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					                                                                                        Company Report
                                                                                        May 7, 2012




  Facebook, Inc.                                                                        Buy
  Facebook - Initiating Coverage with a Buy Rating and $46 PT                           FB
                                                                                        Price NA
                                                                                        Price Target $46.00
  Our Call
  Ahead of Facebook’s (FB) highly anticipated IPO on Friday, May 18 (expected           Interactive Entertainment /
  price range of $28 - $35), we are initiating coverage with a Buy rating. Our 1-       Internet
  year/2-year target prices are $46 (30x 2013 EBITDA estimate of $3.8B) and $59         Arvind Bhatia, CFA
  (30x 2014 EBITDA estimate of $5.0B), respectively.                                    (214) 702-4001
                                                                                        abhatia@sterneagee.com
  The Next Google? FB’s highly coveted Reach, Engagement, Relevance and
                                                                                        Brett Strauser
  Social Context. Just like Google did less than a decade ago, we believe Facebook is   (214) 702-4009
  disrupting the worldwide advertising market (~$600B), particularly its $68B sub-      bstrauser@sterneagee.com
  segment of online advertising (a market that is expected to reach $120B by 2015
  or CAGR of 13%). Driven by 1) Facebook’s leadership position in social media;
                                                                                        Company Data
  2) its unparalleled reach (900 monthly active users); 3) highly engaged audience
                                                                                        Rating                                       Buy
  (526M daily active users); 4) growing ARPU (average revenue per user); 5) mobile      Price                                         NA
  monetization potential; and 6) the wild card—China, we think FB can more than         Price Target                              $46.00
  triple its revenue and EBITDA over the next 4 to 5 years. Our estimates would         52-Week Range                            NA - NA
                                                                                        Market Capitalization (M)                     NA
  be achievable if FB increases its share of online advertising by only 300bps from
                                                                                        Avg. Daily Vol. (000)                         NA
  5% in 2011 to close to 8% by 2016. In addition, we have very little contribution      Dividend                                   $0.00
  from mobile and China modeled currently and as such our estimates could prove
  conservative. Together, Mobile and China could add $1.5B in incremental revenue       Revenue ($M) 2011A 2012E 2013E
  and $600 million in incremental EBITDA by 2015. Additionally, the market for          FY                  3,711.0    5,007.6   6,297.0
  virtual/digital goods is expected to reach $14B by 2016, up from $9B in 2011
                                                                                        EBITDA (M) 2011A 2012E 2013E
  (CAGR of 9%), according to NPD In-Stat. For advertisers, FB differentiates itself     FY                  2,297.0    2,871.4   3,772.8
  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 world’s 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 $300M
  in incremental EBITDA. That said, clearly this opportunity is neither a given nor
  without its own unique set of challenges/hurdles.
                                                                                        Price Performance
  FYE Dec                     2011A                  2012E                  2013E
                              (Curr)                 (Curr)                 (Curr)
  EPS ($)
  Q1 (Mar)                       -                   0.13A                   0.14
                                                                                                      Chart Data Not Available
  Q2 (Jun)                       -                    0.13                   0.17
  Q3 (Sept)                      -                    0.13                   0.17
  Q4 (Dec)                       -                    0.17                   0.21
  FY EPS                         -                    0.56                   0.69

                                                                                        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 STATEMENTS………………………………………………………………23

TRENDS……………………………………………………………………………………..27




                                              Page 2
                                                                                   May 7, 2012
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 company’s 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 Facebook’s 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.


                                                                                        Page 3
                                                                                May 7, 2012


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. Facebook’s 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     FB Penetration
                          Total      Internet    Facebook         user         Of Internet
                        Population     Users       users       Penetration     users-- 2011
                           MM           MM          MM             %                %
    US & Canada             347         273         179           79%              66%
       Europe               816         501         229           61%              46%
   Asia (Ex China)         2542         504         212           20%              42%
   Rest of World           1887         477         225           25%              47%
        Total              5593        1754         845           31%              48%

        China              1337         513          0                38%          0%

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




             Facebook Penetration Rate Estimates: Dec 31, 2016
                                                                  Internet    FB Penetration
                        Total        Internet      Facebook        user        Of Internet
                      Population       Users         users      Penetration    users-- 2016
                         MM             MM            MM            %               %
   US & Canada            365           305           231          84%             76%
      Europe              858           591           329          69%             56%
  Asia (Ex China)        2672           930           484          35%             52%
  Rest of World          1984           799           457          40%             57%
       Total             5878          2624          1501          45%             57%
    5 Yr CAGR             1%            8%            12%
       China             1371           595            0              43%

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




                                                                                     Page 4
                                                                                    May 7, 2012

                  Facebook MAUs (millions): 2004 - 2016)
  1,600                                                                                     1,501
                                                                                    1,415
  1,400                                                                     1,301
                                                                    1,175
  1,200
                                                            1,027
  1,000
                                                      845
   800
                                                608
   600

                                         360
   400

   200                             145
                              58
            1     6     12
     -
          2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

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 pro-
forma 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 company’s 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.




                                                                                            Page 5
                                                                                 May 7, 2012
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

                                                                    5 Yr CAGR
                                              2010       2015E     2010-2015E

             Online Advertising ($BB)          68         120           12%
             Offline Advertising ($BB)        520         630           4%

             Total ($BB)                      588         750           5%

             Online % Share of Total          12%         16%

             Source: Facebook




Facebook’s 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
world’s largest online social network and the world’s 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 1Q’12. FB’s stated goal is to reach almost every
one of the nearly 2 billion people on the Internet. While FB’s reach is clearly enormous, its
engagement metrics are even more impressive. During 1Q’12, 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.



                                                                                      Page 6
                                                                                                                       May 7, 2012
Facebook's Reach


                                          Worldwide MAUs (millions)
 1000
                                                                                                                                 901
  900
                                                                                                                       845
                                                                                                             800
  800
                                                                                                   738

  700                                                                                    681

                                                                               608
  600                                                                550
                                                           482
  500
                                                 432
  400                                  360
                             305
  300
                   242
            196
  200

  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                                                                                                         Rest of World
    500                                                                                                         Asia
    400                                                                                                         Europe
    300
                                                                                                                US & Canada
    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

Source: Company Reports and Sterne Agee




                                                                                                                                Page 7
                                                                                                                         May 7, 2012

                                      Worldwide MAU Growth
 300


 250


 200
                                                                                                                      US & Canada
 150                                                                                                                  Europe
                                                                                                                      Asia
 100
                                                                                                                      Rest of World

   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

Source: Company Reports and Sterne Agee



User Engagement


                                                Worldwide DAUs (millions)
 600

                                                                                                                                    526

 500                                                                                                                      483
                                                                                                                457
                                                                                                      416
 400                                                                                        371

                                                                                  328
                                                                        294
 300
                                                              257
                                                    235

 200                                      185
                                145
                      108
             93
 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




                                                                                                                                   Page 8
                                                                           May 7, 2012

                             Worldwide DAU Mix
    600


    500


    400
                                                                    Rest of World
    300                                                             Asia
                                                                    Europe
    200
                                                                    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

Source: Company Reports and Sterne Agee




                          Worldwide DAU Growth
 160

 140

 120

 100
                                                                      US & Canada
  80                                                                  Europe
  60                                                                  Asia
                                                                      Rest of World
  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

Source: Company Reports and Sterne Agee




                                                                               Page 9
                                                                                         May 7, 2012
                    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

Source: Company Reports and Sterne Agee




            User Engagement by Region (DAU as % of MAU)
 75%

 70%

 65%

 60%

 55%                                                                                  US & Canada
                                                                                      Europe
 50%
                                                                                      Asia
 45%                                                                                  Rest of World

 40%

 35%

 30%
        Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
        '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12

Source: Company Reports and Sterne Agee




                                                                                             Page 10
                                                                                  May 7, 2012
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
               Market Size ($BB)                       $1.5   $18.0      64%

               FB Market Share                          0%           5%

               FB Mobile Advertising Revenue            $0.0     $0.9
               Source: Company Reports, IDC, and Sterne Agee




               Worldwide Mobile MAUs (millions)
  600


                                                                                         488
  500
                                                                                  432

  400                                                                       376

                                                                      325
                                                               288
  300
                                                        245

                                                 196
  200
                                          155
                                    129
                             101
  100                  75
                 50
          35

    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

Source: Company Reports and Sterne Agee



                                                                                        Page 11
                                                                                     May 7, 2012

                 Increasing Mobile MAU penetration
  1000

   900

   800

   700

   600

   500
                                                                                   Mobile MAUs
   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

Source: Company Reports and Sterne Agee



China
Facebook is currently not in China, which has 23% of the world’s 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 China’s 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                    Potential    Potential
                   Total       Internet     Internet         FB           FB
                Population       Users     Penetration   Penetration    Users
                   (MM)          (MM)          (%)          (%)         (MM)

                     1337        513          38%           42%          216

     FB Revenue/EBITDA Potential in China
                 ARPU      Revenue EBITDA Margin           EBITDA
                   ($)      ($MM)         (%)              ($MM)

          Low        $2.00       $432         30%           $130

          High       $3.00       $648         50%           $324

        Sources:   http://www.internetworldstats.com/stats.htm
                   Company Reports, Sterne Agee Estimates
                                                                                        Page 12
                                                                                            May 7, 2012
Virtual Goods Market provides diversification
In the most recent quarter, while 82% of FB’s 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 1Q’12, Zynga represented 11% of FB’s revenue, down from 13% in the
year-ago period. The agreement between Zynga and Facebook expires in May 2015. We
expect FB’s 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                                                                             Advertising
                                                                                  Payments and other fees
  400

  300

  200

  100

    0
        Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12

Source: Company Reports and Sterne Agee




                                 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

Source: Company Reports and Sterne Agee




                                                                                                Page 13
                                                                                         May 7, 2012




                                       Revenue by Region
 600


 500


 400
                                                                                         US & Canada

 300                                                                                     Europe
                                                                                         Asia

 200                                                                                     Rest of World



 100


   0
           Mar '10 Jun '10   Sep '10 Dec '10 Mar '11 Jun '11   Sep '11 Dec '11 Mar '12

Source: Company Reports and Sterne Agee




                                    Revenue Mix by Region
 1200


 1000


  800
                                                                                         Rest of World

  600                                                                                    Asia
                                                                                         Europe

  400                                                                                    US & Canada



  200


       0
           Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12

Source: Company Reports and Sterne Agee



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
                                                                                            Page 14
                                                                                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. Facebook’s impressive web penetration
across multiple sectors of the global economy has allowed it to further entrench itself and has
given strength to the platform’s network effect.




                                                                                    Page 15
                                                                                 May 7, 2012
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 1Q’12 (March), which was a slowdown from Y/Y
growth of 55% in 4Q’11 and 104% in 3Q’11. Sequentially, 1Q’12 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 1Q’11
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.




                                                                                    Page 16
                                                                                          May 7, 2012
                              Seasonality in Monetization Trends

                        Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12

      Advertising        $0.86    $0.93 $0.87       $1.13   $0.99   $1.09 $1.04   $1.15    $1.00
      Payments           $0.01    $0.02 $0.03       $0.13   $0.15   $0.17 $0.20   $0.23    $0.21
      Total              $0.87    $0.94 $0.91       $1.26   $1.14   $1.26 $1.24   $1.37    $1.21

      Y/Y % Chg
      Advertising                                            16%    18% 19%       1%        1%
      Payments                                              1055%   995% 512%     72%       47%
      Total                                                  31%    34% 37%       9%        7%

      Sequential % Chg
      Advertising                  8%      -6%       30%    -12%     10%   -5%    10%      -13%
      Payments                    21%     115%      304%    10%      15%   20%    13%       -6%
      Total                        8%      -4%       39%    -10%     11%   -1%    11%      -12%

                                                      Seasonality & Mix            Seasonality & Mix

Source: Company reports and Sterne Agee Estimates




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 Facebook’s 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, FB’s 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.




                                                                                            Page 17
                                                                                      May 7, 2012
                                  FB vs. GOOG Revenue Growth
                                       GOOG IPO year: 2004
                                         FB IPO year: 2012

   $25,000

   $20,000

   $15,000

   $10,000                                                                           Google

    $5,000                                                                           Facebook

         $0
                 Year       IPO       Year 2     Year 3    Year 4     Year 5
                Before
                 IPO

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                                                                           Google
    $3,000
    $2,000                                                                           Facebook
    $1,000
        $0
                Year        IPO       Year 2    Year 3    Year 4      Year 5
               Before
                IPO
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
Facebook’s 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 user’s 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.




                                                                                         Page 18
                                                                                   May 7, 2012
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 Facebook’s
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 Facebook’s more than
900M users. Upon the successful integration of a third-party application or website with
Facebook, developers can leverage Facebook’s 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 Facebook’s payment infrastructure increases a user’s 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 Apple’s 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. Facebook’s 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 user’s 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 partner’s 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 user’s 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,
                                                                                       Page 19
                                                                                 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 person’s profile.

Messages. Facebook’s 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 user’s friends and the pages to
which a user is connected.

Notifications. This is Facebook’s 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 engagement-
driver 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 they’re
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.



                                                                                     Page 20
                                                                               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 Facebook’s 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 user’s PC.
Developers can add a social element by integrating with Facebook.

Mobile Apps. Developers can integrate their mobile apps with Facebook’s 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 company’s 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 company’s 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 company’s 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.


                                                                                     Page 21
                                                                                   May 7, 2012

David A. Ebersman (42) CFO
David Ebersman has served as the company’s 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 Genentech’s
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 company’s 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 co-
founded 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 company’s 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.




                                                                                      Page 22
                                                                                                                      May 7, 2012



INCOME STATEMENT ($ In Millions) - FY End: December
Facebook Annual Earnings Model: Sterne Agee
Arvind Bhatia, CFA (214) 702 - 4001
                                                        2010A  2011A   2012E          2013E   2014E   2015E         2016E
Advertising Revenue                                   $ 1,869 $ 3,154 $ 4,145        $ 5,238 $ 6,562 $ 8,173       $ 10,070
Payments and other fees revenues                      $    106 $ 557 $ 863           $ 1,059 $ 1,189 $ 1,295       $ 1,372
Revenue ($MM)                                         $ 1,975 $ 3,711 $ 5,008        $ 6,297 $ 7,751 $ 9,469       $ 11,442
Y/Y % Chg-- Advertising Revenue                                69%     31%            26%     25%     25%            23%
Y/Y % Chg-- Payments Revenue                                   425%    55%            23%     12%      9%             6%
Y/Y % Chg-- Revenue                                            88%     35%            26%     23%     22%            21%
Sequential Change -- Advertising Revenue
Sequential Change -- Payments Revenue
Sequential Change -- Revenue
Costs and Expenses
  Cost of revenue                                         493       851     1,247      1,522     1,762     2,102     2,502
Gross Profits                                           1,482     2,860     3,761      4,775     5,989     7,367     8,940
                           Gross Margin                75%       77.1%     75.1%      76%       77%       78%       78%
                           YOY Chg (bps)                  374       203      (197)        73       144        54        33

  Marketing and sales                                     184       384       644       812       972      1,102      1,214
                           % of Revenue                 9%        10%       13%       13%       13%       12%       11%
  Research and development                                134       274       457       632       742        822        902
                           % of Revenue                 7%         7%        9%       10%       10%        9%        8%
  General and administrative                              113       228       378       498       578        658        738
    Total Operating Expenses                              431        886     1,479   1,942       2,292     2,582   2,854
Income from operations (EBIT)                           1,051      1,974     2,281   2,833       3,696     4,785   6,086
Dep & Amort costs included in costs above                 139        323       590     940       1,260     1,480   1,640
 Adjusted EBITDA (ex Stock based comp)                $ 1,190    $ 2,297   $ 2,871 $ 3,773     $ 4,956   $ 6,265 $ 7,726
                           % Y/Y Growth                           93%       25%     31%         31%       26%     23%
                       % Sequential Growth
                      Adjusted EBITDA Margin           60%        62%       57%       60%       64%       66%       68%
               Incremental Adjusted EBITDA Margin      69%        64%       44%       70%       81%       76%       74%
Other expense, net
  Interest expense                                         22        42     -50       -100     -100      -100       -100
  Other income (expense), net                              (2)      (19)     0          0        0         0          0
ProForma Pre Tax Income (ex SBC)                        1,027     1,913     2,331      2,933    3,796     4,885      6,186
Assumed Normalized Taxes (Tax Rate of 35%)                359       670       816      1,026    1,329     1,710      2,165
Pro Forma Net Income (Ex SBC)                                     1,243     1,515      1,906    2,468     3,175      4,021
ProForma Fully Diluted Shares Outstanding                                   2,698      2,769    2,797     2,825      2,854
Pro Forma Fully Diluted EPS (ex SBC)                                       $0.56      $0.69    $0.88     $1.12      $1.41
Source: Company Reports and Sterne Agee Estimates




                                                                                                                          Page 23
                                                                                                                                                                                       May 7, 2012



INCOME STATEMENT ($ In Millions) - FY End: December
Facebook Quarterly Earnings Model: Sterne Agee
Arvind Bhatia, CFA (214) 702 - 4001
                                                        2010A 1Q:11A 2Q:11A 3Q:11A 4Q:11A 2011A 1Q:12A 2Q:12E                    3Q:12E    4Q:12E 2012E        1Q:13E    2Q:13E    3Q:13E 4Q:13E        2013E
Advertising Revenue                                   $ 1,869 $ 637 $ 776 $ 798 $ 943 $ 3,154 $ 872 $ 1,021                      $ 1,044   $ 1,208 $ 4,145     $ 1,123   $ 1,288   $ 1,321 $ 1,506     $ 5,238
Payments and other fees revenues                      $    106 $ 94 $ 119 $ 156 $ 188 $ 557 $ 186 $ 194                          $ 227     $ 256 $ 863         $ 243     $ 240     $ 276 $ 299         $ 1,059
Revenue ($MM)                                         $ 1,975 $ 731 $ 895 $ 954 $ 1,131 $ 3,711 $ 1,058                $ 1,215   $ 1,271   $ 1,464 $ 5,008     $ 1,367   $ 1,528   $ 1,597   $ 1,805   $ 6,297
Y/Y % Chg-- Advertising Revenue                                87%   83%   77%   44%     69%     37%                    32%       31%       28%     31%         29%       26%       27%       25%       26%
Y/Y % Chg-- Payments Revenue                                  1780% 1388% 818%   147%    425%    98%                    63%       45%       36%     55%         31%       23%       22%       17%       23%
Y/Y % Chg-- Revenue                                            112% 107% 104%    55%     88%     45%                    36%       33%       29%     35%         29%       26%       26%       23%       26%
Sequential Change -- Advertising Revenue                        -3%  22%    3%   18%              -8%                   17%        2%       16%                 -7%       15%        3%       14%
Sequential Change -- Payments Revenue                          24%   27%   31%   21%              -1%                    4%       17%       13%                 -5%       -1%       15%        8%
Sequential Change -- Revenue                                     0%  22%    7%   19%              -6%                   15%        5%       15%                 -7%       12%        5%       13%
Costs and Expenses
  Cost of revenue                                         493      167     207     233     244     851          273       303       328       343   1,247         358       373       388        403     1,522
Gross Profits                                           1,482      564     688     721     887   2,860          785       912       943     1,121   3,761       1,009     1,155     1,209      1,402     4,775
                           Gross Margin                75%       77%     77%     76%     78%    77.1%         74%       75%       74%       77%    75.1%        74%       76%       76%       78%       76%
                           YOY Chg (bps)                  374      614     257     363    (105)    203         (296)     (181)     (139)     (186)   (197)        (39)       52       152        111        73

  Marketing and sales                                     184       68      92     108     116       384        136       156       171       181       644       188       198       208       218       812
                           % of Revenue                 9%        9%     10%     11%     10%       10%        13%       13%       13%       12%       13%       14%       13%       13%       12%       13%
  Research and development                                134       53      64      75       82      274         93       108       123       133       457       143       153       163       173       632
                           % of Revenue                 7%        7%      7%      8%      7%        7%        9%        9%        10%       9%         9%       10%       10%       10%       10%       10%
  General and administrative                              113       48      61      54       65      228         72        92       102       112       378       117       122       127       132       498
    Total Operating Expenses                              431      169    217     237      263        886       301      356       396       426       1,479       448      473       498        523   1,942
Income from operations (EBIT)                           1,051      395    471     484      624      1,974       484      556       547       695       2,281       561      682       711        879   2,833
Dep & Amort costs included in costs above                 139       51                                323       110      130       160       190         590       205      225       245        265     940
 Adjusted EBITDA (ex Stock based comp)                $ 1,190    $ 446                            $ 2,297 $     594    $ 686     $ 707     $ 885     $ 2,871   $ 766     $ 907     $ 956     $ 1,144 $ 3,773
                           % Y/Y Growth                                                            93%                                                25%        29%      32%       35%       29%     31%
                       % Sequential Growth                                                                                                                      -13%      18%       5%        20%
                      Adjusted EBITDA Margin           60%                                         62%        56%       56%       56%       60%       57%        56%      59%       60%       63%     60%
               Incremental Adjusted EBITDA Margin      69%                                         64%        45%                                     44%                                             70%
Other expense, net
  Interest expense                                         22                                         42     (12.5)     (12.5)    (12.5)    (12.5)    -50       -25       -25       -25        -25      -100
  Other income (expense), net                              (2)                                       (19)      -          -         -         -        0         0         0         0                    0
ProForma Pre Tax Income (ex SBC)                        1,027                                      1,913       497        569       559       707     2,331       586       707       736        904     2,933
Assumed Normalized Taxes (Tax Rate of 35%)                359                                        670       174        199       196       247       816       205       247       258        316     1,026
Pro Forma Net Income (Ex SBC)                                                                      1,243       323        370       364       460     1,515       381       459       479        588     1,906
ProForma Fully Diluted Shares Outstanding                                                                    2,558      2,738     2,745     2,752     2,698     2,759     2,766     2,773      2,780     2,769
Pro Forma Fully Diluted EPS (ex SBC)                                                                        $0.13      $0.13     $0.13     $0.17     $0.56     $0.14     $0.17     $0.17      $0.21     $0.69
Source: Company Reports and Sterne Agee Estimates




                                                                                                                                                                                             Page 24
                                                                                           May 7, 2012



FACEBOOK BALANCE SHEET
FY End: December ($ in millions)
                                                       2010A       2011A       1Q:12A
Assets
Current assets
  Cash and equivalents                             $     1,785 $     1,512 $     1,282
  Marketable securities                                    -         2,396       2,628
  Accounts Receivable                                      373         547         482
  Prepaid expenses                                           88        149         302
    Total current assets                                 2,246       4,604       4,694
Property and equipment, net                                574       1,475       1,855
Goodwill and intagible assets, net                           96        162         189
Other assets                                                 74         90         121
Total assets                                       $     2,990 $     6,331 $     6,859

Liabilities and stockholder's equity
Current liabilities
  Accounts payable                                         29            63        129
  Platform partners payable                                75          171         178
  Accrued expenses and other current liabilities          137          296         337
  Deferred revenue and deposits                            42            90          93
  Current portion of capital lease obligations            106          279         302
    Total current liabilities                             389          899       1,039
Capital lease obligations, less current portion           117          398         404
Long-term debt                                            250          -           -
Other liabilities                                          72          135         144
    Total liabilities                              $      828 $      1,432 $     1,587


Stockholders' equity
  Convertible preferred stock                              615         615         615
  Common stock                                             -           -           -
  Additional paid-in capital                               947       2,684       2,853
  Accumulated other comprehensive loss                       (6)         (6)         (7)
  Retained earnings                                        606       1,606       1,811
    Total stockholders' equity                           2,162       4,899       5,272
Total liabilities and stockholders' equity         $     2,990 $     6,331 $     6,859
Source: Company Reports




                                                                                             Page 25
                                                                                                                                  May 7, 2012



FACEBOOK STATEMENT OF CASH FLOWS
FY End: December ($ in millions)
                                                                                          2009A         2010A      2011A      1Q:12A
Cash flows from operating activities
Net income                                                                               $       229 $     606     $ 1,000    $   205
Adjustments to reconcile net income to net cash provided by operating activities:
  Depreciation and amortization                                                                   78        139        323        110
  Loss on write-off of equipment                                                                   1          3          4          1
  Share-based compensation                                                                        27         20        217        103
  Tax benefit from share-based award activity                                                     50        115        433         54
  Excess tax benefit from share-based award activity                                             (51)      (115)      (433)       (54)
Changes in assets and liabilities:
  Accounts receivable                                                                        (112)         (209)   (174)           65
  Prepaid expenses and other current assets                                                   (30)          (38)    (31)          (28)
  Other assets                                                                                (59)           17     (32)          (32)
  Accounts payable                                                                             (7)           12       6            (3)
  Platform partners payable                                                                    —             75      96             7
  Accrued expenses and other current liabilities                                               27            20      38             2
  Deferred revenue and deposits                                                                 1            37      49             3
  Other liabilities                                                                             1            16      53             8
  Net cash provided by operating activities                                              $    155 $         698 $ 1,549 $         441

Cash flows from investing activities
  Purchases of property and equipment                                                            (33)   (293)     (606)           (453)
  Purchases of marketable securities                                                              —       —     (3,025)           (876)
  Maturities of marketable securities                                                             —       —        516             567
  Sales of marketable securities                                                                  —       —        113              69
  Investments in non-marketable equity securities                                                 —       —         (3)             (1)
  Acquisitions of business, net of cash acquired, and purchases of intangible and other assets     3     (22)      (24)            (25)
  Change in restricted cash and deposits                                                         (32)     (9)        6              (1)
  Net cash used in investing activities                                                   $      (62) $ (324) $ (3,023) $         (720)

Cash flows from financing activities
  Net proceeds from issuance of convertible preferred stock                                      200        —       —              -
  Net proceeds from issuance of common stock                                                      —        500     998             -
  Proceeds from exercise of stock options                                                          9         6      28                 5
  Proceeds from (repayments of) long-term debt                                                    —        250    (250)            -
  Proceeds from sale and lease-back transactions                                                  31        —      170              62
  Principal payments on capital lease obligations                                                (48)      (90)   (181)            (71)
  Excess tax benefit from share-based award activity                                              51       115     433              54
  Net cash provided by financing activities                                              $       243 $     781 $ 1,198 $            50

Effect of exchange rate changes on cash and cash equivalents                                     —           (3)         3             (1)

Net increase (decrease) in cash and cash equivalents                                             336      1,152       (273)   (230)
Cash and cash equivalents at beginning of period                                                 297        633      1,785   1,512
Cash and cash equivalents at end of period                                               $       633    $ 1,785    $ 1,512 $ 1,282
Source: Company Reports




                                                                                                                                        Page 26
         May 7, 2012




TRENDS




           Page 27
                                                                                                                                May 7, 2012




Reach
                                               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
                EOP MAUs
US & Canada                                          68    81     99    112    130    137    144    154    163    169    176    179      188
Europe                                               71    85    101    117    138    151    167    183    201    212    221    229      241
Asia (Ex China)                                      22    32     48     62    81      96    113    138    156    174    196    212      230
Rest of World                                        35    44     57     69    83      98    126    133    161    183    207    225      242
Total                                               196   242    305    360    432    482    550    608    681    738    800    845      901
       Net Sequential MAUs Adds
US & Canada                                                13     18     13     18     7      7      10      9     6      7       3        9
Europe                                                     14     16     16     21     13     16     16     18     11     9       8       12
Asia (Ex China)                                            10     16     14     19     15     17     25     18     18     22     16       18
Rest of World                                              9      13     12     14     15     28     7      28     22     24     18       17
Total                                                      46     63     55     72     50     68     58     73     57     62     45       56
        Sequential MAU % Growth
US & Canada                                               19%    22%    13%    16%     5%     5%     7%    6%      4%     4%    2%       5%
Europe                                                    20%    19%    16%    18%     9%    11%    10%    10%     5%     4%    4%       5%
Asia                                                      45%    50%    29%    31%    19%    18%    22%    13%    12%    13%    8%       8%
Rest of World                                             26%    30%    21%    20%    18%    29%     6%    21%    14%    13%    9%       8%
Total                                                     23%    26%    18%    20%    12%    14%    11%    12%     8%     8%    6%       7%
   Source of Sequential MAU Growth
US & Canada                                               28%    29%    24%     25%   14%    10%    17%     12%   11%    11%     7%      16%
Europe                                                    30%    25%    29%     29%   26%    24%    28%     25%   19%    15%     18%     21%
Asia                                                      22%    25%    25%     26%   30%    25%    43%     25%   32%    35%     36%     32%
Rest of World                                             20%    21%    22%     19%   30%    41%    12%     38%   39%    39%     40%     30%
Total                                                     100%   100%   100%   100%   100%   100%   100%   100%   100%   100%   100%    100%
         EOP MAU YOY % Growth
US & Canada                                                                     91%   69%    45%    38%    25%    23%    22%    16%      15%
Europe                                                                          94%   78%    65%    56%    46%    40%    32%    25%      20%
Asia                                                                           268%   200%   135%   123%   93%    81%    73%    54%      47%
Rest of World                                                                  137%   123%   121%   93%    94%    87%    64%    69%      50%
Total                                                                          120%   99%    80%    69%    58%    53%    45%    39%      32%
              EOP MAU Mix
US & Canada                                     35%       33%    32%    31%     30%   28%    26%    25%     24%   23%    22%     21%     21%
Europe                                          36%       35%    33%    33%     32%   31%    30%    30%     30%   29%    28%     27%     27%
Asia                                            11%       13%    16%    17%     19%   20%    21%    23%     23%   24%    25%     25%     26%
Rest of World                                   18%       18%    19%    19%     19%   20%    23%    22%     24%   25%    26%     27%     27%
Total                                           100%      100%   100%   100%   100%   100%   100%   100%   100%   100%   100%   100%    100%
      Average MAUs YOY % Growth
US & Canada                                                                           79%    56%    41%     31%   24%    23%    19%      16%
Europe                                                                                85%    71%    61%     51%   43%    36%    29%      22%
Asia                                                                                  228%   161%   128%   106%   86%    77%    63%      50%
Rest of World                                                                         129%   122%   106%    93%   90%    74%    67%      59%
Total                                                                                 109%   89%    74%     63%   55%    49%    42%      35%

Full Year MAU % Growth Y/Y                                                                          88%                         48%
Source: Company reports and Sterne Agee estimates




                                                                                                                                      Page 28
                                                                                                                                                                                                                        May 7, 2012



Reach
                                               2Q:12E 3Q:12E 4Q:12E     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
                EOP MAUs
US & Canada                                         192   196     200    203      206      209      212      215      217      220      222      224      225      227      228      229      229      230      231
Europe                                              249   257     265    271      277      283      289      293      297      301      305      309      313      317      321      323      325      327      329
Asia (Ex China)                                     245   260     275    290      305      320      335      350      365      380      395      408      421      434      447      457      467      477      484
Rest of World                                       257   272     287    300      313      326      339      349      359      369      379      389      399      409      419      429      439      449      457
Total                                               943   985    1027   1064     1101     1138     1175     1207     1238     1270     1301     1330     1358     1387     1415     1438     1461     1483     1501
       Net Sequential MAUs Adds
US & Canada                                          4     4       4      3        3        3        3         3        3        3        3        2        2        2        2        1        1        1       0
Europe                                               8     8       8      6        6        6        6         4        4        4        4        4        4        4        4        2        2        2       2
Asia (Ex China)                                     15     15     15     15       15       15       15        15       15       15       15       13       13       13       13       10       10       10       7
Rest of World                                       15     15     15     13       13       13       13        10       10       10       10       10       10       10       10       10       10       10       8
Total                                               42     42     42     37       37       37       37       31.5     31.5     31.5     31.5     28.5     28.5     28.5     28.5     22.8     22.8     22.8     17.7
        Sequential MAU % Growth
US & Canada                                         2%    2%     2%      1%       1%       1%       1%       1%       1%       1%       1%       1%       1%       1%       1%       0%       0%       0%       0%
Europe                                              3%    3%     3%      2%       2%       2%       2%       1%       1%       1%       1%       1%       1%       1%       1%       1%       1%       1%       1%
Asia                                                7%    6%     6%      5%       5%       5%       5%       4%       4%       4%       4%       3%       3%       3%       3%       2%       2%       2%       2%
Rest of World                                       6%    6%     6%      5%       4%       4%       4%       3%       3%       3%       3%       3%       3%       3%       2%       2%       2%       2%       2%
Total                                               5%    4%     4%      4%       3%       3%       3%       3%       3%       3%       2%       2%       2%       2%       2%       2%       2%       2%       1%
   Source of Sequential MAU Growth
US & Canada                                      10%      10%     10%    8%       8%       8%       8%       8%       8%       8%       8%       5%       5%       5%       5%       3%       3%       3%       3%
Europe                                           19%      19%     19%    16%      16%      16%      16%      13%      13%      13%      13%      14%      14%      14%      14%      9%       9%       9%       11%
Asia                                             36%      36%     36%    41%      41%      41%      41%      48%      48%      48%      48%      46%      46%      46%      46%      44%      44%      44%      42%
Rest of World                                    36%      36%     36%    35%      35%      35%      35%      32%      32%      32%      32%      35%      35%      35%      35%      44%      44%      44%      44%
Total                                           100%      100%   100%   100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%
         EOP MAU YOY % Growth
US & Canada                                         14%   11%    12%     8%       7%       7%       6%       6%       5%       5%       5%       4%       4%       3%       3%       2%       2%       2%       1%
Europe                                              17%   16%    16%     12%      11%      10%      9%       8%       7%       6%       6%       5%       5%       5%       5%       5%       4%       3%       3%
Asia                                                41%   33%    30%     26%      24%      23%      22%      21%      20%      19%      18%      17%      15%      14%      13%      12%      11%      10%      8%
Rest of World                                       40%   31%    28%     24%      22%      20%      18%      16%      15%      13%      12%      11%      11%      11%      11%      10%      10%      10%      9%
Total                                               28%   23%    22%     18%      17%      16%      14%      13%      12%      12%      11%      10%      10%      9%       9%       8%       8%       7%       6%
              EOP MAU Mix
US & Canada                                      20%      20%     19%    19%      19%      18%      18%      18%      18%      17%      17%      17%      17%      16%      16%      16%      16%      16%      15%
Europe                                           26%      26%     26%    25%      25%      25%      25%      24%      24%      24%      23%      23%      23%      23%      23%      22%      22%      22%      22%
Asia                                             26%      26%     27%    27%      28%      28%      29%      29%      29%      30%      30%      31%      31%      31%      32%      32%      32%      32%      32%
Rest of World                                    27%      28%     28%    28%      28%      29%      29%      29%      29%      29%      29%      29%      29%      29%      30%      30%      30%      30%      30%
Total                                           100%      100%   100%   100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%
      Average MAUs YOY % Growth
US & Canada                                         14%   12%    12%     10%      8%       7%       6%       6%       6%       5%       5%       4%       4%       3%       3%       3%       2%       2%       1%
Europe                                              19%   17%    16%     14%      12%      11%      10%      9%       8%       7%       6%       5%       5%       5%       5%       5%       4%       4%       3%
Asia                                                44%   36%    31%     28%      25%      24%      22%      21%      20%      19%      18%      17%      16%      15%      14%      13%      11%      10%      9%
Rest of World                                       45%   36%    29%     26%      23%      21%      19%      17%      15%      14%      12%      12%      11%      11%      11%      10%      10%      10%      9%
Total                                               30%   25%    22%     20%      17%      16%      15%      14%      13%      12%      11%      10%      10%      9%       9%       8%       8%       7%       7%

Full Year MAU % Growth Y/Y                                       26%                                16%                                 12%                                 9%                                  7%
Source: Company reports and Sterne Agee estimates




                                                                                                                                                                                                                          Page 29
                                                                                                                                       May 7, 2012




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     1Q:12A
                DAUs
US & Canada                                         35     40     53     64    82      85     92     99    105    117    124    126      129
Europe                                              35     39     50     63    79      85     94    107    120    127    135    143      152
Asia                                                9      13     20     29    39      45     54     64    72      85     98    105      119
Rest of World                                       14     16     22     29    35      42     54     58    74      87    100    109      126
Total                                               93    108    145    185    235    257    294    328    371    416    457    483      526
           Sequential Growth
US & Canada                                               14%    33%    21%    28%     4%     8%     8%    6%     11%     6%    2%       2%
Europe                                                    11%    28%    26%    25%     8%    11%    14%    12%     6%     6%    6%       6%
Asia                                                      44%    54%    45%    34%    15%    20%    19%    13%    18%    15%    7%       13%
Rest of World                                             14%    38%    32%    21%    20%    29%     7%    28%    18%    15%    9%       16%
Total                                                     16%    34%    28%    27%     9%    14%    12%    13%    12%    10%    6%       9%
               DAU Mix
US & Canada                                     38%       37%    37%    35%     35%   33%    31%    30%     28%   28%    27%     26%     25%
Europe                                          38%       36%    34%    34%     34%   33%    32%    33%     32%   31%    30%     30%     29%
Asia                                            10%       12%    14%    16%     17%   18%    18%    20%     19%   20%    21%     22%     23%
Rest of World                                   15%       15%    15%    16%     15%   16%    18%    18%     20%   21%    22%     23%     24%
Total                                           100%      100%   100%   100%   100%   100%   100%   100%   100%   100%   100%   100%    100%
          DAU % of Avg MAU
US & Canada                                         51%   54%    59%    61%    68%    64%    65%    66%    66%    70%    72%    71%      70%
Europe                                              49%   50%    54%    58%    62%    59%    59%    61%    63%    62%    62%    64%      65%
Asia                                                41%   48%    50%    53%    55%    51%    52%    51%    49%    52%    53%    51%      54%
Rest of World                                       40%   41%    44%    46%    46%    46%    48%    45%    50%    51%    51%    50%      54%
Total                                               47%   49%    53%    56%    59%    56%    57%    57%    58%    59%    59%    59%     60.3%
Source: Company reports and Sterne Agee estimates




                                                                                                                                         Page 30
                                                                                                                                                                                                                 May 7, 2012



Engagement
                                               2Q:12E 3Q:12E 4Q:12E      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
                   DAUs
US & Canada                                         135   138     141     143      145      148      150      152      154      156      158      159      161      162      163      164      165      165      166
Europe                                              161   166     172     176      181      185      190      193      196      200      203      206      209      213      216      218      220      222      224
Asia                                                132   140     149     159      169      179      189      199      209      220      230      240      250      260      270      278      286      295      302
Rest of World                                       139   147     156     163      171      179      187      194      200      206      213      220      226      233      240      247      253      260      266
Total                                               567   591     618     642      666      691      716      738      760      782      804      825      846      867      889      907      925      943      958
           Sequential Growth
US & Canada                                         5%     2%     2%      2%       2%       2%       2%       1%       1%       1%       1%       1%       1%       1%       1%       0%       0%       0%       0%
Europe                                              6%     3%     3%      3%       3%       2%       2%       2%       2%       2%       2%       2%       2%       2%       2%       1%       1%       1%       1%
Asia                                                11%    6%     7%      6%       6%       6%       6%       5%       5%       5%       5%       4%       4%       4%       4%       3%       3%       3%       2%
Rest of World                                       10%    6%     6%      5%       5%       5%       4%       3%       3%       3%       3%       3%       3%       3%       3%       3%       3%       3%       2%
Total                                               8%     4%     5%      4%       4%       4%       4%       3%       3%       3%       3%       3%       3%       3%       2%       2%       2%       2%       2%
               DAU Mix
US & Canada                                      24%      23%      23%    22%      22%      21%      21%      21%      20%      20%      20%      19%      19%      19%      18%      18%      18%      18%      17%
Europe                                           28%      28%      28%    27%      27%      27%      27%      26%      26%      26%      25%      25%      25%      25%      24%      24%      24%      24%      23%
Asia                                             23%      24%      24%    25%      25%      26%      26%      27%      28%      28%      29%      29%      30%      30%      30%      31%      31%      31%      32%
Rest of World                                    24%      25%      25%    25%      26%      26%      26%      26%      26%      26%      26%      27%      27%      27%      27%      27%      27%      28%      28%
Total                                           100%      100%    100%   100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%
          DAU % of Avg MAU
US & Canada                                      70%       70%    70%     70%      71%      71%      71%      71%      71%      71%      71%      71%      71%      71%      72%      72%      72%      72%      72%
Europe                                           65%       65%    65%     65%      65%      65%      66%      66%      66%      66%      66%      67%      67%      67%      67%      67%      68%      68%      68%
Asia                                             54%       54%    54%     55%      55%      56%      56%      57%      57%      58%      58%      59%      59%      60%      60%      61%      61%      62%      62%
Rest of World                                    54%       54%    54%     54%      55%      55%      55%      55%      56%      56%      56%      56%      57%      57%      57%      57%      58%      58%      58%
Total                                           61.5%     61.3%   61%     61%      62%      62%      62%      62%      62%      62%      63%      63%      63%      63%      63%      64%      64%      64%      64%
Source: Company reports and Sterne Agee estimates




                                                                                                                                                                                                                       Page 31
                                                                                                                                                                          May 7, 2012



Monetization                                        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                               1Q:12A
          Advertising ARPU
US & Canada                                                                         $   1.73   $   1.82   $   1.85   $ 2.41   $   2.09   $ 2.37   $ 2.29   $   2.60   $   2.28
Europe                                                                              $   0.75   $   0.89   $   0.82   $ 1.15   $   1.07   $ 1.19   $ 1.13   $   1.36   $   1.17
Asia                                                                                $   0.31   $   0.35   $   0.34   $ 0.42   $   0.38   $ 0.45   $ 0.48   $   0.47   $   0.45
Rest of World                                                                       $   0.16   $   0.23   $   0.21   $ 0.32   $   0.30   $ 0.35   $ 0.36   $   0.37   $   0.34
Total                                                                               $ 0.86     $ 0.93     $ 0.87     $ 1.13   $ 0.99     $ 1.09   $ 1.04 $ 1.15 $ 1.00
         YoY $ Chg Advtg ARPU
US & Canada                                                                                                                   $   0.37   $ 0.55   $ 0.44   $   0.19   $   0.19
Europe                                                                                                                        $   0.32   $ 0.30   $ 0.31   $   0.21   $   0.09
Asia                                                                                                                          $   0.07   $ 0.10   $ 0.13   $   0.04   $   0.07
Rest of World                                                                                                                 $   0.14   $ 0.12   $ 0.15   $   0.05   $   0.04
Total                                                                                                                         $ 0.13     $ 0.17   $ 0.17 $ 0.02 $ 0.01
            Payments ARPU
US & Canada                                                                         $   0.04   $   0.04   $   0.08   $ 0.36   $   0.39   $ 0.46   $ 0.50   $   0.59   $   0.58
Europe                                                                              $    -     $   0.01   $   0.03   $ 0.10   $   0.12   $ 0.15   $ 0.21   $   0.24   $   0.23
Asia                                                                                $    -     $    -     $   0.01   $ 0.04   $   0.04   $ 0.05   $ 0.09   $   0.10   $   0.09
Rest of World                                                                       $    -     $    -     $   0.01   $ 0.02   $   0.02   $ 0.02   $ 0.04   $   0.04   $   0.03
Total                                                                               $ 0.01     $ 0.02     $ 0.03     $ 0.13   $ 0.15     $ 0.17   $ 0.20 $ 0.23 $ 0.21
       YoY $ Chg Payments ARPU
US & Canada                                                                                                                   $   0.35   $ 0.42   $ 0.43   $   0.24   $   0.19
Europe                                                                                                                        $   0.12   $ 0.14   $ 0.18   $   0.15   $   0.11
Asia                                                                                                                          $   0.04   $ 0.05   $ 0.08   $   0.06   $   0.05
Rest of World                                                                                                                 $   0.02   $ 0.02   $ 0.03   $   0.02   $   0.01
Total                                                                                                                         $ 0.13     $ 0.15   $ 0.17 $ 0.10 $ 0.07
                 Total ARPU
US & Canada                                                                         $   1.77   $   1.87   $   1.93   $ 2.77   $   2.49   $ 2.84   $ 2.79   $   3.19   $   2.86
Europe                                                                              $   0.75   $   0.89   $   0.84   $ 1.25   $   1.19   $ 1.33   $ 1.34   $   1.60   $   1.40
Asia                                                                                $   0.31   $   0.35   $   0.35   $ 0.46   $   0.42   $ 0.50   $ 0.56   $   0.56   $   0.53
Rest of World                                                                       $   0.16   $   0.23   $   0.22   $ 0.33   $   0.32   $ 0.38   $ 0.40   $   0.40   $   0.37
Total                                                                               $ 0.87     $ 0.94     $ 0.91     $ 1.26   $ 1.14     $ 1.26   $ 1.24 $ 1.37 $ 1.21
         YoY $ Change in ARPU
US & Canada                                                                                                                   $   0.72   $ 0.97   $ 0.87   $   0.43   $   0.38
Europe                                                                                                                        $   0.44   $ 0.44   $ 0.50   $   0.36   $   0.20
Asia                                                                                                                          $   0.11   $ 0.15   $ 0.21   $   0.10   $   0.11
Rest of World                                                                                                                 $   0.16   $ 0.15   $ 0.18   $   0.07   $   0.05
Total                                                                                                                         $ 0.27     $ 0.32   $ 0.34 $ 0.11 $ 0.08
                  $ per DAU
US & Canada                                                                         $   2.61   $   0.97   $   0.92   $ 1.26   $   1.06   $ 1.13   $ 1.05   $   1.17   $   4.07
Europe                                                                              $   1.22   $   1.52   $   1.43   $ 2.04   $   1.91   $ 2.17   $ 2.15   $   2.52   $   2.16
Asia                                                                                $   0.56   $   0.69   $   0.69   $ 0.91   $   0.86   $ 0.96   $ 1.06   $   1.10   $   0.99
Rest of World                                                                       $   0.34   $   0.50   $   0.46   $ 0.74   $   0.64   $ 0.75   $ 0.78   $   0.80   $   0.69
Total                                                                               $   1.46   $   1.67   $   1.59   $ 2.23   $   1.97   $ 2.15   $ 2.09   $   2.34   $   2.01
Source: Company Reports and Sterne Agee Estimates




                                                                                                                                                                             Page 32
                                                                                                                                                                                                                                                        May 7, 2012



Monetization
                                                    2Q:12E 3Q:12E 4Q:12E           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
          Advertising ARPU
US & Canada                                         $   2.56   $ 2.49   $   2.81   $   2.50   $   2.79   $   2.73   $   3.06   $   2.76   $   3.06   $   3.01   $   3.35   $   3.06   $   3.37   $   3.32   $   3.68   $   3.40   $   3.72   $   3.68   $   4.05
Europe                                              $   1.28   $ 1.23   $   1.47   $   1.29   $   1.41   $   1.38   $   1.63   $   1.45   $   1.59   $   1.56   $   1.82   $   1.66   $   1.80   $   1.78   $   2.05   $   1.90   $   2.05   $   2.05   $   2.33
Asia                                                $   0.52   $ 0.55   $   0.55   $   0.54   $   0.62   $   0.67   $   0.68   $   0.68   $   0.77   $   0.83   $   0.85   $   0.86   $   0.96   $   1.02   $   1.05   $   1.08   $   1.18   $   1.26   $   1.30
Rest of World                                       $   0.39   $ 0.41   $   0.42   $   0.41   $   0.47   $   0.50   $   0.52   $   0.52   $   0.59   $   0.63   $   0.66   $   0.67   $   0.75   $   0.80   $   0.84   $   0.85   $   0.95   $   1.01   $   1.06
Total                                               $ 1.11     $ 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
         YoY $ Chg Advtg ARPU
US & Canada                                         $   0.19   $ 0.20   $   0.21   $   0.22   $   0.23   $   0.24   $   0.25   $   0.26   $   0.27   $   0.28   $   0.29   $   0.30   $   0.31   $   0.32   $   0.33   $   0.34   $   0.35   $   0.36   $   0.37
Europe                                              $   0.09   $ 0.10   $   0.11   $   0.12   $   0.13   $   0.14   $   0.15   $   0.16   $   0.17   $   0.18   $   0.19   $   0.20   $   0.21   $   0.22   $   0.23   $   0.24   $   0.25   $   0.26   $   0.27
Asia                                                $   0.07   $ 0.08   $   0.09   $   0.10   $   0.11   $   0.12   $   0.13   $   0.14   $   0.15   $   0.16   $   0.17   $   0.18   $   0.19   $   0.20   $   0.21   $   0.22   $   0.23   $   0.24   $   0.25
Rest of World                                       $   0.04   $ 0.05   $   0.06   $   0.07   $   0.08   $   0.09   $   0.10   $   0.11   $   0.12   $   0.13   $   0.14   $   0.15   $   0.16   $   0.17   $   0.18   $   0.19   $   0.20   $   0.21   $   0.22
Total                                               $ 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
            Payments ARPU
US & Canada                                         $   0.62   $ 0.63   $   0.70   $   0.66   $   0.69   $   0.70   $   0.74   $   0.69   $   0.71   $   0.72   $   0.77   $   0.72   $   0.74   $   0.75   $   0.80   $   0.74   $   0.77   $   0.78   $   0.82
Europe                                              $   0.23   $ 0.28   $   0.30   $   0.28   $   0.27   $   0.32   $   0.33   $   0.30   $   0.29   $   0.34   $   0.35   $   0.32   $   0.31   $   0.34   $   0.35   $   0.32   $   0.31   $   0.34   $   0.35
Asia                                                $   0.06   $ 0.10   $   0.10   $   0.09   $   0.06   $   0.10   $   0.10   $   0.09   $   0.06   $   0.10   $   0.10   $   0.09   $   0.06   $   0.10   $   0.10   $   0.09   $   0.06   $   0.10   $   0.10
Rest of World                                       $   0.02   $ 0.04   $   0.04   $   0.04   $   0.03   $   0.04   $   0.04   $   0.04   $   0.03   $   0.04   $   0.04   $   0.04   $   0.03   $   0.04   $   0.04   $   0.04   $   0.03   $   0.04   $   0.04
Total                                               $ 0.21     $ 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
       YoY $ Chg Payments ARPU
US & Canada                                         $   0.16   $ 0.13   $   0.11   $   0.09   $   0.07   $   0.07   $   0.05   $   0.03   $   0.03   $   0.03   $   0.03   $   0.03   $   0.03   $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03
Europe                                              $   0.08   $ 0.07   $   0.06   $   0.05   $   0.04   $   0.04   $   0.03   $   0.02   $   0.02   $   0.02   $   0.02   $   0.02   $   0.02   $ -    $ -    $ -    $ -    $ -    $ -
Asia                                                $   0.02   $ 0.01   $   0.01   $   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
Rest of World                                       $   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 $ 0.00
Total                                               $ 0.04     $ 0.03 $ 0.03 $ 0.02 $ 0.01 $ 0.01 $ 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)
                 Total ARPU
US & Canada                                         $   3.18   $ 3.12   $   3.51   $   3.17   $   3.48   $   3.42   $   3.80   $   3.45   $   3.77   $   3.73   $   4.12   $   3.78   $   4.11   $   4.08   $   4.48   $   4.14   $   4.48   $   4.46   $   4.87
Europe                                              $   1.50   $ 1.51   $   1.78   $   1.57   $   1.68   $   1.70   $   1.96   $   1.75   $   1.87   $   1.90   $   2.17   $   1.97   $   2.10   $   2.12   $   2.41   $   2.22   $   2.36   $   2.38   $   2.68
Asia                                                $   0.58   $ 0.65   $   0.66   $   0.63   $   0.69   $   0.77   $   0.78   $   0.77   $   0.83   $   0.92   $   0.95   $   0.95   $   1.02   $   1.12   $   1.16   $   1.16   $   1.25   $   1.36   $   1.40
Rest of World                                       $   0.42   $ 0.45   $   0.46   $   0.44   $   0.50   $   0.54   $   0.56   $   0.55   $   0.62   $   0.67   $   0.70   $   0.70   $   0.78   $   0.84   $   0.88   $   0.89   $   0.98   $   1.05   $   1.10
Total                                               $ 1.32     $ 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
         YoY $ Change in ARPU
US & Canada                                         $   0.35   $ 0.33   $   0.32   $   0.31   $   0.30   $   0.31   $   0.30   $   0.29   $   0.30   $   0.31   $   0.32   $   0.33   $   0.34   $   0.35   $   0.36   $   0.37   $   0.38   $   0.39   $   0.40
Europe                                              $   0.17   $ 0.17   $   0.17   $   0.17   $   0.17   $   0.18   $   0.18   $   0.18   $   0.19   $   0.20   $   0.21   $   0.22   $   0.23   $   0.22   $   0.23   $   0.24   $   0.25   $   0.26   $   0.27
Asia                                                $   0.08   $ 0.09   $   0.09   $   0.10   $   0.11   $   0.12   $   0.13   $   0.14   $   0.15   $   0.16   $   0.17   $   0.18   $   0.19   $   0.20   $   0.21   $   0.22   $   0.23   $   0.24   $   0.25
Rest of World                                       $   0.04   $ 0.05   $   0.06   $   0.07   $   0.08   $   0.09   $   0.10   $   0.11   $   0.12   $   0.13   $   0.14   $   0.15   $   0.16   $   0.17   $   0.18   $   0.19   $   0.20   $   0.21   $   0.22
Total                                               $ 0.06     $ 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
                  $ per DAU
US & Canada                                         $   4.48   $ 4.39   $   4.94   $   4.46   $   4.89   $   4.81   $   5.34   $   4.84   $   5.28   $   5.22   $   5.75   $   5.28   $   5.73   $   5.68   $   6.23   $   5.77   $   6.23   $   6.19   $   6.76
Europe                                              $   2.29   $ 2.30   $   2.70   $   2.38   $   2.54   $   2.56   $   2.95   $   2.64   $   2.81   $   2.85   $   3.25   $   2.94   $   3.13   $   3.14   $   3.55   $   3.28   $   3.47   $   3.50   $   3.92
Asia                                                $   1.04   $ 1.17   $   1.17   $   1.12   $   1.21   $   1.34   $   1.36   $   1.32   $   1.42   $   1.57   $   1.60   $   1.58   $   1.69   $   1.84   $   1.89   $   1.89   $   2.01   $   2.17   $   2.24
Rest of World                                       $   0.75   $ 0.81   $   0.83   $   0.80   $   0.89   $   0.96   $   1.00   $   0.98   $   1.09   $   1.18   $   1.23   $   1.23   $   1.35   $   1.46   $   1.52   $   1.54   $   1.68   $   1.79   $   1.88
Total                                               $   2.14   $ 2.15   $   2.37   $   2.13   $   2.29   $   2.31   $   2.52   $   2.30   $   2.48   $   2.52   $   2.73   $   2.54   $   2.72   $   2.78   $   2.99   $   2.83   $   3.02   $   3.09   $   3.32
Source: Company Reports and Sterne Agee Estimates




                                                                                                                                                                                                                                                             Page 33
                                                                                                                                                        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
US & Canada
Advertising                                                                     $ 209    $ 243 $ 260 $ 359 $ 332 $ 394 $ 395           $ 462   $ 419
Payments and other fees                                                         $   5    $   6 $ 11 $ 53 $ 62 $ 77 $ 87                $ 105   $ 106
   Total                                                                        $ 214    $ 249   $ 271 $ 412 $ 394 $ 471 $ 482         $ 567   $ 525
                 YOY Growth
Advertising                                                                                                     59%   62%      52%      29%      26%
Payments and other fees                                                                                        1140% 1183%     691%     98%      71%
  Total                                                                                                         84%   89%      78%      38%      33%
                 Mix
Advertising                                                                      98%     98%     96%    87%     84%     84%    82%      81%     80%
Payments and other fees                                                          2%       2%      4%    13%     16%     16%    18%      19%     20%
  Total                                                                         100%     100%    100%   100%   100%     100%   100%    100%    100%
           Sequential Growth
Advertising                                                                              16%      7%    38%    -8%      19%     0%      17%      -9%
Payments and other fees                                                                  20%     83%    382%   17%      24%    13%      21%      1%
  Total                                                                                  16%      9%    52%    -4%      20%     2%      18%      -7%
Europe
Advertising                                                                     $ 96     $ 128   $ 130 $ 201 $ 206 $ 245 $ 245         $ 306   $ 274
Payments and other fees                                                         $ -      $   1   $   4 $ 17 $ 23 $ 30 $ 45             $ 55    $ 54
   Total                                                                        $   96   $ 129   $ 134 $ 218 $ 229 $ 275 $ 290         $ 361   $ 328
                 YOY Growth
Advertising                                                                                                    115%      91%   88%      52%     33%
Payments and other fees                                                                                         nm      2900% 1025%    224%    135%
  Total                                                                                                        139%      113% 116%      66%     43%
                 Mix
Advertising                                                                     100%     99%     97%    92%    90%      89%    84%      85%      84%
Payments and other fees                                                          0%       1%      3%     8%    10%      11%    16%      15%      16%
                 Total

           Sequential Growth
Advertising                                                                              33%      2%    55%    2%       19%     0%      25%    -10%
Payments and other fees                                                                  nm      300%   325%   35%      30%    50%      22%     -2%
  Total                                                                                  34%      4%    63%    5%       20%     5%      24%     -9%
Asia
 Advertising                                                                    $ 22 $ 31 $        36   $ 53   $   56   $ 74 $ 88      $ 95    $ 99
 Payments and other fees                                                        $ -  $ -  $         1   $ 5    $    6   $ 8 $ 16       $ 20    $ 19
   Total                                                                        $ 22 $ 31 $        37   $ 58   $   62   $ 82 $ 104     $ 115   $ 118
              YOY Growth
Advertising                                                                                                    155%     139%    144%    79%     77%
Payments and other fees                                                                                         nm       nm    1500%   300%    217%
  Total                                                                                                        182%     165%    181%    98%     90%
                 Mix
Advertising                                                                     100%     100%    97%    91%     90%     90%    85%      83%     84%
Payments and other fees                                                          0%       0%      3%     9%     10%     10%    15%      17%     16%
                  Total                                                         100%     100%    100%   100%   100%     100%   100%    100%    100%

           Sequential Growth
Advertising                                                                              41%     16%    47%    6%       32%    19%      8%       4%
Payments and other fees                                                                  nm      nm     400%   20%      33%    100%     25%      -5%
  Total                                                                                  41%     19%    57%    7%       32%    27%      11%      3%
Rest of World
 Advertising                                                                    $ 12 $ 21 $        24   $ 41   $   44   $ 61   $ 71 $     79 $     79
 Payments and other fees                                                        $ -  $ -  $         1   $ 2    $    3   $ 4    $ 7 $       8 $      8
   Total                                                                        $ 12 $ 21 $        25   $ 43   $   47   $ 65   $ 78 $     87 $     87
              YOY Growth
Advertising                                                                                                    267%     190%   196%     93%     80%
Payments and other fees                                                                                         nm       nm    600%    300%    167%
  Total                                                                                                        292%     210%   212%    102%     85%
                 Mix
Advertising                                                                     100%     100%    96%    95%     94%     94%    91%      91%     91%
Payments and other fees                                                          0%       0%      4%     5%     6%       6%     9%      9%      9%
                  Total                                                         100%     100%    100%   100%   100%     100%   100%    100%    100%

           Sequential Growth
Advertising                                                                              75%     14%    71%    7%       39%    16%      11%      0%
Payments and other fees                                                                  nm      nm     100%   50%      33%    75%      14%      0%
                 Total                                                                   75%     19%    72%    9%       38%    20%      12%      0%
Source: Company Reports and Sterne Agee Estimates




                                                                                                                                                          Page 34
                                                                                                                                                                                               May 7, 2012



              Revenue
                                                    2Q:12E 3Q:12E 4Q:12E   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
US & Canada
Advertising                                         $ 487 $ 483   $ 557    $ 504    $ 571    $ 566    $ 644    $ 589    $ 660    $ 656    $ 739    $ 682    $ 755    $ 751    $ 836     $ 776    $ 851     $ 846     $ 932
Payments and other fees                             $ 118 $ 122   $ 138    $ 134    $ 140    $ 145    $ 157    $ 147    $ 154    $ 158    $ 170    $ 160    $ 166    $ 169    $ 181     $ 170    $ 176     $ 178     $ 190
   Total                                            $ 605 $ 605   $ 695    $ 638    $ 711    $ 711    $ 801    $ 736    $ 814    $ 814    $ 910    $ 841    $ 921    $ 920    $ 1,017   $ 946    $ 1,027   $ 1,025   $ 1,122
                 YOY Growth
Advertising                                          24%    22%    20%      20%      17%      17%      16%      17%      16%      16%      15%      16%      14%      14%      13%       14%      13%       13%       12%
Payments and other fees                              53%    41%    32%      26%      19%      18%      13%      10%      10%      9%       9%       8%       8%       7%       6%        6%       6%        5%        5%
  Total                                              28%    26%    23%      22%      18%      17%      15%      15%      14%      15%      14%      14%      13%      13%      12%       12%      11%       11%       10%
                 Mix
Advertising                                          81%   80%      80%     79%      80%      80%      80%      80%      81%      81%      81%      81%      82%      82%      82%       82%      83%       83%       83%
Payments and other fees                              19%   20%      20%     21%      20%      20%      20%      20%      19%      19%      19%      19%      18%      18%      18%       18%      17%       17%       17%
  Total                                             100%   100%    100%    100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%      100%     100%      100%      100%
           Sequential Growth
Advertising                                          16%    -1%    15%      -9%      13%      -1%      14%      -9%      12%      -1%      13%      -8%      11%      -1%      11%       -7%      10%       -1%       10%
Payments and other fees                              11%     4%    13%      -3%      5%       3%       8%       -6%      4%       3%       8%       -6%      4%       2%       7%        -6%      3%        2%        6%
  Total                                              15%     0%    15%      -8%      11%      0%       13%      -8%      11%      0%       12%      -8%      10%      0%       11%       -7%      9%        0%        9%
Europe
Advertising                                         $ 313 $ 312   $ 384    $ 345    $ 387    $ 386    $ 465    $ 423    $ 468    $ 467    $ 551    $ 508    $ 559    $ 562    $ 655     $ 611    $ 665     $ 668     $ 763
Payments and other fees                             $ 55 $ 70     $ 79     $ 75     $ 73     $ 89     $ 96     $ 87     $ 84     $ 101    $ 107    $ 98     $ 95     $ 106    $ 113     $ 103    $ 99      $ 110     $ 116
   Total                                            $ 369 $ 383   $ 464    $ 420    $ 460    $ 475    $ 561    $ 510    $ 552    $ 568    $ 659    $ 606    $ 654    $ 668    $ 768     $ 714    $ 764     $ 778     $ 880
                 YOY Growth
Advertising                                          28%    27%    26%      26%      23%      23%      21%      22%      21%      21%      19%      20%      20%      20%      19%       20%      19%       19%       17%
Payments and other fees                              84%    56%    44%      39%      32%      27%      20%      16%      16%      14%      12%      13%      13%      5%       5%        5%       4%        4%        3%
  Total                                              34%    32%    29%      28%      25%      24%      21%      21%      20%      20%      17%      19%      19%      18%      17%       18%      17%       16%       15%
                 Mix
Advertising                                          85%    82%    83%      82%      84%      81%      83%      83%      85%      82%      84%      84%      85%      84%      85%       86%      87%       86%       87%
Payments and other fees                              15%    18%    17%      18%      16%      19%      17%      17%      15%      18%      16%      16%      15%      16%      15%       14%      13%       14%       13%
                 Total

           Sequential Growth
Advertising                                          14%     0%    23%     -10%      12%      0%       21%      -9%      11%      0%       18%      -8%      10%      0%       17%       -7%      9%        0%        14%
Payments and other fees                              2%     27%    13%      -6%      -3%      22%      7%       -9%      -4%      20%      6%       -9%      -3%      12%      6%        -9%      -4%       11%       6%
  Total                                              12%     4%    21%      -9%      9%       3%       18%      -9%      8%       3%       16%      -8%      8%       2%       15%       -7%      7%        2%        13%
Asia
 Advertising                                        $ 122 $ 140   $ 148    $ 154    $ 185    $ 209    $ 223    $ 234    $ 275    $ 308    $ 328    $ 345    $ 396    $ 438    $ 464     $ 486    $ 547     $ 595     $ 625
 Payments and other fees                            $ 15 $ 24     $ 28     $ 24     $ 19     $ 30     $ 34     $ 30     $ 23     $ 36     $ 40     $ 35     $ 27     $ 42     $ 46      $ 39     $ 30      $ 46      $ 50
   Total                                            $ 138 $ 164   $ 175    $ 178    $ 204    $ 240    $ 256    $ 263    $ 298    $ 344    $ 368    $ 380    $ 423    $ 479    $ 510     $ 525    $ 576     $ 641     $ 675
              YOY Growth
Advertising                                          65%    59%    56%      56%      51%      50%      51%      52%      49%      47%      47%      48%      44%      42%      41%       41%      38%       36%       35%
Payments and other fees                              89%    53%    38%      28%      26%      24%      23%      21%      20%      19%      18%      17%      16%      15%      14%       13%      12%       11%       9%
  Total                                              68%    58%    53%      51%      48%      46%      46%      48%      46%      44%      44%      44%      42%      39%      38%       38%      36%       34%       32%
                 Mix
Advertising                                          89%   85%      84%     86%      91%      87%      87%      89%      92%      90%      89%      91%      94%      91%      91%       93%      95%       93%       93%
Payments and other fees                              11%   15%      16%     14%      9%       13%      13%      11%      8%       10%      11%      9%       6%       9%       9%        7%       5%        7%        7%
                  Total                             100%   100%    100%    100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%      100%     100%      100%      100%

           Sequential Growth
Advertising                                          24%    14%    6%       4%       20%      13%      6%       5%       18%      12%      7%       5%       15%      10%      6%        5%       12%       9%        5%
Payments and other fees                             -20%    61%    13%     -12%     -22%      59%      12%     -13%     -23%      58%      11%     -13%     -23%      56%      10%      -14%     -24%       55%       9%
  Total                                              17%    19%    7%       2%       15%      17%      7%       3%       13%      15%      7%       3%       11%      13%      6%        3%       10%       11%       5%
Rest of World
 Advertising                                        $ 98 $ 109    $ 119    $ 120 $ 145       $ 160    $ 174    $ 178 $ 209       $ 230    $ 248    $ 255    $ 296    $ 323    $ 348     $ 362    $ 412     $ 448     $ 480
 Payments and other fees                            $   6 $ 10    $ 11     $ 10 $    8       $ 12     $ 13     $ 12 $    9       $ 14     $ 15     $ 14     $ 11     $ 16     $ 17      $ 16     $ 12      $ 18      $ 19
   Total                                            $ 104 $ 119   $ 129    $ 130 $ 153       $ 173    $ 187    $ 190 $ 219       $ 244    $ 263    $ 270    $ 307    $ 339    $ 365     $ 378    $ 424     $ 466     $ 499
              YOY Growth
Advertising                                          61%    54%    50%      51%      48%      47%      47%      49%      45%      43%      42%      44%      41%      41%      41%       42%      39%       39%       38%
Payments and other fees                              51%    39%    33%      29%      28%      24%      22%      21%      20%      17%      15%      15%      16%      14%      13%       13%      14%       13%       12%
  Total                                              60%    53%    49%      49%      46%      45%      45%      46%      43%      41%      40%      42%      40%      39%      39%       40%      38%       37%       37%
                 Mix
Advertising                                          94%   92%      92%     92%      95%      93%      93%      93%      96%      94%      94%      95%      96%      95%      95%       96%      97%       96%       96%
Payments and other fees                              6%     8%      8%      8%       5%       7%       7%       7%       4%       6%       6%       5%       4%       5%       5%        4%       3%        4%        4%
                  Total                             100%   100%    100%    100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%      100%     100%      100%      100%

           Sequential Growth
Advertising                                          24%    11%     9%      1%       21%      11%      9%       2%       18%      10%      8%       3%       16%      9%       8%        4%       14%       9%        7%
Payments and other fees                             -24%    61%     9%      -3%     -25%      56%      7%       -4%     -25%      52%      6%       -4%     -25%      50%      5%        -5%     -24%       48%       5%
                 Total                               20%    14%     9%      0%       17%      13%      8%       2%       15%      11%      8%       3%       14%      11%      8%        4%       12%       10%       7%
Source: Company Reports and Sterne Agee Estimates




                                                                                                                                                                                                   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:
                                                                                                          IB Serv./ Past 12Mos.
Rating Category                        Count                     Percent                    Count                    Percent
Buy                                    228                       49.78%                     12                       5.26%
Neutral                                201                       43.89%                     6                        2.99%
Underperform                           29                        6.33%                      0                        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

                     INSTITUTIONAL SALES                                                                      INSTITUTIONAL TRADING
Steve Pokorny      Head of Institutional Sales                (214) 702-4020           JT Cacciabaudo        Head of Trading                           (212) 763-8288

                                                                    EQUITY RESEARCH
                                         Robert Hoehn           Director of Research                      (212) 338-4731
CONSUMER                                                                                  FINANCIAL SERVICES (CONT.)
 Apparel Retailing & Toys                                                                 Property/Casualty Insurance
  Margaret Whitfield                   SVP, Sr. Analyst       (973) 519-1019              Dan Farrell                          Mng. Dir.               (212) 338-4782
  Tom Nikic, CFA                       Analyst                (212) 338-4784              Nitin Chhabra, FCAS                  Analyst                 (212) 338-4779

Interactive Entertainment / Internet                                                   INDUSTRIALS
  Arvind Bhatia, CFA                   Mng. Dir.              (214) 702-4001             Aerospace & Defense
  Brett Strauser                       Analyst                (214) 702-4009              Peter Arment                         Mng. Dir.               (646) 376-5336
  Footwear & Apparel                                                                      Josh W. Sullivan                     Analyst                 (646) 376-5337
  Sam Poser                            Mng. Dir.              (212) 763-8226
  Ben Shamsian                         Associate              (212) 338-4721              Auto, Auto Parts and Auto Retailers
                                                                                          Michael P. Ward, CFA                 Mng. Dir.               (646) 376-5375
  Leisure & Entertainment                                                                 Ali-Ahmad Faghri                     Associate               (646) 376-5304
  David Bain                           Mng. Dir.              (949) 721-6651
  Sherry Yin                           Associate              (949) 721-6651              Coal, Metals & Mining, Engineering & Construction
                                                                                          Michael S. Dudas, CFA                Mng. Dir.               (646) 376-5329
  Restaurants                                                                             Satyadeep Jain                       Analyst                 (646) 376-5357
  Lynne Collier                        Mng. Dir.              (214) 702-4045              Patrick Uotila, CPA                  Analyst                 (646) 376-5358
  Philip May                           Analyst                (214) 702-4004
                                                                                          Construction Materials & Diversified Industrials
ENERGY                                                                                    Todd Vencil, CFA                     SVP, Sr. Analyst       (804) 282-7385
  Exploration & Production                                                                Kevin Bennett, CFA                   Analyst                (804) 282-4506
  Tim Rezvan, CFA                      Sr. Analyst            (212) 338-4736
  Ryan Mueller                         Analyst                (212) 338-4732           HEALTHCARE
  Truman Hobbs                         Associate              (212) 338-4767               Pharmaceutical Services
                                                                                          Greg T. Bolan                        Mng. Dir.              (615) 760-1469
  Oilfield Services & Equipment                                                           Himanshu Rastogi, PhD, CFA           Analyst                (615) 760-1478
  Stephen D. Gengaro                   Mng. Dir.              (646) 376-5331
  Grant Fox                            Analyst                (212) 338-4723           TECHNOLOGY
  Tripp Schoff                         Associate              (646) 376-5325
                                                                                         Data Networking and Storage
FINANCIAL SERVICES                                                                        Alex Kurtz                           Mng. Dir                (415) 402-6015
  Asset Management                                                                        Amelia Harris                        Analyst                 (415) 402-6018
  Jason Weyeneth, CFA                  SVP, Sr. Analyst       (212) 763-8293
  Charles Warren                       Analyst                (646) 376-5309
                                                                                          Financial Technology
                                                                                          Greg Smith                           Mng. Dir                (818) 615-2029
                                                                                          Jennifer Dugan                       Analyst                 (415) 402-6051
  Banks & Thrifts
  Matthew Kelley                       Mng. Dir.              (207) 699-5800              Hardware, Mobile Devices, IT Supply Chain
  Mike I. Shafir                       SVP, Sr. Analyst       (212) 763-8239              Shaw Wu                              SVP, Sr. Analyst        (415) 362-7431
  Matthew Breese                       Analyst                (207) 699-5800
  Brett Rabatin, CFA                   SVP, Sr. Analyst       (877) 457-8625              LED Supply Chain
  Kenneth James                        Analyst                (615) 760-1474              Andrew Huang                          Mng. Dir.              (415) 362-6143
  Nathan Race                          Associate              (615) 760-1477              John Shen                             Associate              (415) 402-6052
  Peyton Green                         Mng. Dir.              (877) 492-2663
  Zachary Wollam                       Analyst                (615) 760-1468              Semiconductors
  Todd L. Hagerman                     Mng. Dir.              (212) 338-4744              Vijay Rakesh                         Mng. Dir.               (312) 525-8431
  Robert Greene                        Analyst                (212) 763-8296              Troy Cowdrey                         Associate               (312) 525-8430

  Life Insurance                                                                       TRANSPORTATION, SERVICES & EQUIPMENT
  John M. Nadel                        Mng. Dir.              (212) 338-4717
                                                                                          Jeffrey A. Kauffman                  Mng. Dir.               (212) 338-4765
  Alex Levine                          Analyst                (212) 338-4748
                                                                                          Sal Vitale                           VP, Analyst             (212) 338-4766
  Mortgage Finance & Specialty Finance
  Henry J. Coffey, Jr., CFA            Mng. Dir.              (615) 760-1472
  Jason Weaver                         VP, Sr. Analyst        (615) 760-1475
  Calvin Hotrum                        Analyst                (615) 760-1476

Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

				
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