Potential buyers got their first look at Facebook financials yesterday, which showed the company produced a $1 billion profit last year from $3.71 billion in revenues. The company derives 85% of those revenues from advertising, with the rest from social gaming and other fees. The initial public offering could value the social network between $75 billion and $100 billion, putting the company on track for one of the biggest U.S. stock-market debuts of all time.
Facebook's membership growth has been staggering. The company said in its filing that it has 845 million users globally, up 39% from a year earlier.
Facebook takes pains to mention the importance of privacy, mentioning the word 35 times in the filing, and even listing its "privacy and sharing settings" as one of the ways the company creates value.
The number of ads delivered on the site grew 42% and the average price per ad grew 18% over 2011 from 2010, according to the filing.
The company attributed the improvement to a vast trove of information that allows marketers to "show their ads to a subset of our users based on demographic factors such as age, location, gender, education, work history, and specific interests that they have chosen to share with us on Facebook or by using the Like button around the web or on mobile devices."
(Wall Street Journal)
While all this is quite interesting data to me, there was one particular piece in the IPO filing that caught my attention:
As a matter of required disclosure, to caution investors against buying blindly, Facebook had to release a list of "risks" on the S-1 Registration Statement.
A quick review of those risks, which follows, made me think...this is a terrific exercise and one that law firms could benefit from-a REALLY HONEST assessment of their "risks."
SIDE BAR: A SWOT analysis completed during strategic planning-strengths, weaknesses, opportunities and threats-will likely get you to the answers, as I'm thinking threats could be substituted for "risks." With one caveat: your list of threats cannot be unfounded nor cliché. I've seen many law firm SWOT reports, and I have to say that too many have made me wonder if they were just filling in the blanks or if they really knew or understood their actual market risks?
Now, if a law firm did plunge into a market risk assessment, what if instead of keeping risks hidden in the executive boardroom, what if that list was distributed among the firm's stakeholders (not just partners but also employees whose careers are dependent upon the success of the law firm)? Couldn't that help the firm's best interest? After all, they are all investors at various levels and...they have ability and responsibility to protect the firm's best interests from its risks. How can they do that if they don't know what they are? Management? Do all your attorneys know? Is it practical to share that information with an associate who might be on his way out in another year and off to a competing law firm?
What do you think? Maybe not? Just saying...I think it would be of great benefit on several levels.
Here is the list pulled from the Facebook SEC Form S-1 Registration Statement. Thanks to Brian Solis for pointing it out on his blog post of Feb 1, 2012.
FACEBOOK RISK FACTORS
Risks Related to Our Business and Industry
If we fail to retain existing users or add new users, or if our users decrease their level of engagement with Facebook, our revenue, financial results, and business may be significantly harmed.
The size of our user base and our users' level of engagement are critical to our success. We had 845 million monthly active users (MAUs) as of December 31, 2011. Our financial performance has been and will continue to be significantly determined by our success in adding, retaining, and engaging active users. We anticipate that our active user growth rate will decline over time as the size of our active user base increases, and as we achieve higher market penetration rates. To the extent our active user growth rate slows, our business performance will become increasingly dependent on our ability to increase levels of user engagement in current and new markets. If people do not perceive our products to be useful, reliable, and trustworthy, we may not be able to attract or retain users or otherwise maintain or increase the frequency and duration of their engagement. A number of other social networking companies that achieved early popularity have since seen their active user bases or levels of engagement decline, in some cases precipitously. There is no guarantee that we will not experience a similar erosion of our active user base or engagement levels. A decrease in user retention, growth, or engagement could render Facebook less attractive to developers and advertisers, which may have a material and adverse impact on our revenue, business, financial condition, and results of operations. Any number of factors could potentially negatively affect user retention, growth, and engagement, including if: