February 02, 2012 by Chris Taylor
For MASHABLE
Here’s one of the more painful parts of taking a company public: You have to make an honest assessment, in front of the whole world, of all the things that could kill your business. Facebook is no exception.
In its SEC filing, as required by law, the company outlined a whopping 35 “risk factors” that could “materially and adversely affect” Facebook. It’s a comprehensive list of every threat the social network currently faces. Some are head-slappingly obvious (they could lose users and advertisers), while others are more revealing (Facebook isn’t making any money from its mobile platform — so what if that grows and web users shrink?)
That may seem like a lot, but not in comparison to recent tech IPOs. LinkedIn listed 42 risk factors in its filing, Zynga offered 44, and Groupon had 55.
Does that make Facebook a better bet for investors? You be the judge. What follows is a summary, in plain (or at least plainer) English, of the things Facebook says could kill it.
In other words, here is every single little worry that keeps Mark Zuckerberg up at night. We’ve bolded the ones that sound particularly troubling to us.
1. We could simply lose users, or fail to add new ones.
2. We could lose advertisers — and new technology may let users block ads.
3. Facebook’s mobile platform doesn’t show ads — so the more that grows, the worse for us.
4. The platform for Facebook apps might not be successful.
5. The competition from Google, Microsoft and Twitter could heat up — not to mention other social networks around the world.
6. More governments could restrict access to Facebook.
7. Users could turn their noses up at new products.
8. The Facebook culture is all about rapid innovation and getting users engaged — and that could come at the cost of profits.
9. Unspecified future events could tarnish our brand.
10. Bugs might give people access to users’ information that they’re not supposed to see.
11. The media could turn on us.
12. Our quarterly financial results could be difficult to predict.
13. Zynga accounts for 12% of our revenue. If we part ways, that could seriously hurt us.
14. Our revenue grew by 88% last year — and that’s simply not sustainable. Growth is bound to decline.
15. The U.S. laws and regulations we’re governed by could change or be reinterpreted.
16. If our patents and copyrights aren’t granted — or aren’t effective — it could seriously hurt us.
17. We have some patent lawsuits on our hands that could end badly.
18. We’re also involved in class-action lawsuits, and we could lose them too.
19. Mark Zuckerberg has a massive amount of shares, which concentrates power in the hands of one man.
20. There’s a complicated tax liability connected to a particular kind of stock unit we gave out — one that will be taxed at 45%.
21. If we need more rounds of investment, the terms might not be reasonable.
22. Costs might grow faster than revenue.
23. A lot of our servers are handled by third parties, and they might be disrupted.
24. We’ve started building a lot of our own data centers to handle traffic, and we’ve got limited experience doing this kind of thing.
25. Our software is incredibly complex and may have a lot of bugs.
26. We can’t say for sure that we’ll handle our growth effectively — we have more than 3,000 employees now, and that could spin out of control.
27. If we lose our leaders, like Zuckerberg and COO Sheryl Sandberg, that would really harm us.
28. People might sue us over all sorts of stuff posted on Facebook — intellectual property, copyright, defamation, and so on.
29. Viruses, hacking, phishing and malware. Oh my.
30. Payment systems in Facebook apps could mean new government regulations.
31. We’re continually expanding abroad, and we may not understand all the risks in new countries.
32. We’re planning to acquire lots of other companies, which could disrupt everything at Facebook.
33. We might default on our leases or our debt.
34. Our tax liabilities, in general, are bigger than we thought.
35. U.S. tax code reform, if it happens, might hit us where it hurts.
"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
"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
Source: MASHABLE
