Facebook took social media by storm on Wednesday after the company filed the preliminary prospectus for its long-awaited initial public offering. The company is seeking to raise $5 billion.
SEE ALSO: Facebook IPO: Reactions from the Social Web (and Zuckerberg)Still not sure what all of this means? If you haven’t already had a chance to read the document, we’ve embedded it below. For a breakdown on everything you need to know about Facebook’s IPO, read further.
Facebook S 1http://www.scribd.com/embeds/80163405/content?start_page=1&view_mode=list&access_key=key-x1m5pgmpecxg3zpxaeo
Inside Look
Within the document, some huge numbers about the company were revealed — from 845 million active users, to 2.7 billion daily likes and comments.
After initial news of the filing broke, a more extensive look at the document reveals hard evidence of the company’s business, growth, competition and a bit about what’s in store for the future. Certain terms, such as “advertising” and “mobile” appear more than 100 times throughout.
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As we learned by reading the S1 document, Facebook relies heavily on advertising for revenue. “Advertising” comes up 123 times, matched only by “Mobile” (also with 123 mentions). Interestingly, Facebook is not really making much money from mobile but still considers it a key component for future development.
It should come as no surprise that “Capital” (111) and “Expenses” (110) were second-most mentioned terms. This is a financial document after all, and never have Facebook’s profits, losses, expenses and gains been spelled out so clearly. “Revenue,” by the way, had 214 mentions (more than any other word we analyzed), but “Profit,” a sometimes uncomfortable word in an S1 document, was only mentioned 12 times. (“Revenue” was left out of the Word Cloud image from Wordle because it would have overwhelmed the image).
Image courtesy borman818
Facebook’s intention to build its social network into a true platform has never been clearer. The phrase “Facebook Platform” gets 44 mentions and most of them with “Platform” capitalized. Facebook defines the Facebook Platform as, “a set of development tools and application programming interfaces (APIs).” Facebook is sounding more and more like an Operating System.
Image courtesy of iStockphoto, -Oxford-
Here’s the good news: 35 mentions of “Privacy” means Facebook is serious about it. The bad news is that the majority of those mentions revolve around the risk that screwing up privacy (by Facebook, its partners or through external perceptions of it) could pose to Facebook’s business.
From the document: “We have in the past experienced, and we expect that in the future we will continue to experience, media, legislative, or regulatory scrutiny of our decisions regarding user privacy”
Facebook later dives into its privacy practices and all the ways in which it lets Facebook users control it:
“Privacy and Sharing. People come to Facebook to connect and share. Protecting user privacy is an important part of our product development process. “
Image courtesy of iStockphoto, IvelinRadkov
Okay, we get it, Farmville-maker Zynga is an important part of the Facebook story. It got 24 mentions in the S1 and many were about all the money Zynga and its virtual currency program brings into the giant social network — 12% of Facebook’s revenues! Oddly “Virtually Goods” are mentioned just six times.
It’s now quite clear that Facebook considers Google its chief competitor. Yes, the document notes how Facebook competes not only online with Google and Google+, but with other offline entities. Yet, no other digital brand receives even half as many mentions. Twitter, by contrast, is mentioned just twice. If I were Dick Costollo, I’d be a little miffed. Apple and Microsoft also had just two mentions a piece.
Image courtesy of iStockphoto, andrearoad
Timeline, one of Facebook’s most recent and arguably biggest, innovations has 13 mentions. The feature, which allows uses to organize their Facebook activities in chronological order is clearly a highlight of 2011 and will play a critical role as it spreads across Facebook’s user base throughout the early part of this year.
The founding member/investor and former company President retains stock voting rights but his one mention pales in comparisons to Zuckerberg’s 113.
Image courtesy JD Lasica, Flickr.
Cameron Winklevoss and Tyler Winklevoss have maintained that Mark Zuckerberg broke a verbal contract with them and stole their idea for Facebook. They have lost virtually all the legal battles surrounding the issue. So, perhaps, we should not be surprised that they did not even warrant a mention as one of the many “Risks” (29 mentions) Facebook might face in the future.
Image courtesy Inquisitr
However, there is one thing missing — Facebook did not include how many shares it plans to sell, or the price, but that information will be added before it hits the market, likely this May.
The several-hundred-page document is some heavy reading, but Facebook also used illustrative screenshots and diagrams to explain its business mission and how it plans to raise $5 billion.
Salary
Facebook CEO Mark Zuckerberg pulled in a base salary of almost $500,000, and COO Sheryl Sandberg and CFO David Ebersman both made $300,000 each.
However, these executives are earning a lot more than just their base salary. Sandberg was the highest-paid employee at Facebook in 2011, raking in a total of $30.87 million when you include stock awards.
Zuckerberg’s total earnings were $1.49 million — $700,000 of which was in costs related to private plane use “chartered in connection with his comprehensive security program and on which family and friends flew during 2011.”
However, since he owns 28.4% of the company, he is worth significantly more. Zuckerberg’s salary will fall to $1 annually, starting Jan. 1, 2013.
If Facebook manages to raise the $5 billion, it will be on a shortlist of biggest tech IPOs of all time, and Zuckerberg’s net worth will skyrocket.
Advertisers and Partnerships
Facebook announced it generates a “substantial majority” of its revenue from advertising, more specifically from its partnership with Zynga. The gaming company contributed 12% of Facebook’s $3.71 billion — that’s almost $500 million.
SEE ALSO: Facebook IPO Reveals How It Made $3.71 Billion in 2011The gaming company’s dependence on Facebook as a source of revenue has been commonly viewed as a risk for Zynga investors. But the Facebook filing shows just how interdependent the companies really are.
Some have claimed that online advertising — which is due to surpass print ads in the U.S. for the first time this year, according to eMarketer — is the real reason behind Facebook’s IPO.
Risk Factors
Risks with advertisers and partnerships are a few things that could “materially and adversely affect” Facebook. As required by law, the filing included a list of 35 things that could kill the company.
Ten big ones are below.
“We fail to introduce new and improved products or if we introduce new products or services that are not favorably received."
Image courtesy of Flickr, Mr. T in DC
“We are unable to successfully balance our efforts to provide a compelling user experience with the decisions we make with
respect to the frequency, prominence, and size of ads and other commercial content that we display."
“There are changes in user sentiment about the quality or usefulness of our products or concerns related to privacy and
sharing, safety, security, or other factors."
“There are adverse changes in our products that are mandated by legislation, regulatory authorities, or litigation, including
settlements or consent decrees."
“Decisions by advertisers to use our free products, such as Facebook Pages, instead of advertising on Facebook."
“Loss of advertising market share to our competitors."
Image courtesy of iStockphoto, travelif
“We fail to introduce new and improved products or if we introduce new products or services that are not favorably received."
“There are changes in user sentiment about the quality or usefulness of our products or concerns related to privacy and sharing, safety, security, or other factors."
Image courtesy of iStockphoto, domin_domin
“We are unable to manage and prioritize information to ensure users are presented with content that is interesting, useful, and relevant to them."
“Adverse media reports or other negative publicity involving us, our Platform developers, or other companies in our industry."
Image courtesy of iStockphoto, drxy
“The degree to which users opt out of social ads or otherwise limit the potential audience of commercial content."
Image courtesy of iStockphoto, freie-kreation
The comprehensive assessment includes potential issues, such as competition from Google, Microsoft and Twitter, as well as other social networks that may not even exist yet. The company also brings up common concerns of users, such as changes in U.S. government laws that would restrict access or bugs giving access to private information.
Social Mission
Within an honest assessment, there was also a letter from Mark Zuckerberg to potential shareholders that emphasized Facebook “was built to accomplish a social mission.”
By law, when the company officially goes public later this year, it is then obligated to create more value for its shareholders. This brings up the future of the company — where Facebook is headed five or ten years from now. It’s something yet to be fully grasped.
However, as we have previously noted, “Stocks perform over a long haul; not over days, but over weeks, months, years.” Although it’s much too early to know what the future holds for a public Facebook, this could potentially take social networking to a more professional level, outside of the “bubble.”
By: http://mashable.com/2012/02/03/facebook-ipo-complete-guide/#view_as_one_page-gallery_box4147
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