Wednesday, February 1, 2012

The 6 Most Surprising Things From Facebook’s IPO Filing

The 6 Most Surprising Things From Facebook’s IPO Filing:

Zuckerberg on stage at an event in 2011.

After years of waiting for a peek behind Facebook’s financial curtain, the company finally filed its prospectus for an initial public offering on Wednesday, seeking $5 billion in funding. It’s on track to become one of the largest IPOs in tech company history.

An exciting time for investors and Wall Street, no doubt, and the S-1 filing will most likely be scrutinized for some time to come. But unless you’re working for Goldman Sachs, you’re probably not well-versed in the ins-and-outs of stuffy financial paperwork.

We’ve taken a quick and dirty look at some of the juicier bits of Facebook’s filings. Here’s what jumped out at us the most.

Zynga’s Massive Footprint

We knew Zynga was going to be featured prominently in the S-1 — the foundation of Zynga’s core business is built atop the Facebook platform — but we didn’t know just how much Facebook relied on Zynga.

The social gaming company accounted for 12 percent of Facebook’s annual revenues in 2011, a massive figure derived from payment processing fees involved in the sale of Zynga’s virtual goods as well as advertising purchased by Zynga directly. Furthermore, each of Zynga’s social games produce a significant number of additional pages against which Facebook can sell display advertising, boosting revenues all the more.

In other words, while Zynga still needs Facebook, Facebook is quite attached to Zynga — so much so that Facebook includes the data in its “risk factors” section.

Photo: Jon Snyder/

Mobile is Huge, but Still Not a Moneymaker

Facebook has made it clear for some time: Mobile is the future. Led by CTO Bret Taylor, the company will continue to focus on HTML5 development for mobile devices.

It’s a good thing, considering 425 million people visited the site on a mobile device in the month of December. That’s over half of the company’s user base.

What’s worrisome, however, is that Facebook’s precious ads aren’t being served up to mobile users. Read that again: Facebook’s main revenue stream is lost on over half of the 845 million users coming to the site in December. If that trend continues and Facebook fails to monetize mobile quickly, it’s not a pretty sign.

A Twitter-esque Move: Sponsored Posts

Speaking of mobile, Facebook could be working on a way to monetize site visits from phones and tablets. And the company may take its cues from Twitter.

The S-1 states that the increasing growth of mobile remains a risk for the company until it can successfully monetize the platform, which could include inserting “sponsored posts” into users’ news feeds on mobile devices. While Facebook doesn’t go into what that is exactly, it seems akin to Twitter’s business strategy with the incorporation of “promoted tweets” — Twitter messages paid for by companies and featured prominently at the top of Twitter users’ feeds.

Facebook allows that it could attempt to deliver traditional display ads on of mobile devices, though we’re having a difficult time thinking that through, considering the form factors. Tablets? Maybe. Phones, difficult.

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