From slowing growth to scant mobile dollars to a heavier-than-expected reliance on
, prospective investors were given some revealing insights into Facebook's world.
Despite boasting over 845 million users across its network, Facebook says in its so-called S-1 document that it expects its active user growth rate to decline over time as it achieves higher market penetration and increased competition. These signs are already starting to show.
While the number of users in Brazil and India continues to climb -- representing increases of 268% and 132%, respectively -- growth in the U.S. has slowed to 16%. Facebook's ability to increase its user base is critical to revenue growth by influencing the number of ads that the site shows, the value of those ads and the number of payment transactions that occur.
"If we are unable to maintain and increase our user base and user engagement, our revenue, financial results, and future growth potential may be adversely affected," the S-1 said.
One of the most surprising elements of Facebook's S-1 is that, despite the company's heavy reliance on mobile platforms, it does not make any money from its mobile products.
Of the $3.71 billion in revenue Facebook generated in 2011, no "meaningful" revenue was generated from its mobile platforms, the company said.
Facebook had more than 425 million users accessing Facebook through its various mobile products (iPhone, Android, iPad, and BlackBerry apps) in December 2011. The company said that it expects mobile growth will actually surpass the growth rate of overall users (845 million) as it continues to focus on developing mobile products. "We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven," the filing said.
Greater-Than-Expected Reliance on Zynga
maker Zynga generated 12% of Facebook's revenue in 2011 through payment processing from the sale of virtual goods as well as advertising purchased through the social gaming firm. If Zynga chooses not to feature its games on Facebook's platform or if Facebook fails to maintain a solid relationship with Zynga, its business could be severely hurt.
Zynga users must use Facebook Credits -- the social network's virtual currency -- to pay for goods on the site. Facebook then keeps a 30% cut of goods purchased from Zynga's games.
Advertising Revenue Slowdown
Advertising revenue growth slowed markedly from 2009 to 2011. Growth dropped from 144% from 2009 to 2010, to 68.9% from 2010 to 2011. Facebook generated $764 million in advertising revenue in 2009, $1.89 billion in 2010, and $3.15 billion in 2011.
5. Payments Platform Details
Despite some of the caveats seen in the S-1, Facebook does expect big things from its Payments platform.
Facebook expects the market for virtual goods to increase over 100% from 2010 to 2014, jumping from $7 billion to $15 billion. Facebook takes a 30% fee from Zynga for the virtual goods sold for games such as FarmVille, Mafia Wars and other games. The company said that it may seek to extend its Payments platform to "other types of apps in the future," but did not say exactly what types of apps it planned to expand into.
Revenue from Payments and other fees rose from $106 million in 2010 to $557 million in 2011.
--Written by Olivia Oran and Chris Ciaccia in New York.
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