Facebook's S-1 Filing

http://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/0001193125-12-034517-index.htm

by hornokplease • 14 years ago

413 203 14 years ago

rplnt• 14 years ago

The site is really slow for me, maybe it's getting overloaded or ... something else. Either way, could someone post a summary of the filing? If I remember correctly there should be some pretty interesting figures; revenue, profit and so on.

hornokplease• 14 years ago

Here's a screencap of the summary financial data chart:

http://i.imgur.com/c5pHt.png

samstave• 14 years ago

Wow, thats pretty interesting; the earnings per share.

I would love to see that compared to users. Especially if new users flattened out somewhat compared to increasing revenues.

I am not sure, but I dont think that FB userbase went up by 4.5x in the same period as did revenues.

That means they are getting far better at monetizing the users/advertisers are willing to spend far more to advert to the users, than before.

portman• 14 years ago

EDGAR keeps timing out for me, anyone know of a mirror?

bcn• 14 years ago

http://www.scribd.com/doc/80163402/Facebook-S-1

dm8• 14 years ago

Wow.. $3.7 billion in revenues in 2011; $1 billion in profits. Out of curiosity, what were GOOG's revenue/profit numbers when they filed for IPO?

cwe• 14 years ago

In their S1, GOOG reported net income of $106M on $962M revenue.

src: https://twitter.com/#!/goldman/status/164830894685818880

gphil• 14 years ago

Not as good. See here:

http://sec.gov/Archives/edgar/data/1288776/00011931250407363...

nextparadigms• 14 years ago

Google filed for IPO earlier in the company's life, though. Year per year, Google made more than Facebook.

RobPfeifer• 14 years ago

They're here: <a href="http://imgur.com/5YeNq><img src="http://i.imgur.com/5YeNq.gif title="Hosted by imgur.com" alt="" /></a>

I saved this when I came across it a while back. Also, they had $961mm in net income the year they went out

mun2mun• 14 years ago

Looks like jacquesm lost a bet http://news.ycombinator.com/item?id=689789 :).

swalsh• 14 years ago

To be fair, he said multiple billion in profit not revenue. Still has some ways to go.

pessimist2• 14 years ago

Interestingly, Google 2011 revenues are $37b, profits $9.7b, ratio almost exactly the same. Google also has 10x the number of employees as FB. Of course FB growth is much faster.

cromwellian2• 14 years ago

Consider that in 1996, there were far fewer people on the internet/web. It doesn't really make sense to compare absolute revenue numbers. Growth rates and revenue per user would probably be more interesting.

encoderer• 14 years ago

1996? You must be thinking "Yahoo." Google IPOd in the following decade.

zach• 14 years ago

Direct link to the text of the S-1:

http://www.sec.gov/Archives/edgar/data/1326801/0001193125120...

bradleyjg• 14 years ago

They are doing a dual class offering. The class B shares (i.e. those held by Zuckerberg and other insiders) are going to have ten times the voting rights as the class A shares.

I wouldn't by into such an ownership structure, though to be fair, google has such a structure and those that bought that at IPO have done very well so far.

From the risks section:

As a result of voting agreements with certain stockholders, together with the shares he holds, Mark Zuckerberg, our founder, Chairman, and CEO, will be able to exercise voting rights with respect to an aggregate of XX shares of common stock, representing a majority of the voting power of our outstanding capital stock following our initial public offering. As a result, Mr. Zuckerberg has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, Mr. Zuckerberg has the ability to control the management and affairs of our company as a result of his position as our CEO and his ability to control the election of our directors. Additionally, in the event that Mr. Zuckerberg controls our company at the time of his death, control may be transferred to a person or entity that he designates as his successor. As a board member and officer, Mr. Zuckerberg owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Zuckerberg is entitled to vote his shares, and shares over which he has voting control as a result of voting agreements, in his own interests, which may not always be in the interests of our stockholders generally.

tlrobinson2• 14 years ago

How many other public companies have a single stockholder with majority voting power?

jmackinn• 14 years ago

Frank Stronach, of Magna International, held a voting majority for over 30 years, despite actually owning a minority share of the company.

nknight2• 14 years ago

> I wouldn't by into such an ownership structure

I would under some circumstances, but there are absolutely no circumstances under which I would be prepared to invest in a company where one person has majority voting power. At least with Google, no single person's psychotic break can bring down the company.

jpdoctor4• 14 years ago

> and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Zuckerberg is entitled to vote his shares, and shares over which he has voting control as a result of voting agreements, in his own interests, which may not always be in the interests of our stockholders generally.

So he must act in good faith except when he doesn't. Got it.

tlrobinson2• 14 years ago

Presumably he must act in good faith until he resigns from the board.

ajays2• 14 years ago

Doesn't Google also have dual class shares? They seem to be doing well despite that. Maybe it'll work for Zuck too.

adamtmca• 14 years ago

I'm interested to hear why you wouldn't buy into that structure - is it a concern w/ Zuckerberg himself or an aversion to any situation where a single entity has majority voting rights?

justincormack• 14 years ago

Share ownership without votes is participation but not real ownership. In the long run companies can end up not being run in the interests of the shareholders. Most companies with these structures are valued at less than they would be with a normal structure. Classic example is News Corp where the Murdochs keep control with a minority ownership and run it much like a private company.

A public company should be public not half private.

ok_craig• 14 years ago

I don't know a lot about stock, so if you could explain to me how this works I'd be very thankful. Facebook is worth something like $100 billion, but their IPO is only for $5 billion. Doesn't that mean 95% of the company is still owned by... Facebook? (??) What fraction of the company are they selling by having a $5b IPO?

aliston• 14 years ago

$5 billion is the value of the new shares that are being issued as part of the ipo. The valuation is expected to be between 75 and 100 billion, so essentially that means FB is selling between 5 and 6.6 percent of the company to raise the $5 billion. In that sense, it works exactly the same way that a new round of funding works from a VC. It doesn't however, mean that 95% of the company is owned by "facebook" since those shares can (presumably after some lockup period) be traded publicly. A lot of employees and investors, for example, will probably unload some of their shares on the public market.

apike• 14 years ago

It turns out that Zynga only accounts for 12% of their revenue.

"In 2011, Zynga accounted for approximately 12% of our revenue, which amount was comprised of revenue derived from payments processing fees related to Zynga’s sales of virtual goods and from direct advertising purchased by Zynga. Additionally, Zynga’s apps generate a significant number of pages on which we display ads from other advertisers."

It appears they would still be profitable without Zynga.

veyron3• 14 years ago

"Zynga’s apps generate a significant number of pages on which we display ads from other advertisers"

Are those ads counted toward the 12% statistic?

anonymoushn• 14 years ago

Based on my reading of the quote, the 12% does not include ads displayed on pages generated by Zynga apps.

brd2• 14 years ago

85% of revenue is from advertising. So either Zynga controls 80% of all non advertising revenue (aka the remaining 15%) or that 12% figure includes advertisements served on Zynga pages.

Is it reasonable to conclude that Zynga constitutes 80% of FB's credit ecosystem?

nekojima• 14 years ago

"It appears they would still be profitable without Zynga."

That assumes many of those Zynga users would still be on, or use Facebook as often, if it wasn't for Zynga or other games on the platform. The significant amounts of time spent on Facebook is due in large part to games and photos. That length of time on the platform helps to drive display ad revenue.

veyron3• 14 years ago

what's happening with project Z (or whatever zynga was trying to create to diversify away from facebook)?

simonb• 14 years ago

Apparently only 17% of time on FB is spent looking at photos: http://www.scribd.com/doc/79028052/Buddy-Media-DLD-Keynote-H...

vnorby• 14 years ago

So we can trade Zynga shares on Facebook quarterly earnings reports. Sounds good to me!

CWIZO• 14 years ago

As someone that lives in EU (as in, not in USA) and has no clue about stock market: what would be the easiest way for me to get a couple of hundred € worth of stocks in FB? Is that even possible?

Tichy• 14 years ago

I also don't really have a clue, but I think if you have a "trading depot" with some bank, they will offer you several stock exchanges to trade on. So you could pick some US stock exchange and buy the shares there.

Mvandenbergh• 14 years ago

Probably not, no. Most IPO shares are sold to large clients of brokerages. One of the inducements that large investment banks offer independent brokerages who use their services is letting them offer hot IPO stocks to some of their major customers.

hkolk• 14 years ago

Probably best to find a local broker that is on nasdaq. In the Netherlands, I would advise Binck or something similar. I personally have my companies stock in eTrade, but that is because that is how I received it :)

It can be tricky to get into the IPO though. Don't know the details on those rules.

spinchange• 14 years ago

You're not going to get in on the IPO price. That's for the banks who are selling to their very top-tier clients before it even starts trading on the exchange, basically.

Look into what is involved in buying stock in any American company from the EU. If you're still interested, you can pick up a few shares after it's trading on the exchanges.

patd2• 14 years ago

You need to buy them on the day they IPO. You will not be able to buy it at the IPO price but at the price of the first minute of trading.

On top of that, "a couple of hundred €" is probably not enough money. The fees to buy stocks on the Nasdaq is usually in the tens of euro. You'll probably have between 10 and 50 euros of fees at the cheaper online trading platforms.

You can also call your traditional bank to buy the stocks but the fees would probably be higher.

olivercameron2• 14 years ago

Curiously, Sean Parker appears to not be on the top shareholders list[1], despite previously having a large %. Did he sell all of it on SecondMarket?

1. http://techcrunch.com/2012/02/01/facebooks-s-1-and-the-large...

trotsky3• 14 years ago

While I don't know the specifics, it is very common for insiders to sell shares to new investors during later rounds. If I remember correctly, most of last year's goldman deal was from existing shareholders and not the company itself. So there is also a lot of opportunity to unload shares without using the formal markets as long as management is cooperative.

jpdoctor4• 14 years ago

> it is very common for insiders to sell shares to new investors during later rounds.

Since when? Way back in the dark ages (2003), it was seen as a lack of faith in the company if the insiders were selling.

It is the paradox of the sale: If you think the stock is about to double or triple, why would you part with any of it? Sensible folks would go get a loan, esp with interest rates so low.

paul2• 14 years ago

That's not a list of top shareholders (despite the headline). I think they only need to report the holdings of officers, directors, and anyone with more than 5%. Sean Parker does not fall into any of those categories, so they don't report his ownership.

olivercameron2• 14 years ago

Ah, that explains it.

sp332• 14 years ago

So what % of the company are they selling off for $5 Billion? I'm wondering what they're claiming the whole company to be worth.

trotsky3• 14 years ago

All of those numbers will be preliminary, they won't actually decide on number of shares offered and offering price (which determines their claimed valuation) until just before the offering. It depends on market conditions and what the large institutions say they're willing to pay.

dxbydt• 14 years ago

It looks like the accountant put in the perfect round figure of 1000 million for 2011 Net Income& then backed out all the other entries :) I used to do exactly that in my Accountancy 101 exams - Q.write the income statement for Acme Corp. What do you want Net Income to be ? XXX $. That means, TCO must be XXX - yyy, R&D must be XXX - zzz, and similarly back out everything else. Not saying they actually did that, just that seeing such perfectly round numbers reminded me of those exam problems.

chintan• 14 years ago

<Interesting/> "Mobile" appears as risk factor in 2 instances.

- Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results;

- Facebook user growth and engagement on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that we do not control;

ypcx• 14 years ago

They will be able to exert any control they want on the Windows Phone through Microsoft. Also, what prevents them from showing ads in mobile apps? They did a great work locking everyone out of functionality that would enable direct FB access, app developers can only access FB as an FB app, so no ad-less competition there.

Sthorpe• 14 years ago

"In the first quarter of 2012, our compensation committee discussed and approved a request by our CEO to reduce his base salary to $1 per year, effective January 1, 2013."

Awesome.

craigbellot2• 14 years ago

I never understood why management sometimes take $1 salary. Doesn't the IRS see that as non reasonable compensation?

wmf• 14 years ago

CEOs are still paying taxes on their non-salary compensation.

wh-uws• 14 years ago

All of your compensation is in stock and worth the stock price.

1) It looks good to investors: you've got to believe in it if your worth is in the stock, for instance most of Bill Gates net worth is in Microsoft stock and it would look bad if he sold it all,

2) You pay lower taxes: capital gains vs income, not to mention

3) it sounds good in the press and when people say it

tazzy531• 14 years ago

People complain when they take too big of a salary and complain when they take $1...

Can't make people happy.

daemin• 14 years ago

I had it explained to me that they have to take a salary to be eligible to receive company perks, such as a company car, travel expenses, etc. Therefore they take a nominal salary of $1 so that they are officially on the payroll and are receiving a salary, and hence can receive all the other perks and benefits through the company.

taylorwc• 14 years ago

3.711B in revenue and 3,200 employees at the end of 2011. That puts their revenue/employee numbers only slightly lower than Apple & Google, but beats Amazon. Impressive.

moxiemk1• 14 years ago

$1 Billion in profit => $1/(user year) in profit for 2011, correct?

That's pretty darn good money, but not a huge amount more room for user-growth. They'll grow by having new businesses/making current ones more profitable. New business would have to be monetizable (eventually, at least), current businesses would either have to convert better or become less costly to run.

Facebook is full of some smart cookies - it'll be interesting to see how they accomplish those paths.

brd2• 14 years ago

I was thinking the same thing. Considering they have ~42% of all users (assuming the billion internet user estimate) there is only so much growth available from relying on their current model of acquiring users and serving ads to them.

I would imagine a next logical step would be to expand its ad network beyond facebook (i.e. serve facebook ads outside of facebook itself), it would allow for a significant jump in growth potential while staying close to their core competency.

Toddward• 14 years ago

"We had 845 million monthly active users (MAUs) as of December 31, 2011."

That blows some estimates out of the water.

mwytock2• 14 years ago

Key information on revenue is on page 50. 85% of revenue comes from ads, which grew 69% Y/Y mostly driven by user growth (39% Y/Y) and showing a bunch more ads starting Q4 2010:

2011 Compared to 2010. Revenue in 2011 increased $1,737 million, or 88% compared to 2010. The increase was due primarily to a 69% increase in advertising revenue to $3,154 million. Advertising revenue grew due to a 42% increase in thenumber of ads delivered and an 18% increase in the average price per ad delivered. The increase in ads delivered was driven primarily by user growth. The number of ads delivered was also affected by many other factors including product changes that significantly increased the number of ads on many Facebook pages beginning in the fourth quarter of 2010, partially offset byan increase in usage of our mobile products, where we do not show ads, and by various product changes implemented in 2011that in aggregate modestly reduced the number of ads on certain pages. The increase in average price per ad delivered was affected by factors including improvements in our ability to deliver more relevant ads to users and product changes that contributed to higher user interaction with the ads by increasing their relative prominence.

jcampbell13• 14 years ago

The key information is on page 54-55: Why the massive jump in Q4 2011 revenue over Q3? It looks like there is a seasonality factor, but their explanation only covers Q4 2010, to Q4 2011.

This is going to be a super volatile stock. If there Q1 2012 revenue is flat QoQ, this is probably a $50B company, if it is up 15%, then this is probably a $100B company.

jcampbell13• 14 years ago

The key information is on page 54-55: Why the massive jump in Q4 2011 revenue over Q3? It looks like there is a seasonality factor, but their explanation only covers Q4 2010, to Q4 2011.

This is going to be a super volatile stock. If the Q1 2012 revenue is flat QoQ, this is probably a $50B company, if it is up 15%, then this is probably a $100B company.

mwytock2• 14 years ago

I was actually most curious to see if they had developed a source of revenue other than ads. It seems like the answer to that is mostly no, although they are working on payments.

I agree that ads revenue growth will be key for them in the short term. The Q4 2011 vs 2010 growth was 44% and it seems like perhaps the growth rate is slowing down.

Of course they're not yet showing ads on mobile..

omarish• 14 years ago

I'm curious as to what facebook did to generate $382k of revenue in 2004. Seems like a great start for a company of their size at the time. IIRC, they didn't turn on ads for a while afterwards.

Link: http://www.sec.gov/Archives/edgar/data/1326801/0001193125120...

scottkrager• 14 years ago

Not sure about 2004 but I bought an ad on facebook in 2005. It was for a specific university and that was about the extent of the targeting if I remember correctly...

revorad• 14 years ago

Zuckerberg's letter is really fantastic -http://techcrunch.com/2012/02/01/facebook-ipo-letter/.

I'm really proud of him for clearly and loudly representing the hacker way when the whole world is watching.

ColdAsIce• 14 years ago

What makes Zuckerberg a hacker?

pja• 14 years ago

So what if he isn't? He still gets the props for writing so clearly about his preference for that approach to product development.

I suspect it's also a shout out to future potential employees that he doesn't intend FB to change focus or style as a consequence of going public.

mpeg3• 14 years ago

he made a website used by 800 million people?

You might not necessarily agree with the extent the word "hacker" is applied to nowadays, but considering you are in a site called "hacker news" you probably should

lyime• 14 years ago

A small tidbit. FB paid Zuck $783,529 (3) in "other" compensation from his base 500k salary.

(3) The fine print.... The amount reported represent approximately $692,679 for costs related to personal use of aircraft chartered in connection with his comprehensive security program and on which family and friends flew during 2011.

Like a boss.

sriramk• 14 years ago

For someone worth close to $30b, compromising on things like flying and security seems silly. Amazed they aren't spending more.

phillmv• 14 years ago

Eeeeeh, I think it's one of those executive privilege things.

1) If he's already flying domestically and first class, that shaves what? An hour? Please.

2) The company doesn't have to charter a jet to fly friends and family.

So… let's just call it for the luxury that it is. They're not strapped for cash, after all.

(Besides, just how liquid is Mark Zuckerberg? He's only a billionaire on paper, right?)

hga• 14 years ago

Indeed.

One should also remember that in the infinite wisdom of the Congress and whoever was President at the time, any cash salary over $1 million gets an extra tax on top of normal income taxes. Better to pay for his security in before tax dollars.

newhouseb• 14 years ago

One of the interesting gems in this filing is at the very end, it details stock grants for acquisitions so you can infer the running rate of talent acquisitions. So for example, "On February 28, 2011, we issued 681,357 shares of our Class A common stock as consideration to a company in connection with our purchase of certain assets from the company." You can cross reference these with news and correlate approximate acquisition cost based on the estimate value of price per share assuming, say, a valuation of $100 billion. So I'm guessing that the company I mentioned is Octazen and assuming a $100 billion valuation (~$50 per share), this comes out to about $35 million (assuming an entirely stock acquisition - note that Facebook spent, for example, $20 million aggregate in cash on acquisitions in 2010).

jonnathanson2• 14 years ago

Facebook is heavily (heavily!) reliant on display advertising, all of which is a) challenged by the switch of its userbase to mobile, and b) going to hit critical mass eventually. No matter how smart you make display advertising, there's still a cap on how much you can foist onto users before you piss them off.

IMO, Facebook's future depends on two things:

1) Figuring out how to serve up contextually relevant ads on mobile platforms in a nonintrusive and, ideally, useful way.

2) Figuring out how to serve up contextually relevant ads outside of Facebook, to Facebook Connect-backended partner sites and apps. (Sort of like an AdSense/AdWords hybrid, but based on very intelligent user-interest and browsing data).

I'm betting on #2's being the runaway breadwinner for Facebook in the long run. The longterm strategy seems to be to reduce reliance/dependence on Facebook.com in favor of Facebook Connect.

ig16• 14 years ago

#2 doesn't require them to do anything special, Facebook ads are driven off user demographics and not page context.

mahmud3• 14 years ago

Facebook delivered us 200k uniques. Zero conversions.

Google brings us a few hundred a day, consisten conversion.

Apparel retail. FWIW.

As far as I'm concerned FB traffic is junk. Comes handy for load-testing though.

xxbondsxx• 14 years ago

You forgot about fraud systems. Right now they only collect money -- once you start giving away money to websites who host Facebook ads, the incentive for fraud now exists. Google has done a lot of work in just securing the AdWords system from malicious gaming

teej• 14 years ago

I've been saying this for a while now (http://news.ycombinator.com/item?id=3041689). Facebook's engagement is shifting to mobile. Their entire business model relies on web. Their app ecosystem has been crashing as a result, and display advertising is likely to follow.

Facebook is filled with smart people. They understand the trends better than we do. As you'll note, 4 of their top 5 Risk Factors relate to the web-to-mobile shift and the problems inherent with that.

From the filing:

#2 - "We generate a substantial majority of our revenue from advertising. The loss of advertisers, or reduction in spending by advertisers with Facebook, could seriously harm our business;"

#3 - "Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results;"

#4 - "Facebook user growth and engagement on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that we do not control;"

#5 - "We may not be successful in our efforts to grow and further monetize the Facebook Platform;"

jpdoctor4• 14 years ago

> and display advertising is likely to follow.

I think this is correct, and it explains why the IPO exit is happening now. Most of the insane growth (in profit as well as valuation) has already been squeezed out.

gabaix• 14 years ago

Mobile shift is a huge problem even with a pool of smart minds. Nothing can beat a thousand startups that designs mobile from the ground up.

pork3• 14 years ago

> #4 - "Facebook user growth and engagement on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that we do not control;"

Interesting. While the other points are gloomy-doomy and a bit vague, this one lends itself to a concrete solution, doesn't it?

ryanmerket• 14 years ago

A Facebook mobile ad network would be huge. Mobile publishers are already suffering with low eCPMs, so they are hungry for new solutions. Showing brands/banners is one thing, but showing mobile app ads is another.

Since a lot of mobile apps have some type of Facebook integration (ie: a Facebook app id), Facebook has a good idea of who has what apps installed and they can serve up apps that are relevant to the user both on the interest graph and the data of what other mobile apps they have installed.

Wouldn't be surprised to see them move into mobile advertising hard in 2012/2013.

* Disclaimer: This is all speculation, no insider information was divulged

sek5• 14 years ago

The people will still use the Desktop like before. The problem is, for messaging and status updates is mobile totally sufficient.

They talk much about Pictures, but most of the people i know don't post any. The big success of Facebook is the E-Mail IM replacement for young people, but it is very difficult to advertise on that. Who made ever money on IM and Mail? ICQ and AIM had impressive numbers, but were never a big success financially.

sycren2• 14 years ago

I'm wondering, this might seem absolutely ridiculous, but would Facebook not benefit from having their own mobile operating system, even if its based off Android. Services are no longer apps or on the web but part of the system. Phone numbers are obsolete, you would phone facebook contacts as you would on skype. Such a system could perhaps offer better advertising capabilities and offer another competitor against Google and Apple on the mobile landscape..

alain940402• 14 years ago

I disagree. I'm comparing Google AdWords and Facebook (http://blog.foundrs.com/2012/02/02/why-ill-buy-facebook-stoc...), and I don't see any virality with Google. So I'd worry about Google's sustainability before Facebook's.

So actually I don't worry about either company's continued success. Both Google and Facebook are here to stay and grow even bigger.

pessimist2• 14 years ago

Facebook will never grow revenue to 10x (matching Google) by continuing to sell display advertising on its own site.

However, it knows so much about users and keeps them logged in, so it definitely has potential to serve highly targeted or viral campaigns everywhere else on the web and mobile apps, a much better version of adsense.

Secondly, it is involving itself deeply in to user's habits and eventually may make a big play in to e-commerce, getting a cut out of every transaction made by the user (while frictionlessly sharing the information, of course). Credits is just in its infancy.

Finally, its learning so much about user's habits on the web that it can do a better job than Google at search, and make a killing on search ads.

If all this happens, $100B is a bargain.

startupfounder• 14 years ago

To piggyback on this they can take a page out of Amazon's playbook and do one click purchase with facebook credits.

Serving up ads on other websites is where the magic happens.

AJ007• 14 years ago

$100b a bargain, I'm not so sure. I'd be more inclined to describe it as a fair valuation.

This is the real reason Google is getting desperate about Google+, they are worried about FB launching its own hyper targeted ad network. Google has context and tons of advertisers, FB has context and deep demographics and quite a lot of advertisers.

guimarin• 14 years ago

i agree the outlooks on facebook are pretty good under your points. I should point out that Facebook, specifically zuckerburg has not shown interest in search, and has even said he does not want it in the past. It is also incredibly difficult to build an effective search engine. Incredibly difficult.

emp_• 14 years ago

Isn't HATEOAS (REST) a great case for #1? If all the APIs get their state from Facebook they could inject a 2-3 seconds ad between every XX requests or YY interval. I dislike ads just like the next guy, but this IMO is better than intrusive hooks inside the content, much like TV.

ngsayjoe• 14 years ago

The killer model would be Facebook implementing AdSense like product on websites across all the Internet ...

1) They have users logged in all the time ... they can serve targeted ads (e.g. gender based ads) 2) AdSense is monopolizing the market now

ramanujan• 14 years ago

Hmmm. I think the obvious transition would be to ship the Facebook Phone and heavily incorporate Facebook Credits.

The four things people do on phones (call, email, text, and nowadays photo-share) are all inherently social things. Crucially, your iPhone contacts list likely has only the first/last name and phone number for each person, whereas the Facebook app is far richer in its implementation of the very same contacts list -- because the person on the other side has gone to the trouble of keeping their address, phone, picture, and the like all fresh and up to date[1].

So the FB Phone would be an enormous improvement in contacts management over what we currently have, and an FB Phone Directory would probably not be long in following[2].

Once people are using the FB Phone, you'd want to heavily push FB Credits as the payment solution for everything. I am sure that from a fraud protection standpoint, the identity signals that an FB account provides are highly desirable to Visa and Mastercard. FB could also just cut out the middleman and do payments directly with an FB Card, instantly accepted by 800+ million people worldwide and countless businesses. Sign up for FB.com and accept/receive payments. Use the social graph for authentication, where each node has an authenticity rank (based on its date of first signup, number of non-commercial posts, number of authentic friends, and the like). It's easy to set up a fake email address, but much harder to fake a realistic profile for years and get "real people" to friend you and interact with you.

Thus, a Facebook purchase or clone of something like WePay or Square would seem like a logical move. Embrace the shift towards mobile and own mobile payments by owning identity. Owning identity means a lower risk profile and higher profit margin than any competitor in payments.

[1] Not incidentally, the use of the FB Phone would ensure that people have even more of an incentive to keep their contact information up to date and searchable.

[2] This directory would be a huge product in its own right and the core of a real social search product, something more along the lines of findpeopleonplus.com than anything that's called itself "social search" to this point. The purpose of social search is to find a person, not a web page.

vm• 14 years ago

Facebook already solved mobile with News Feed ads.

Today, the most effective FB ads are the ones that show up in the News Feed after your friends "Like" or take action on an ad or brand page. The ROI on these ads crushes that of traditional display ads (including those on the FB right-side margin) AND the targeting is still in its nascency.

The best part is that these ads transfer seamlessly to mobile or any future platform.

bojanbabic• 14 years ago

mobile use can be leveraged out by call-to-action approach including deals. ROI for call-to-action s much greater then for display ads and also revenue from deals can be more significant then it is today

patd2• 14 years ago

If you are logged on Facebook, never go on the website but still see the like-button that are scattered all around the web, do you count as an "monthly active user" ?

pork3• 14 years ago

No. A simple search of their site will yield that information to you. It's people who log into the site, either mobile or web.

alastair• 14 years ago

"We define a monthly active user as a registered Facebook user who logged in and visited Facebook through our website or a mobile device, or took an action to share content or activity with his or her Facebook friends or connections via a third-party website that is integrated with Facebook."

gggrgraham• 14 years ago

The Letter from mark has to be the coolest part.

http://theairspace.net/commentary/letter-mark/

The Hacker Way has grown up and lambasted Wall St.

ig16• 14 years ago

Reading this document makes me think Facebook don't know what's happening inside their own company. Facebook from all behavioural indications have been focused on maximizing short-term spend per advertiser rather than the long term revenue per user. Yet that doesn't seem to be reflected at all in their filing.

ig16• 14 years ago

If you disagree with this statement I'd suggest you comment explaining why rather than just down-voting. Speaking as someone who bought over 35 million ads on Facebook last year, it's pretty evident that there's a mismatch between what Facebook are doing in practice and their view of what they're doing as portrayed by their SEC filing.

whatusername2• 14 years ago

Rather than complaining about down-votes -- it would be awesome for you (who having bought a ton of FB ads knows that market really really well) to explain and justify your statement. Can you give us some examples of their short-term thinking?

alain940402• 14 years ago

Interesting salary history: 100% raise over 2 years.

Molly Graham, the daughter of Donald E. Graham, a member of our board of directors, is employed by us. During 2009, 2010, and 2011, Ms. Graham had total cash compensation, including base salary, bonus and other compensation, of $98,058, $133,620, and $189,168.

meric• 14 years ago

I would think that is a fair compensation considering Facebook doubled its profits over that time also.

gwern• 14 years ago

I doubt she was responsible for the doubling of profits. (And what of all the other employees...)

bibinou• 14 years ago

She changed jobs in April 2010, arguably with more responsabilities : http://www.linkedin.com/pub/molly-graham/6/658/a50

collypops• 14 years ago

"Effective January 1, 2013, Mr. Zuckerberg’s annual base salary will be reduced to $1."

In the business world, we can now call this "Doing a Jobs".

apaprocki• 14 years ago

Or a Elon Musk, Sergey Brin, Larry Page, Mike Bloomberg..

http://en.wikipedia.org/wiki/One-dollar_salary

ryanwaggoner• 14 years ago

I found this interesting:

http://en.wikipedia.org/wiki/One-dollar_salary

blantonl• 14 years ago

Per the S-1 filing, Facebook did $1 billion dollars in net revenue in 2011.

A valuation of $80-$100 billion dollars after the IPO would mean Facebook would be trading at 80 to 100x earnings.

Facebook is going to need to see some serious growth to continue to command a PE ratio like that long term. Serious Growth

ldayley• 14 years ago

Huge P/E ratio hasn't seemed to hurt shares of Salesforce.com too much.

jacques_chester• 14 years ago

Alpha Centauri is an untapped market.

LearnYouALisp• 14 years ago

Think of all the arcane technology to recover from the ruins!

newguy0• 14 years ago

Looks like members of the exec team (COO, CTO, etc.) will each be worth 100MM post IPO

Wonder what amt of RSUs the rank-and-file are getting?

Also, it'll be interesting to see how the culture changes when a good % of the populace are millionaires

sek5• 14 years ago

Wow look at site 54, they pushed their revenue this year to a billion in December. How are they doing this?

dcaranda5• 14 years ago

4th quarter, and December in particular, are usually huge in advertising cause of the holiday shopping season.

ChrisNorstrom• 14 years ago

I wonder how many employees are going to ditch the company after it goes public. They might have stuck around just for the IPO so they can hit big, take the money, leave, and start their own companies.

tdenkinger• 14 years ago

They won't be able to exercise their vested options for several months (usually six, as I recall). And many won't have vested 100% yet. That keeps people around.

ajays2• 14 years ago

Facebook's revenue will eventually shift from display advertising to data selling. There will come a time when no display campaign will run without input from Facebook.

Before any impression on any online media, advertisers will make a query to Facebook to find out which of the ads should be shown to this user. And Facebook will charge a small fee for each such query.

Johngibb• 14 years ago

If they filed for an IPO today, how long will it be until their shares are actually available to an average investor?

mikejestes• 14 years ago

Sounds like 2nd quarter, maybe May.

dcaranda5• 14 years ago

Technically, just cause you file doesn't necessarily mean you IPO. Depends how their roadshow goes. But yeah - prolly May

swlkr• 14 years ago

I agree with what people say about a Facebook phone. They might offer a smartphone for a heavily subsidized price and/or a feature phone for free. They might even offer free unlimited data, the catch for either model (and the data) is the that you log in with Facebook first thing, and maybe they'll restrict you to using only Facebook services, like messenger.

hessenwolf• 14 years ago

An adsense product from facebook would be really interesting, but I am not interested in adverstising on facebook.com. Do they already have this?

visegrip• 14 years ago

Filing a S1 when business is slowing down. Genius!

Subscriber rates have fallen and the future is filled with uncertainty. Let's go Public!

Google SYWP changing the game of advertising. Panic!

Exit strategy for investors to monetize their investments. Priceless!

hc8217• 14 years ago

I just read through the entire S-1 before reading anything in the media about it. I liveblogged the tidbits I found interesting:

http://hc8217.tumblr.com/

shaggy• 14 years ago

I really wish everyone would stop talking about mobile access like it's this entirely new thing that's never been done before. Using facebook from a mobile device is absolutely, 100%, without room for debate using "the web". Sure it's a mobile device, but it's still HTTP and it's still a mobile browser based app. Just because it's not a "desktop" version of a browser does not mean the access isn't "web".

politician• 14 years ago

The issue with mobile is the limited screen real estate and the impact that has on being able to place ads. The mobile environment is different from the desktop environment, so it makes sense to distinguish the two. But you're right, calling the later "web" is a misnomer.

dcaranda5• 14 years ago

I put together a really quick valuation multiples analysis based on financial info from the S-1: https://twitter.com/#!/daranda/status/164854828957310978/pho...

Disclaimer: This analysis is flawed

- Using multiples is not a perfect method to understand the valuation of a business. It's one of many. It's a proxy. It's quick.

- This chart uses 2011 financial data. Facebook is growing fast - their multiples would come down significantly if we used 2012 projections - which we don't have. If I had more than 10 minutes on this - I would use 2nd half of 2011 or Q4 2011 as a run rate.

Quick Thoughts (Not Conclusions):

- In Ben Horowitz's argument against the bubble - he says the valuations they were seeing at AH for large private tech companies (like facebook) is in line with large public tech companies (google). So just looking at the data quickly, I was disappointed that FB appeared to have higher multiples (his blog post: http://bhorowitz.com/2011/03/24/bubble-trouble-i-don%E2%80%9...)

- DAYAM FB has a crazy operating margin

- And they're getting better at monetizing each user. User growth was 40% from end of 2010 to end of 2011, while revenue grew 80% (http://allthingsd.com/20120201/facebook-has-845-million-user...)

Facebook's S-1 Filing

Related Stories