Microsoft targets Yahoo! with $44.6bn bid

Intimate details about the financial performance of Facebook, the fast-growing social network, have been leaked on the internet.

The company's 23-year-old chief executive, Mark Zuckerberg, reportedly held a conference call with staff yesterday in which he discussed Facebook's anticipated earnings for the next year and beyond.

Employees were free to dial an open number and join the call, and afterwards, it appears, some were less discreet than others.

The news came on the same day it emerged that Microsoft announced that it was making a $44.6 billion bid to buy Yahoo!, the struggling internet portal.

Among the details to be revealed by Mr Zuckerberg were that revenues for 2007 would be $150 million - as had been expected - and that revenue for 2008 would more than double to between $300 and $350 million.

He also said the number of employees would rise from the current figure of 450 to 1,000 in 2008, according to The Wall Street Journal.

Mr Zuckerberg said that Facebook would make $200 million worth of capital expenditure in 2008, which was taken to refer to new servers that will be needed to store the growing amount of information - such as photos - uploaded by Facebook's 37 million users.

A surprising admission was that Mr Zuckerberg expected the company's EBITDA - earnings before interest, tax, depreciation and amortisiation - to be $50 million in 2008, suggesting that it will have a negative cash flow of about $150 million next year.

He apparently added, however, that he was not concerned about EBITDA, because the company has sufficient cash reserves. At present, the company is understood to break even.

In October, Microsoft bought a 1.6 per cent stake in Facebook for $240 million, valuing the site at $15 billion. Other injections have brought the total amount recently invested in the company to more than $300 million.

Some analysts have expressed concern about the earnings potential of social networking sites, citing the "chronic unfaithfulness" of users. Figures released yesterday by comScore, the monitoring firm, also suggested that the average time spent on such sites dipped in December, though this may be a result of seasonal behaviour, comScore said.

Facebook has also had some teething problems with its revenue strategy. Last month it was forced to apologise to users after it introduced a feature which would have allowed companies to attach advertisements to messages sent from one Facebook to another without the sender's consent.

The feature, which has since been changed, was billed as a way of introducing word-of-mouth style advertising to the internet, but was widely criticising for invading users' privacy.

Online advertising revenue - which will make up the bulk of Facebook's revenue - is expected to grow from over $40 billion in 2007 to nearly $80 billion by 2010.

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