Specifically, in the third quarter of 2012, Facebook kept all of about 4 cents on every dollar it made. Now it keeps an almost respectable 21 cents. That means that somehow the company is doing what Google ( GOOG), Amazon ( AMZN) and LinkedIn ( LNKD) can't: Getting dramatically smarter about how it spends its cash.

Net profit margins not only climbed from 15% in the third quarter of 2012 to the 21.1% it is in the third quarter of 2013, but by an unheard-of-for-the-Web 40-ish percent. Cash flow from operations also jumped year over year, from $931 million last year to $2.991 million. That's over 221%. And operating margins, EBIT margins and all the rest were similarly gaudy.

Again, simplicity was the key.

"If you look at the new advertisers we acquired in Q3, 62% of them started with either promoted posts or promoted pages, which are the simplest of our advertising formats," said Sheryl Sandberg, chief operating officer, in the earnings conference call to analysts. "We think continuing to roll out very simple ways to become an advertiser is driving our growth."

Facebook still an open -- and smaller -- book
As refreshingly optimistic as this performance is, investors are still dealing with the Web. Problems still loom. Namely that, despite this enormous operational upside, Facebook itself did not actually grow.

Total balance sheet assets were not only flat, but fell slightly, from $15.1 billion to $14.9 billion year-over-year. Where are the assets leaking? For starters, not all of Facebook's users are real. Up to roughly 10% of all accounts are either doubled or from non-human, automated sources, according to the disclosures. And if you look, growth in North America is leveling out; global revenues grew 30% more than those in the U.S. and Canada.

But the most troubling chapter in Facebook is far darker. Even though the company is young, the young want less and less to do with it.

"As we've said previously, this is a hard issue for us to measure because self-reported age data is unreliable for young users," David Ebersman, chief financial officer, said during the company's conference call last week. But while overall average daily users jumped 25% in September year over year, Ebersman said, overall U.S. teen use was flat to down.

"We do see a decrease in daily users, specifically among younger teens," he admitted.

An uncertainty that Rosenstein confirms: "From what I am seeing there is a lot of success in pricing right now," he said. "But could it get more competitive and price the smaller firms out? Sure."

"This is all still a work in progress."
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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