Will Facebook trump Google after its IPO?

Facebook IPOThere has been a lot of speculation since Facebook filed for initial public offering (IPO) with the U.S. Securities and Exchange Commission on February 1, 2012. The social media network will soon join the ranks of fellow Silicon Valley tech giant Google. The Facebook IPO will likely be the largest internet IPO in U.S. history, seeking to raise at least $5 billion. The Menlo Park-based company has an estimated $100 billion valuation. By putting 5% of its Class A common stock on the New York Stock Exchange, Facebook was obliged to reveal some company information to the public.

Some new details have been released about employment agreements for CEO Mark Zuckerberg and COO Sheryl Sandberg. Zuckerberg will earn $500,000 annual base salary, and Sandberg will receive $300,000. Both will be eligible for 45% of bonuses and stock grants. Beginning January 2013, Zuckerberg will forgo his base salary in exchange for $1 per year and bonuses – meaning he will profit from price increase of shares.

So does Facebook have the potential to beat out Google in terms of generating revenue? Let’s compare the two companies. In 2011, Google pulled in $36.5 billion in ad revenue. Google’s IPO in 2004 raised $1.7 billion, giving it a valuation of $23 billion at the time. The year before it went public, Google pulled in just under $1 billion revenue.

Facebook, with its 845 million monthly active users, earned $777 million revenue in 2009 and $3.7 billion in 2011 – the year before going public. Advertising accounts for 88% of Facebook’s revenue, with the remaining 12% from services sold by third parties such as Zynga.

Facebook is still tiny compared to Google in internet advertising. However, comparing stats on their IPO and revenue at the time, Facebook has the potential to become the highest grossing internet company if they continue to develop new sources of income that are yet untapped, such as ads in mobile marketing