ 105 $ 567 29% 98% 38% 81% 19% 100% 17% 21% 18% $ 306 $ 55 $ 361 52% 224% 66% 85% 15%
96% 4% 100% 7% 83% 9%
87% 13% 100% 38% 382% 52%
84% 16% 100% -8% 17% -4%
84% 16% 100% 19% 24% 20%
Europe
Advertising Payments and other fees Total $ 128 $ 1 $ 129 $ 130 $ 201 $ 206 $ 245 $ 245 $ 4 $ 17 $ 23 $ 30 $ 45 $ 134 $ 218 $ 229 $ 275 $ 290 115% nm 139% 100% 0% 99% 1% 97% 3% 92% 8% 90% 10% 91% 88% 2900% 1025% 113% 116% 89% 11% 84% 16%
96
33% nm 34%
2% 300% 4% 36 1 37
55% 325% 63% $ 53 $ 5 $ 58
2% 35% 5% $ $ $ 56 6 62
19% 30% 20%
0% 50% 5%
25% 22% 24% $ 95 $ 20 $ 115 79% 300% 98% 83% 17% 100%
-10% -2% -9% $ 99 $ 19 $ 118 77% 217% 90% 84% 16% 100%
$ 22 $ 31 $ $ $ $ $ 22 $ 31 $
$ 74 $ 88 $ 8 $ 16 $ 82 $ 104 139% nm 165% 90% 10% 100% 144% 1500% 181% 85% 15% 100%
155% nm 182% 100% 0% 100% 100% 0% 100% 97% 3% 100% 91% 9% 100% 90% 10% 100%
41% nm 41%
16% nm 19% 24 1 25
47% 400% 57% $ 41 $ 2 $ 43
6% 20% 7% $ $ $ 44 3 47
32% 33% 32% $ 61 $ 4 $ 65 190% nm 210% 94% 6% 100%
19% 100% 27% $ 71 $ $ 7 $ $ 78 $ 196% 600% 212% 91% 9% 100%
8% 25% 11% 79 $ 8 $ 87 $
4% -5% 3% 79 8 87
$ 12 $ 21 $ $ $ $ $ 12 $ 21 $
267% nm 292% 100% 0% 100% 100% 0% 100% 96% 4% 100% 95% 5% 100% 94% 6% 100%
93% 300% 102% 91% 9% 100%
80% 167% 85% 91% 9% 100%
75% nm 75%
14% nm 19%
71% 100% 72%
7% 50% 9%
39% 33% 38%
16% 75% 20%
11% 14% 12%
0% 0% 0%
Page 34
May 7, 2012
Revenue
2Q:12E 3Q:12E 4Q:12E 1Q:13E $ 504 $ 134 $ 638 20% 26% 22% 79% 21% 100% -9% -3% -8% $ 345 $ 75 $ 420 26% 39% 28% 82% 18% 2Q:13E $ 571 $ 140 $ 711 17% 19% 18% 80% 20% 100% 13% 5% 11% $ 387 $ 73 $ 460 23% 32% 25% 84% 16% 3Q:13E $ 566 $ 145 $ 711 17% 18% 17% 80% 20% 100% -1% 3% 0% $ 386 $ 89 $ 475 23% 27% 24% 81% 19% 4Q;13E $ 644 $ 157 $ 801 16% 13% 15% 80% 20% 100% 14% 8% 13% $ 465 $ 96 $ 561 21% 20% 21% 83% 17% 1Q:14E $ 589 $ 147 $ 736 17% 10% 15% 80% 20% 100% -9% -6% -8% $ 423 $ 87 $ 510 22% 16% 21% 83% 17% 2Q:14E $ 660 $ 154 $ 814 16% 10% 14% 81% 19% 100% 12% 4% 11% $ 468 $ 84 $ 552 21% 16% 20% 85% 15% 3Q:14E $ 656 $ 158 $ 814 16% 9% 15% 81% 19% 100% -1% 3% 0% $ 467 $ 101 $ 568 21% 14% 20% 82% 18% 4Q:14E $ 739 $ 170 $ 910 15% 9% 14% 81% 19% 100% 13% 8% 12% $ 551 $ 107 $ 659 19% 12% 17% 84% 16% 1Q:15E $ 682 $ 160 $ 841 16% 8% 14% 81% 19% 100% -8% -6% -8% $ 508 $ 98 $ 606 20% 13% 19% 84% 16% 2Q:15E $ 755 $ 166 $ 921 14% 8% 13% 82% 18% 100% 11% 4% 10% $ 559 $ 95 $ 654 20% 13% 19% 85% 15% 3Q:15E $ 751 $ 169 $ 920 14% 7% 13% 82% 18% 100% -1% 2% 0% $ 562 $ 106 $ 668 20% 5% 18% 84% 16% 4Q:15E $ 836 $ 181 $ 1,017 13% 6% 12% 82% 18% 100% 11% 7% 11% $ 655 $ 113 $ 768 19% 5% 17% 85% 15% 1Q:16E $ 776 $ 170 $ 946 14% 6% 12% 82% 18% 100% -7% -6% -7% $ 611 $ 103 $ 714 20% 5% 18% 86% 14% 2Q:16E $ 851 $ 176 $ 1,027 13% 6% 11% 83% 17% 100% 10% 3% 9% $ 665 $ 99 $ 764 19% 4% 17% 87% 13% 3Q:16E $ 846 $ 178 $ 1,025 13% 5% 11% 83% 17% 100% -1% 2% 0% $ 668 $ 110 $ 778 19% 4% 16% 86% 14% 4Q:16E $ 932 $ 190 $ 1,122 12% 5% 10% 83% 17% 100% 10% 6% 9% $ 763 $ 116 $ 880 17% 3% 15% 87% 13%
US & Canada
Advertising Payments and other fees Total YOY Growth Advertising Payments and other fees Total Mix Advertising Payments and other fees Total Sequential Growth Advertising Payments and other fees Total 24% 53% 28% 81% 19% 100% 16% 11% 15% 22% 41% 26% 80% 20% 100% -1% 4% 0% 20% 32% 23% 80% 20% 100% 15% 13% 15% $ 384 $ 79 $ 464 26% 44% 29% 83% 17% $ 487 $ 483 $ 118 $ 122 $ 605 $ 605 $ 557 $ 138 $ 695
Europe
Advertising Payments and other fees Total YOY Growth Advertising Payments and other fees Total Mix Advertising Payments and other fees Total Sequential Growth Advertising Payments and other fees Total Asia Advertising Payments and other fees Total YOY Growth Advertising Payments and other fees Total Mix Advertising Payments and other fees Total Sequential Growth Advertising Payments and other fees Total Rest of World Advertising Payments and other fees Total YOY Growth Advertising Payments and other fees Total Mix Advertising Payments and other fees Total Sequential Growth Advertising Payments and other fees Total
$ 313 $ 312 $ 55 $ 70 $ 369 $ 383 28% 84% 34% 85% 15% 27% 56% 32% 82% 18%
14% 2% 12%
0% 27% 4%
23% 13% 21% $ 148 $ 28 $ 175 56% 38% 53% 84% 16% 100%
-10% -6% -9% $ 154 $ 24 $ 178 56% 28% 51% 86% 14% 100%
12% -3% 9% $ 185 $ 19 $ 204 51% 26% 48% 91% 9% 100%
0% 22% 3% $ 209 $ 30 $ 240 50% 24% 46% 87% 13% 100%
21% 7% 18% $ 223 $ 34 $ 256 51% 23% 46% 87% 13% 100%
-9% -9% -9% $ 234 $ 30 $ 263 52% 21% 48% 89% 11% 100%
11% -4% 8% $ 275 $ 23 $ 298 49% 20% 46% 92% 8% 100%
0% 20% 3% $ 308 $ 36 $ 344 47% 19% 44% 90% 10% 100%
18% 6% 16% $ 328 $ 40 $ 368 47% 18% 44% 89% 11% 100%
-8% -9% -8% $ 345 $ 35 $ 380 48% 17% 44% 91% 9% 100%
10% -3% 8% $ 396 $ 27 $ 423 44% 16% 42% 94% 6% 100%
0% 12% 2% $ 438 $ 42 $ 479 42% 15% 39% 91% 9% 100%
17% 6% 15% $ 464 $ 46 $ 510 41% 14% 38% 91% 9% 100%
-7% -9% -7% $ 486 $ 39 $ 525 41% 13% 38% 93% 7% 100%
9% -4% 7% $ 547 $ 30 $ 576 38% 12% 36% 95% 5% 100%
0% 11% 2% $ 595 $ 46 $ 641 36% 11% 34% 93% 7% 100%
14% 6% 13% $ 625 $ 50 $ 675 35% 9% 32% 93% 7% 100%
$ 122 $ 140 $ 15 $ 24 $ 138 $ 164 65% 89% 68% 89% 11% 100% 59% 53% 58% 85% 15% 100%
24% -20% 17%
14% 61% 19%
6% 13% 7% $ 119 $ 11 $ 129 50% 33% 49% 92% 8% 100%
4% -12% 2%
20% -22% 15%
13% 59% 17% $ 160 $ 12 $ 173 47% 24% 45% 93% 7% 100%
6% 12% 7% $ 174 $ 13 $ 187 47% 22% 45% 93% 7% 100%
5% -13% 3%
18% -23% 13%
12% 58% 15% $ 230 $ 14 $ 244 43% 17% 41% 94% 6% 100%
7% 11% 7% $ 248 $ 15 $ 263 42% 15% 40% 94% 6% 100%
5% -13% 3% $ 255 $ 14 $ 270 44% 15% 42% 95% 5% 100%
15% -23% 11% $ 296 $ 11 $ 307 41% 16% 40% 96% 4% 100%
10% 56% 13% $ 323 $ 16 $ 339 41% 14% 39% 95% 5% 100%
6% 10% 6% $ 348 $ 17 $ 365 41% 13% 39% 95% 5% 100%
5% -14% 3% $ 362 $ 16 $ 378 42% 13% 40% 96% 4% 100%
12% -24% 10% $ 412 $ 12 $ 424 39% 14% 38% 97% 3% 100%
9% 55% 11% $ 448 $ 18 $ 466 39% 13% 37% 96% 4% 100%
5% 9% 5% $ 480 $ 19 $ 499 38% 12% 37% 96% 4% 100%
$ 98 $ 109 $ 6 $ 10 $ 104 $ 119 61% 51% 60% 94% 6% 100% 54% 39% 53% 92% 8% 100%
$ 120 $ 145 $ 10 $ 8 $ 130 $ 153 51% 29% 49% 92% 8% 100% 48% 28% 46% 95% 5% 100%
$ 178 $ 209 $ 12 $ 9 $ 190 $ 219 49% 21% 46% 93% 7% 100% 45% 20% 43% 96% 4% 100%
24% -24% 20%
11% 61% 14%
9% 9% 9%
1% -3% 0%
21% -25% 17%
11% 56% 13%
9% 7% 8%
2% -4% 2%
18% -25% 15%
10% 52% 11%
8% 6% 8%
3% -4% 3%
16% -25% 14%
9% 50% 11%
8% 5% 8%
4% -5% 4%
14% -24% 12%
9% 48% 10%
7% 5% 7%
Page 35
May 7, 2012
APPENDIX SECTION
IMPORTANT DISCLOSURES: Regulation Analyst Certification:
I, Arvind Bhatia and Brett Strauser, hereby certify the views expressed in this research report accurately reflect my personal views about the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this report.
Research Disclosures:
Sterne, Agee & Leach, Inc. makes a market in the following subject companies Apple Inc. and Zynga Inc.. Sterne, Agee & Leach, Inc.'s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach, Inc.'s total revenues, a portion of which is generated by investment banking activities. Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject company and/or companies in the next three months.
Price Target Risks & Related Risk Factors:

Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve Sterne, Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect demand for a company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or industry; intense and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability to recruit and retain competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could affect the market price of a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities Exchange Commission.
Company Specific Risks:

Risks. Key risks to FB include 1) slower-than-expected growth; 2) competitive threats from companies like Google; 3) regulatory risks; 4) risks associated with entering new international markets etc.
Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflects the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors. Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.
Definition of Investment Ratings:

BUY: We expect this stock to outperform the industry over the next 12 months. NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months. UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months. RESTRICTED: Restricted list requirements preclude comment.
Ratings Distribution:
Rating Category Buy Neutral Underperform Count 228 201 29 Percent 49.78% 43.89% 6.33% Count 12 6 0 IB Serv./ Past 12Mos. Percent 5.26% 2.99% 0.00%
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731. Other Disclosures:
Appendix Section, Page I
May 7, 2012 Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein and may act as principal or agent to buy or sell such securities. Copyright 2012 Sterne, Agee & Leach, Inc. All Rights Reserved.
Appendix Section, Page II
May 7, 2012 To receive price charts or other disclosures on the companies mentioned in this report, please visit our website at https:// sterneagee.bluematrix.com/sellside/Disclosures.action or contact Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or (205) 949-3689.
Appendix Section, Page III
Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the early years, our founders prominently established themselves in the financial securities industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne, Agee is headquartered in Birmingham, Alabama with offices in 22 states. Sterne Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee Financial Services, Inc.www.sterneagee.com
EQUITY CAPITAL MARKETS

Ryan Medo Managing Dir., Eq. Cap. Mkts. (205) 949-3623 William McIlroy Director, Equity Products (212) 338-4781
Steve Pokorny
INSTITUTIONAL SALES Head of Institutional Sales

Robert Hoehn
(214) 702-4020
JT Cacciabaudo
INSTITUTIONAL TRADING Head of Trading

(212) 338-4731
(212) 763-8288
EQUITY RESEARCH
Director of Research
CONSUMER Apparel Retailing & Toys

Margaret Whitfield Tom Nikic, CFA Arvind Bhatia, CFA Brett Strauser SVP, Sr. Analyst Analyst Mng. Dir. Analyst Mng. Dir. Associate Mng. Dir. Associate (973) 519-1019 (212) 338-4784 (214) 702-4001 (214) 702-4009 (212) 763-8226 (212) 338-4721 (949) 721-6651 (949) 721-6651
FINANCIAL SERVICES (CONT.) Property/Casualty Insurance

Dan Farrell Nitin Chhabra, FCAS Mng. Dir. Analyst (212) 338-4782 (212) 338-4779
Interactive Entertainment / Internet
INDUSTRIALS Aerospace & Defense

Peter Arment Josh W. Sullivan Mng. Dir. Analyst (646) 376-5336 (646) 376-5337
Footwear & Apparel

Sam Poser Ben Shamsian
Auto, Auto Parts and Auto Retailers

Michael P. Ward, CFA Ali-Ahmad Faghri Mng. Dir. Associate (646) 376-5375 (646) 376-5304
Leisure & Entertainment

David Bain Sherry Yin
Coal, Metals & Mining, Engineering & Construction

Michael S. Dudas, CFA Satyadeep Jain Patrick Uotila, CPA Mng. Dir. Analyst Analyst (646) 376-5329 (646) 376-5357 (646) 376-5358
Restaurants
Lynne Collier Philip May Mng. Dir. Analyst (214) 702-4045 (214) 702-4004
ENERGY Exploration & Production

Tim Rezvan, CFA Ryan Mueller Truman Hobbs Sr. Analyst Analyst Associate (212) 338-4736 (212) 338-4732 (212) 338-4767
Construction Materials & Diversified Industrials

Todd Vencil, CFA Kevin Bennett, CFA SVP, Sr. Analyst Analyst (804) 282-7385 (804) 282-4506
HEALTHCARE
Pharmaceutical Services
Greg T. Bolan Himanshu Rastogi, PhD, CFA Mng. Dir. Analyst (615) 760-1469 (615) 760-1478
Oilfield Services & Equipment

Stephen D. Gengaro Grant Fox Tripp Schoff Mng. Dir. Analyst Associate (646) 376-5331 (212) 338-4723 (646) 376-5325
TECHNOLOGY Data Networking and Storage

Alex Kurtz Amelia Harris Mng. Dir Analyst (415) 402-6015 (415) 402-6018
FINANCIAL SERVICES Asset Management

Jason Weyeneth, CFA Charles Warren SVP, Sr. Analyst Analyst (212) 763-8293 (646) 376-5309
Financial Technology
Greg Smith Jennifer Dugan Mng. Dir Analyst (818) 615-2029 (415) 402-6051
Banks & Thrifts

Matthew Kelley Mike I. Shafir Matthew Breese Brett Rabatin, CFA Kenneth James Nathan Race Peyton Green Zachary Wollam Todd L. Hagerman Robert Greene Mng. Dir. SVP, Sr. Analyst Analyst SVP, Sr. Analyst Analyst Associate Mng. Dir. Analyst Mng. Dir. Analyst (207) 699-5800 (212) 763-8239 (207) 699-5800 (877) 457-8625 (615) 760-1474 (615) 760-1477 (877) 492-2663 (615) 760-1468 (212) 338-4744 (212) 763-8296
Hardware, Mobile Devices, IT Supply Chain

Shaw Wu SVP, Sr. Analyst (415) 362-7431
LED Supply Chain

Andrew Huang John Shen Mng. Dir. Associate (415) 362-6143 (415) 402-6052
Semiconductors
Vijay Rakesh Troy Cowdrey Mng. Dir. Associate (312) 525-8431 (312) 525-8430
Life Insurance
John M. Nadel Alex Levine Mng. Dir. Analyst (212) 338-4717 (212) 338-4748
TRANSPORTATION, SERVICES & EQUIPMENT

Jeffrey A. Kauffman Sal Vitale Mng. Dir. VP, Analyst (212) 338-4765 (212) 338-4766
Mortgage Finance & Specialty Finance

Henry J. Coffey, Jr., CFA Jason Weaver Calvin Hotrum Mng. Dir. VP, Sr. Analyst Analyst (615) 760-1472 (615) 760-1475 (615) 760-1476
Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

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Revenue ($M) 2011A 2012E 2013E

EBITDA (M) 2011A 2012E 2013E

Price Performance FYE Dec

Our financial modeling framework assumes:

Facebook Penetration Rates: Dec 31, 2011

1. http://www.internetworldstats.com/stats.htm 2. Facebook 3. Sterne Agee Estimates

Facebook Penetration Rate Estimates: Dec 31, 2016

1. http://www.internetworldstats.com/stats.htm 2. Facebook 3. Sterne Agee Estimates

Facebook MAUs (millions): 2004 - 2016)

Worldwide Advertising Market

Worldwide MAUs (millions)

845 800 738 681 608

800 700 600 500 400 305 300

550 482 432 360 242 196

Source: Company Reports and Sterne Agee

Worldwide MAU Mix

Source: Company Reports and Sterne Agee

Worldwide MAU Growth

Source: Company Reports and Sterne Agee

Worldwide DAUs (millions)

Source: Company Reports and Sterne Agee

Worldwide DAU Mix

Source: Company Reports and Sterne Agee

Worldwide DAU Growth

Source: Company Reports and Sterne Agee

Worldwide User Engagement (DAU as % of MAU)

Source: Company Reports and Sterne Agee

User Engagement by Region (DAU as % of MAU)

70% 65% 60% 55% 50% 45% 40% 35%

US & Canada Europe Asia Rest of World

Source: Company Reports and Sterne Agee

Market Size ($BB) FB Market Share FB Mobile Advertising Revenue

Source: Company Reports, IDC, and Sterne Agee

Worldwide Mobile MAUs (millions)

400 325 300 245

196 155 101 75 35 50

Source: Company Reports and Sterne Agee

Increasing Mobile MAU penetration

Source: Company Reports and Sterne Agee

Facebook's China Potential

Internet Penetration (%) 38%

EBITDA ($MM) $130 $324

http://www.internetworldstats.com/stats.htm Company Reports, Sterne Agee Estimates

Revenue by Segment (millions)

Source: Company Reports and Sterne Agee

Revenue Mix by Segment

Payments and other fees Advertising

Source: Company Reports and Sterne Agee

400 US & Canada 300 Europe Asia 200 Rest of World

Source: Company Reports and Sterne Agee

Revenue Mix by Region

800 Rest of World 600 Asia Europe 400 US & Canada

Source: Company Reports and Sterne Agee

Seasonality in Monetization Trends

16% 1055% 31%

18% 19% 995% 512% 34% 37%

-6% 115% -4%

30% 304% 39%

-12% 10% -10%

10% 15% 11%