Caja PDF

Comparta fácilmente sus documentos PDF con sus contactos, la web y las redes sociales.

Compartir un archivo PDF Gestor de archivos Caja de instrumento Buscar PDF Ayuda Contáctenos



facebookS1 .pdf



Nombre del archivo original: facebookS1.pdf
Título: Registration Statement on Form S-1
Autor: LeeAnn Prescott

Este documento en formato PDF 1.6 fue generado por Google Chrome / Mac OS X 10.6.8 Quartz PDFContext, y fue enviado en caja-pdf.es el 29/06/2014 a las 10:53, desde la dirección IP 95.61.x.x. La página de descarga de documentos ha sido vista 3374 veces.
Tamaño del archivo: 12.1 MB (201 páginas).
Privacidad: archivo público




Descargar el documento PDF









Vista previa del documento


S-1 1 d287954ds1.htm REGISTRATION STATEMENT ON FORM S-1
Table of Contents
As filed with the Securities and Exchange Commission on February 1, 2012

Registration No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933

Facebook, Inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

7370
(Primary Standard Industrial
Classification Code Number)

20-1665019
(IRS Employer
Identification No.)

Facebook, Inc.
1601 Willow Road
Menlo Park, California 94025
(650) 308-7300
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

David A. Ebersman
Chief Financial Officer
Facebook, Inc.
1601 Willow Road
Menlo Park, California 94025
(650) 308-7300
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Please send copies of all communications to:
Gordon K. Davidson, Esq.
Jeffrey R. Vetter, Esq.
James D. Evans, Esq.
Fenwick & West LLP
801 California Street
Mountain View, California 94041
(650) 988-8500

Theodore W. Ullyot, Esq.
David W. Kling, Esq.
Michael L. Johnson, Esq.
Facebook, Inc.
1601 Willow Road
Menlo Park, California 94025
(650) 308-7300

William H. Hinman, Jr., Esq.
Daniel N. Webb, Esq.
Simpson Thacher & Bartlett LLP
2550 Hanover Street
Palo Alto, California 94304
(650) 251-5000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the
following box: ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the

definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨
Non-accelerated filer x

(Do not check if a smaller reporting company)

Accelerated filer ¨
Smaller reporting company ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of
Securities to be Registered
Class A Common Stock, $0.000006 par value

Proposed Maximum
Aggregate
Offering Price(1)(2)

Amount of
Registration
Fee

$5,000,000,000

$573,000

(1) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.
(2) Includes shares that the underwriters have the option to purchase to cover over-allotments, if any.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to
said Section 8(a), may determine.

Table of Contents
The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities
until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these
securities and neither we nor the selling stockholders are soliciting offers to buy these securities in any state where the offer or sale is not
permitted.

PROSPECTUS (Subject to Completion)
Dated February 1, 2012

Shares

CLASS A COMMON STOCK
Facebook, Inc. is offering
shares of its Class A common stock and the selling stockholders are offering
shares
of Class A common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our
initial public offering and no public market currently exists for our shares of Class A common stock. We anticipate that the
initial public offering price will be between $
and $
per share.

We have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the
holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion.
Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten
votes per share and is convertible at any time into one share of Class A common stock. Outstanding shares of Class B
common stock will represent approximately
% of the voting power of our outstanding capital stock following this
offering, and outstanding shares of Class A common stock and Class B common stock held by, or subject to voting control
by, our founder, Chairman, and CEO, Mark Zuckerberg, will represent approximately
% of the voting power of our
outstanding capital stock following this offering.

We intend to apply to list our Class A common stock on

under the symbol “FB.”

Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 11.
PRICE $

Price to
Public

Per share
Total

A SHARE

Underwriting
Discounts and
Commissions

$
$

Proceeds to
Facebook

$
$

Proceeds to
Selling
Stockholders

$
$

We and the selling stockholders have granted the underwriters the right to purchase up to an additional
Class A common stock to cover over-allotments.

$
$
shares of

The Securities and Exchange Commission and state regulators have not approved or disapproved of these securities, or
determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of Class A common stock to purchasers on

MORGAN STANLEY
BofA MERRILL LYNCH

, 2012

J.P. MORGAN
BARCLAYS CAPITAL

, 2012.

GOLDMAN, SACHS & CO.
ALLEN & COMPANY LLC

Table of Contents

Table of Contents

Table of Contents
TABLE OF CONTENTS
Page

Prospectus Summary
Risk Factors
Special Note Regarding Forward-Looking
Statements
Industry Data and User Metrics
Use of Proceeds
Dividend Policy
Capitalization
Dilution
Selected Consolidated Financial Data
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Letter from Mark Zuckerberg
Business

Page

Management
Executive Compensation
Related Party Transactions
Principal and Selling Stockholders
Description of Capital Stock
Shares Eligible for Future Sale
Material U.S. Federal Tax Considerations for NonU.S. Holders of Class A Common Stock
Underwriting
Legal Matters
Experts
Where You Can Find Additional Information
Index to Consolidated Financial Statements

1
11
33
33
34
34
35
38
40
42
67
71

95
103
123
126
130
137
140
144
150
150
150
F-1

Neither we, nor the selling stockholders, nor the underwriters, have authorized anyone to provide any information or to
make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared.
We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give
you. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of our Class A common stock only
in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our Class A common stock. Our
business, financial condition, results of operations, and prospects may have changed since that date.
The information in this preliminary prospectus is not complete and is subject to change. No person should rely on the
information contained in this document for any purpose other than participating in our proposed initial public offering, and
only the preliminary prospectus dated
, 2012, is authorized by us to be used in connection with our proposed
initial public offering. The preliminary prospectus will only be distributed by us and the underwriters named herein and no
other person has been authorized by us to use this document to offer or sell any of our securities.
Until
, 2012 (25 days after the commencement of our initial public offering), all dealers that buy, sell, or
trade shares of our Class A common stock, whether or not participating in our initial public offering, may be required to
deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or subscriptions.
For investors outside the United States: Neither we, nor the selling stockholders, nor the underwriters have done
anything that would permit our initial public offering or possession or distribution of this prospectus in any jurisdiction
where action for that purpose is required, other than in the United States. Persons outside the United States who come into
possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares
of our Class A common stock and the distribution of this prospectus outside of the United States.
i

Table of Contents

PROSPECTUS SUMMARY
This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not
complete and does not contain all of the information you should consider in making your investment decision. You
should read the entire prospectus carefully before making an investment in our Class A common stock. You should
carefully consider, among other things, our consolidated financial statements and the related notes and the sections
entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included elsewhere in this prospectus.
FACEBOOK, INC.
Our mission is to make the world more open and connected.
People use Facebook to stay connected with their friends and family, to discover what is going on in the world
around them, and to share and express what matters to them to the people they care about.
Developers can use the Facebook Platform to build applications (apps) and websites that integrate with Facebook to
reach our global network of users and to build products that are more personalized, social, and engaging.
Advertisers can engage with more than 800 million monthly active users (MAUs) on Facebook or subsets of our users
based on information they have chosen to share with us such as their age, location, gender, or interests. We offer
advertisers a unique combination of reach, relevance, social context, and engagement to enhance the value of their ads.
We believe that we are at the forefront of enabling faster, easier, and richer communication between people and that
Facebook has become an integral part of many of our users’ daily lives. We have experienced rapid growth in the number
of users and their engagement.



We had 845 million MAUs as of December 31, 2011, an increase of 39% as compared to 608 million MAUs as of
December 31, 2010.



We had 483 million daily active users (DAUs) on average in December 2011, an increase of 48% as compared to
327 million DAUs in December 2010.



We had more than 425 million MAUs who used Facebook mobile products in December 2011.



There were more than 100 billion friend connections on Facebook as of December 31, 2011.



Our users generated an average of 2.7 billion Likes and Comments per day during the three months ended
December 31, 2011.
1

Table of Contents

For a description of how we calculate our MAUs and DAUs and factors that can affect these metrics, see “Industry
Data and User Metrics” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Trends in Our User Metrics.”
How We Create Value for Users
Our top priority is to build useful and engaging products that enable you to:


Connect with Your Friends. With 845 million MAUs worldwide, our users are increasingly able to find and stay
connected with their friends, family, and colleagues on Facebook.



Discover and Learn. We believe that users come to Facebook to discover and learn more about what is going on
in the world around them, particularly in the lives of their friends and family and with public figures and
organizations that interest them.



Express Yourself. We enable our users to share and publish their opinions, ideas, photos, and activities to
audiences ranging from their closest friends to our 845 million users, giving every user a voice within the
Facebook community.



Control What You Share. Through Facebook’s privacy and sharing settings, our users can control what they
share and with whom they share it.



Experience Facebook Across the Web. Through apps and websites built by developers using the Facebook
Platform, our users can interact with their Facebook friends while playing games, listening to music, watching
movies, reading news, and engaging in other activities.



Stay Connected with Your Friends on Mobile Devices. Through the combination of our mobile sites,
smartphone apps, and feature phone products, users can bring Facebook with them on mobile devices wherever
they go.

Foundations of the Social Web
We believe that the web, including the mobile web, is evolving to become more social and personalized. This
evolution is creating more rewarding experiences that are centered on people, their connections, and their interests. We
believe that the following elements form the foundation of the social web:


Authentic Identity. We believe that using your real name, connecting to your real friends, and sharing your
genuine interests online create more engaging and meaningful experiences. Representing yourself with your
authentic identity online encourages you to behave with the same norms that foster trust and respect in your
daily life offline. Authentic identity is core to the Facebook experience, and we believe that it is central to the
future of the web. Our terms of service require you to use your real name and we encourage you to be your true
self online, enabling us and Platform developers to provide you with more personalized experiences.



Social Graph. The Social Graph represents the connections between people and their friends and interests. Every
person or entity is represented by a point within the graph, and the affiliations between people and their friends
and interests form billions of connections between the points. Our mapping of the Social Graph enables
Facebook and Platform developers to build more engaging user experiences that are based on these connections.



Social Distribution. Over time, people are consuming and creating more kinds of information at a faster pace
across a broader range of devices. The growing volume of information makes it challenging to find meaningful
and trusted content and to effectively make your voice heard. Facebook organizes and prioritizes content and
serves as a powerful social distribution tool delivering to users what we believe they will find most compelling
based on their friends and interests.
2

Table of Contents

How We Create Value for Developers Through the Facebook Platform
The Facebook Platform is a set of development tools and application programming interfaces (APIs) that enables
developers to easily integrate with Facebook to create social apps and websites and to reach our 845 million users.
Platform developers build experiences that allow our users to connect and share with friends while engaging in a wide
range of activities. Platform developers range from a student on his or her computer at home to teams of programmers at
leading websites. We are focused on the growth and success of Platform developers by enabling:


Personalized and Social Experiences. We enable Platform developers to create better products that are
personalized and social and that offer new ways for our users to engage with friends and share experiences across
the web and on mobile devices. For example, a Facebook user can visit the Pandora website and immediately
begin listening to a personalized radio station that is customized based on the bands the user Likes on
Facebook.



Social Distribution. We enable Platform developers to reach our global user base and use our social distribution
channels to increase traffic to their apps and websites.



Payments. We provide an online payments infrastructure that enables Platform developers to receive payments
from our users in an easy-to-use, secure, and trusted environment.

How We Create Value for Advertisers and Marketers
We offer advertisers and marketers a unique combination of reach, relevance, social context, and engagement:


Reach. Facebook offers the ability to reach a vast consumer audience of over 800 million MAUs with a single
advertising purchase.



Relevance. Advertisers can specify that we show their ads to a subset of our users based on demographic factors
and specific interests that they have chosen to share with us on Facebook or by using the Like button around the
web. We allow advertisers to select relevant and appropriate audiences for their ads, ranging from millions of
users in the case of global brands to hundreds of users in the case of smaller, local businesses.



Social Context. We believe that the recommendations of friends have a powerful influence on consumer interest
and purchase decisions. We offer advertisers the ability to include “social context” with their marketing
messages. Social context is information that highlights a user’s friends’ connections with a particular brand or
business, for example, that a friend Liked a product or checked in at a restaurant. We believe that users find
marketing messages more engaging when they include social context.



Engagement. We believe that the shift to a more social web creates new opportunities for businesses to engage
with interested customers. Any brand or business can create a Facebook Page to stimulate an ongoing dialog
with our users.

Our Market Opportunity
Our Advertising Market Opportunity
Advertisers’ objectives range from building long-term brand awareness to stimulating an immediate purchase. We
offer advertising solutions that are designed to be more engaging and relevant for users in order to help advertisers better
achieve their goals. Facebook’s combination of reach, relevance, social context, and engagement gives advertisers
enhanced opportunities to generate brand awareness and affiliation, while also creating new ways to generate near-term
demand for their products from consumers likely to have purchase
3

Table of Contents

intent. According to an industry source, total worldwide advertising spending in 2010 was $588 billion. Our addressable
market opportunity includes portions of many existing advertising markets, including the traditional offline branded
advertising, online display advertising, online performance-based advertising, and mobile advertising markets.
Advertising on the social web is a significant market opportunity that is still emerging and evolving. We believe that
most advertisers are still learning and experimenting with the best ways to leverage Facebook to create more social and
valuable ads.
Our Market Opportunity for Payments
When users purchase virtual and digital goods from our Platform developers using our Payments infrastructure, we
receive fees that represent a portion of the transaction value. Currently, substantially all of the Payments transactions
between our users and Platform developers are for virtual goods used in social games. According to an industry source, the
worldwide revenue generated from the sale of virtual goods increased from $2 billion in 2007 to $7 billion in 2010, and is
forecasted to increase to $15 billion by 2014. We currently require Payments integration in games on Facebook, and we
may seek to extend the use of Payments to other types of apps in the future.
Our Strategy
We are in the early days of pursuing our mission to make the world more open and connected. We believe that we
have a significant opportunity to further enhance the value we deliver to users, developers, and advertisers. Key elements
of our strategy are:


Expand Our Global User Community. We continue to focus on growing our user base across all geographies,
including relatively less-penetrated, large markets such as Brazil, Germany, India, Japan, Russia, and South
Korea. We intend to grow our user base by continuing our marketing and user acquisition efforts and enhancing
our products, including mobile apps, in order to make Facebook more accessible and useful.



Build Great Social Products to Increase Engagement. We prioritize product development investments that we
believe will create engaging interactions between our users, developers, and advertisers on Facebook, across the
web, and on mobile devices. We continue to invest significantly in improving our core products such as News
Feed, Photos, and Groups, developing new products such as Timeline and Ticker, and enabling new Platform
apps and website integrations.



Provide Users with the Most Compelling Experience. Facebook users are sharing and receiving more
information across a broader range of devices. To provide the most compelling user experience, we continue to
develop products and technologies focused on optimizing our social distribution channels to deliver the most
useful content to each user by analyzing and organizing vast amounts of information in real time.



Build Engaging Mobile Experiences. We are devoting substantial resources to developing engaging mobile
products and experiences for a wide range of platforms, including smartphones and feature phones. In addition,
we are working across the mobile industry with operators, hardware manufacturers, operating system providers,
and developers to improve the Facebook experience on mobile devices and make Facebook available to more
people around the world. We believe that mobile usage is critical to maintaining user growth and engagement
over the long term.



Enable Developers to Build Great Social Products Using the Facebook Platform. The success of our Platform
developers and the vibrancy of our Platform ecosystem are key to increasing user engagement.
4

Table of Contents

We continue to invest in tools and APIs that enhance the ability of Platform developers to deliver products that
are more social and personalized and better engage users on Facebook, across the web, and on mobile devices.
Additionally, we plan to invest in enhancing our Payments offerings and in making the Payments experience on
Facebook as convenient as possible for users and Platform developers.


Improve Ad Products for Advertisers and Users. We plan to continue to improve our ad products in order to
create more value for advertisers and enhance their ability to make their advertising more social and relevant for
users. Our advertising strategy centers on the belief that ad products that are social, relevant, and well-integrated
with other content on Facebook can enhance the user experience while providing an attractive return for
advertisers. We intend to invest in additional products for our advertisers and marketers while continuing to
balance our monetization objectives with our commitment to optimizing the user experience.

Summary Risk Factors
Our business is subject to numerous risks described in the section entitled “Risk Factors” and elsewhere in this
prospectus. You should carefully consider these risks before making an investment. Some of these risks include:


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;



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;



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;



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



Our business is highly competitive, and competition presents an ongoing threat to the success of our business;



Improper access to or disclosure of our users’ information could harm our reputation and adversely affect our
business;



Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data
protection, and other matters. Many of these laws and regulations are subject to change and uncertain
interpretation, and could harm our business;



Our CEO has control over key decision making as a result of his control of a majority of our voting stock;



The loss of Mark Zuckerberg, Sheryl K. Sandberg, or other key personnel could harm our business;



We anticipate that we will expend substantial funds in connection with tax withholding and remittance
obligations related to the initial settlement of our restricted stock units (RSUs) approximately six months
following our initial public offering;



The market price of our Class A common stock may be volatile or may decline, and you may not be able to resell
your shares at or above the initial public offering price; and
5

Table of Contents



Substantial blocks of our total outstanding shares may be sold into the market as “lock-up” periods end, as
further described in “Shares Eligible for Future Sale.” If there are substantial sales of shares of our common stock,
the price of our Class A common stock could decline.

Corporate Information
We were incorporated in Delaware in July 2004. Unless expressly indicated or the context requires otherwise, the
terms “Facebook,” “company,” “we,” “us,” and “our” in this prospectus refer to Facebook, Inc., a Delaware corporation,
and, where appropriate, its wholly-owned subsidiaries. The term “Facebook” may also refer to our products, regardless of
the manner in which they are accessed. Our principal executive offices are located at 1601 Willow Road, Menlo Park,
California 94025, and our telephone number is (650) 308-7300. Our website address is www.facebook.com. The
information on or that can be accessed through our website is not part of this prospectus.
Facebook, the Facebook logo, FB, the Like Button, f8, and our other registered or common law trademarks, service
marks, or trade names appearing in this prospectus are the property of Facebook, Inc. Other trademarks, service marks, or
trade names appearing in this prospectus are the property of their respective owners.
6

Table of Contents

THE OFFERING
Class A common stock offered
By us

shares

By the selling stockholders

shares

Total

shares

Class A common stock to be outstanding after
our initial public offering

shares

Class B common stock to be outstanding after
our initial public offering

shares

Total Class A and Class B common stock to
be outstanding after our initial public
offering

shares

Over-allotment option of Class A common
stock offered by us and the selling
stockholders

shares

Use of proceeds

We estimate that our net proceeds from the sale of the Class A common
stock that we are offering will be approximately $
billion, assuming an
initial public offering price of $
per share, which is the midpoint of the
price range on the cover page of this prospectus, and after deducting
estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
The principal purposes of our initial public offering are to create a public
market for our Class A common stock and thereby enable future access to
the public equity markets by us and our employees, obtain additional
capital, and facilitate an orderly distribution of shares for the selling
stockholders. We intend to use the net proceeds to us from our initial public
offering for working capital and other general corporate purposes; however
we do not have any specific uses of the net proceeds planned. We may use
some of the net proceeds to us to satisfy a portion of the anticipated tax
withholding and remittance obligations related to the initial settlement of
our outstanding RSUs, which will become due approximately six months
following the completion of our initial public offering. Additionally, we
may use a portion of the proceeds to us for acquisitions of complementary
businesses, technologies, or other assets.
We will not receive any proceeds from the sale of shares of Class A common
stock by the selling stockholders. Mark Zuckerberg, our founder, Chairman,
and CEO, will offer and sell
shares in our initial public offering. We
expect that substantially all of the net proceeds Mr. Zuckerberg will receive
upon such sale will be used to satisfy taxes that he will incur upon his
exercise of an outstanding stock option to purchase 120,000,000 shares of
our Class B common stock. See “Use of Proceeds.”
7

Table of Contents

Voting rights

Shares of Class A common stock are entitled to one vote per share.
Shares of Class B common stock are entitled to ten votes per share.
Holders of our Class A common stock and Class B common stock will
generally vote together as a single class, unless otherwise required by law.
Mr. Zuckerberg, who after our initial public offering will control more than
% of the voting power of our outstanding capital stock, will have the
ability to control the outcome of matters submitted to our stockholders for
approval, including the election of our directors. See “Description of
Capital Stock.”

Proposed

symbol

“FB”

The number of shares of Class A and Class B common stock to be outstanding after our initial public offering is
based on 117,097,143 shares of our Class A common stock and 1,758,902,390 shares of our Class B common stock
outstanding as of December 31, 2011, as well as the exercise by Mr. Zuckerberg of an outstanding stock option to
purchase 120,000,000 shares of our Class B common stock and the automatic conversion of
of those shares into an
equal number of shares of Class A common stock upon their sale in our initial public offering, and excludes:


138,539,434 shares of Class B common stock issuable upon the exercise of options outstanding as of
December 31, 2011 under our 2005 Stock Plan, with a weighted-average exercise price of approximately $0.83
per share;



378,772,184 shares of Class B common stock subject to RSUs outstanding as of December 31, 2011 under our
2005 Stock Plan;



1,947,208 shares of Class B common stock subject to RSUs granted between January 1, 2012 and January 31,
2012 under our 2005 Stock Plan; and



77,185,000 shares of our common stock reserved for future issuance under our equity compensation plans,
consisting of 25,000,000 shares of Class A common stock reserved for issuance under our 2012 Equity Incentive
Plan, and 52,185,000 shares of Class B common stock reserved for issuance under our 2005 Stock Plan. On the
date of this prospectus, any remaining shares available for issuance under our 2005 Stock Plan will be added to
the shares to be reserved under our 2012 Equity Incentive Plan and we will cease granting awards under the
2005 Stock Plan. Our 2012 Equity Incentive Plan also provides for automatic annual increases in the number of
shares reserved thereunder, as more fully described in “Executive Compensation—Employee Benefit Plans.”

Unless expressly indicated or the context requires otherwise, all information in this prospectus assumes:


the conversion of all outstanding shares of our convertible preferred stock into 545,551,391 shares of Class B
common stock in connection with our initial public offering;



the automatic conversion of
shares of our Class B common stock into an equal number of shares of our
Class A common stock upon their sale by the selling stockholders in our initial public offering;



the conversion by certain of our existing stockholders of an aggregate of
shares of our Class B common
stock into an equivalent number of shares of our Class A common stock in connection with our initial public
offering;



no exercise by the underwriters of their right to purchase up to an additional
stock to cover over-allotments; and



the filing of our restated certificate of incorporation and the effectiveness of our restated bylaws in connection
with our initial public offering.
8

shares of Class A common

Table of Contents

SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes our consolidated financial data. We have derived the summary consolidated
statements of income data for the years ended December 31, 2009, 2010, and 2011 and the consolidated balance sheets
data as of December 31, 2010 and 2011 from our audited consolidated financial statements included elsewhere in this
prospectus. Our historical results are not necessarily indicative of our results in any future period. The summary of our
consolidated financial data set forth below should be read together with our consolidated financial statements and the
related notes, as well as the section entitled “Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” included elsewhere in this prospectus.
Year Ended December 31,
2009
2010
2011
(in millions, except per share data)

Consolidated Statements of Income Data:
Revenue
Costs and expenses(1):
Cost of revenue
Marketing and sales
Research and development
General and administrative
Total costs and expenses
Income from operations
Other expense, net
Income before provision for income taxes
Provision for income taxes
Net income

$

777

$ 1,974

$ 3,711

$

223
115
87
90
515
262
8
254
25
229

493
184
144
121
942
1,032
24
1,008
402
$ 606

860
427
388
280
1,955
1,756
61
1,695
695
$ 1,000

Net income attributable to Class A and Class B common stockholders

$

122

$

372

$

668

Earnings per share attributable to Class A and Class B common stockholders(2):
Basic

$

0.12

$

0.34

$

0.52

$

0.10

$

0.28

$

0.46

$

0.49

$

0.43

Diluted
Pro forma earnings per share attributable to Class A and Class B common
Basic

stockholders(2):

Diluted
(1) Costs and expenses include share-based compensation expense as follows:

2009
Cost of revenue
Marketing and sales
Research and development
General and administrative
Total share-based compensation expense

$


2
6
19

$

27

Year Ended December 31,
2010
2011
(in millions)
$

$
9
2
43
9
114
9
51
$

20

$

217

(2) See note 2 of the notes to our consolidated financial statements for a description of how we compute basic and diluted earnings per share attributable to
Class A and Class B common stockholders and pro forma basic and diluted earnings per share attributable to Class A and Class B common stockholders.

9

Table of Contents

Actual

Consolidated Balance Sheet Data:
Cash, cash equivalents, and marketable securities
Working capital
Property and equipment, net
Total assets
Total liabilities
Additional paid-in capital
Retained earnings
Total stockholders’ equity

$3,908
3,705
1,475
6,331
1,432
2,684
1,606
4,899

As of December 31, 2011
Pro Forma As
Adjusted (2)
(1)
(3)
Pro Forma
(in millions)

$3,908
4,034
1,475
6,660
1,432
4,267
967
5,228

$

(1) The pro forma consolidated balance sheet data as of December 31, 2011 presents our consolidated balance sheet data to give effect to the automatic conversion
of all of our outstanding shares of convertible preferred stock into shares of Class B common stock in connection with our initial public offering and to also
give effect to a share-based compensation expense of approximately $968 million associated with RSUs granted prior to 2011, for which the service condition
was satisfied as of December 31, 2011 and which we expect to record upon completion of our initial public offering, as further described in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Share-based Compensation.” The
pro forma adjustment related to share-based compensation expense of approximately $968 million has been reflected as an increase to additional paid-in capital
and the associated tax effect of $329 million has been netted against this charge, resulting in a net reduction of $639 million to retained earnings. The income
tax effects have been reflected as an increase to deferred tax assets included in prepaid expenses and other current assets, to reflect the anticipated future tax
benefits upon settlement of these RSUs.
(2) The pro forma as adjusted consolidated balance sheet data reflects the items described in footnote (1) above and our receipt of estimated net proceeds from the
sale of shares of Class A common stock that we are offering at an assumed initial public offering price of the Class A common stock of $
per share, the
midpoint of the price range on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering
expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $
per share would increase (decrease) each of cash, cash
equivalents, and marketable securities, working capital, total assets, additional paid-in capital, and total stockholders’ equity by $
million, assuming that
the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting
discounts and commissions.
(3) The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms
of our initial public offering determined at pricing.

10

Table of Contents
RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should consider carefully the risks and
uncertainties described below, together with all of the other information in this prospectus, including the consolidated
financial statements and the related notes included elsewhere in this prospectus, before deciding whether to invest in shares
of our Class A common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and
uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that
adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of
operations, and future prospects could be materially and adversely affected. In that event, the market price of our Class A
common stock could decline, and you could lose part or all of your investment.
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:


users increasingly engage with competing products;



we fail to introduce new and improved products or if we introduce new products or services that are not favorably
received;



we are unable to successfully balance our efforts to provide a compelling user experience with the decisions we
make with respect to the frequency, prominence, and size of ads and other commercial content that we display;



we are unable to continue to develop products for mobile devices that users find engaging, that work with a variety
of mobile operating systems and networks, and that achieve a high level of market acceptance;



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;



we are unable to manage and prioritize information to ensure users are presented with content that is interesting,
useful, and relevant to them;



there are adverse changes in our products that are mandated by legislation, regulatory authorities, or litigation,
including settlements or consent decrees;



technical or other problems prevent us from delivering our products in a rapid and reliable manner or otherwise
affect the user experience;
11

Table of Contents


we adopt policies or procedures related to areas such as sharing or user data that are perceived negatively by our
users or the general public;



we fail to provide adequate customer service to users, developers, or advertisers;



we, our Platform developers, or other companies in our industry are the subject of adverse media reports or other
negative publicity; or



our current or future products, such as the Facebook Platform, reduce user activity on Facebook by making it easier
for our users to interact and share on third-party websites.

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.
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.
The substantial majority of our revenue is currently generated from third parties advertising on Facebook. In 2009, 2010,
and 2011, advertising accounted for 98%, 95%, and 85%, respectively, of our revenue. As is common in the industry, our
advertisers typically do not have long-term advertising commitments with us. Many of our advertisers spend only a relatively
small portion of their overall advertising budget with us. In addition, advertisers may view some of our products, such as
sponsored stories and ads with social context, as experimental and unproven. Advertisers will not continue to do business
with us, or they will reduce the prices they are willing to pay to advertise with us, if we do not deliver ads and other
commercial content in an effective manner, or if they do not believe that their investment in advertising with us will generate
a competitive return relative to other alternatives. Our advertising revenue could be adversely affected by a number of other
factors, including:


decreases in user engagement, including time spent on Facebook;



increased user access to and engagement with Facebook through our mobile products, where we do not currently
directly generate meaningful revenue, particularly to the extent that mobile engagement is substituted for
engagement with Facebook on personal computers where we monetize usage by displaying ads and other
commercial content;



product changes or inventory management decisions we may make that reduce the size, frequency, or relative
prominence of ads and other commercial content displayed on Facebook;



our inability to improve our analytics and measurement solutions that demonstrate the value of our ads and other
commercial content;



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;



adverse legal developments relating to advertising, including legislative and regulatory developments and
developments in litigation;



adverse media reports or other negative publicity involving us, our Platform developers, or other companies in our
industry;



our inability to create new products that sustain or increase the value of our ads and other commercial content;



the degree to which users opt out of social ads or otherwise limit the potential audience of commercial content;



changes in the way online advertising is priced;
12

Table of Contents


the impact of new technologies that could block or obscure the display of our ads and other commercial content;
and



the impact of macroeconomic conditions and conditions in the advertising industry in general.

The occurrence of any of these or other factors could result in a reduction in demand for our ads and other commercial
content, which may reduce the prices we receive for our ads and other commercial content, or cause advertisers to stop
advertising with us altogether, either of which would negatively affect our revenue and financial results.
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.
We had more than 425 million MAUs who used Facebook mobile products in December 2011. We anticipate that the
rate of growth in mobile users will continue to exceed the growth rate of our overall MAUs for the foreseeable future, in part
due to our focus on developing mobile products to encourage mobile usage of Facebook. Although the substantial majority
of our mobile users also access and engage with Facebook on personal computers where we display advertising, our users
could decide to increasingly access our products primarily through mobile devices. 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.
Accordingly, if users continue to increasingly access Facebook mobile products as a substitute for access through personal
computers, and if we are unable to successfully implement monetization strategies for our mobile users, our revenue and
financial results may be negatively affected.
Facebook user growth and engagement on mobile devices depend upon effective operation with mobile operating systems,
networks, and standards that we do not control.
There is no guarantee that popular mobile devices will continue to feature Facebook, or that mobile device users will
continue to use Facebook rather than competing products. We are dependent on the interoperability of Facebook with
popular mobile operating systems that we do not control, such as Android and iOS, and any changes in such systems that
degrade our products’ functionality or give preferential treatment to competitive products could adversely affect Facebook
usage on mobile devices. Additionally, in order to deliver high quality mobile products, it is important that our products work
well with a range of mobile technologies, systems, networks, and standards that we do not control. We may not be successful
in developing relationships with key participants in the mobile industry or in developing products that operate effectively
with these technologies, systems, networks, or standards. In the event that it is more difficult for our users to access and use
Facebook on their mobile devices, or if our users choose not to access or use Facebook on their mobile devices or use mobile
products that do not offer access to Facebook, our user growth and user engagement could be harmed.
We may not be successful in our efforts to grow and further monetize the Facebook Platform.
We have made and are continuing to make major investments to enable developers to build applications (apps) and
websites that integrate with the Facebook Platform. Existing and prospective Platform developers may not be successful in
building apps or websites that create and maintain user engagement. Additionally, developers may choose to build on other
platforms, including mobile platforms controlled by third parties, rather than building on the Facebook Platform. We are
continuously seeking to balance the distribution objectives of our Platform developers with our desire to provide an optimal
user experience, and we may not be successful in achieving a balance that continues to attract and retain Platform developers.
From time to time, we have taken actions to reduce the volume of communications from apps to users on Facebook with the
objective of enhancing the user experience, and such actions have reduced distribution from, user engagement with, and our
monetization opportunities from, apps on Facebook. In some instances, these actions have adversely affected our
relationships with Platform developers. If we are not successful in our efforts to grow our Platform or if we are unable to build
and maintain good relations with Platform developers, our user growth and user engagement and our financial results may be
adversely affected.
13

Table of Contents
Additionally, we may not be successful in further monetizing the Facebook Platform. We currently monetize the
Facebook Platform in several ways, including ads on pages generated by apps on Facebook, direct advertising on Facebook
purchased by Platform developers to drive traffic to their apps and websites, and fees from our Platform developers’ use of our
Payments infrastructure to sell virtual and digital goods to users. Apps built by developers of social games, particularly
Zynga, are currently responsible for substantially all of our revenue derived from Payments. If the Platform apps that currently
generate revenue fail to grow or maintain their users and engagement, if Platform developers do not continue to introduce new
apps that attract users and create engagement, if Platform developers reduce their advertising on Facebook, if we fail to
maintain good relationships with Platform developers or attract new developers, or if Platform apps outside of social games do
not gain popularity and generate significant revenue, our financial performance and ability to grow revenue could be
adversely affected.
Our business is highly competitive. Competition presents an ongoing threat to the success of our business.
We face significant competition in almost every aspect of our business, including from companies such as Google,
Microsoft, and Twitter, which offer a variety of Internet products, services, content, and online advertising offerings, as well as
from mobile companies and smaller Internet companies that offer products and services that may compete with specific
Facebook features. We also face competition from traditional and online media businesses for advertising budgets. We
compete broadly with Google’s social networking offerings, including Google+, and also with other, largely regional, social
networks that have strong positions in particular countries, including Cyworld in Korea, Mixi in Japan, Orkut (owned by
Google) in Brazil and India, and vKontakte in Russia. We would also face competition from companies in China such as
Renren, Sina, and Tencent in the event that we are able to access the market in China in the future. As we introduce new
products, as our existing products evolve, or as other companies introduce new products and services, we may become subject
to additional competition.
Some of our current and potential competitors have significantly greater resources and better competitive positions in
certain markets than we do. These factors may allow our competitors to respond more effectively than us to new or emerging
technologies and changes in market requirements. Our competitors may develop products, features, or services that are similar
to ours or that achieve greater market acceptance, may undertake more far-reaching and successful product development
efforts or marketing campaigns, or may adopt more aggressive pricing policies. In addition, Platform partners may use
information shared by our users through the Facebook Platform in order to develop products or features that compete with us.
Certain competitors, including Google, could use strong or dominant positions in one or more markets to gain competitive
advantage against us in areas where we operate including: by integrating competing social networking platforms or features
into products they control such as search engines, web browsers, or mobile device operating systems; by making acquisitions;
or by making access to Facebook more difficult. As a result, our competitors may acquire and engage users at the expense of
the growth or engagement of our user base, which may negatively affect our business and financial results.
We believe that our ability to compete effectively depends upon many factors both within and beyond our control,
including:


the usefulness, ease of use, performance, and reliability of our products compared to our competitors;



the size and composition of our user base;



the engagement of our users with our products;



the timing and market acceptance of products, including developments and enhancements to our or our
competitors’ products;



our ability to monetize our products, including our ability to successfully monetize mobile usage;



the frequency, size, and relative prominence of the ads and other commercial content displayed by us or our
competitors;
14

Table of Contents


customer service and support efforts;



marketing and selling efforts;



our ability to establish and maintain developers’ interest in building on the Facebook Platform;



changes mandated by legislation, regulatory authorities, or litigation, including settlements and consent decrees,
some of which may have a disproportionate effect on us;



acquisitions or consolidation within our industry, which may result in more formidable competitors;



our ability to attract, retain, and motivate talented employees, particularly software engineers;



our ability to cost-effectively manage and grow our operations; and



our reputation and brand strength relative to our competitors.

If we are not able to effectively compete, our user base and level of user engagement may decrease, which could make us
less attractive to developers and advertisers and materially and adversely affect our revenue and results of operations.
Action by governments to restrict access to Facebook in their countries could substantially harm our business and financial
results.
It is possible that governments of one or more countries may seek to censor content available on Facebook in their
country, restrict access to Facebook from their country entirely, or impose other restrictions that may affect the accessibility of
Facebook in their country for an extended period of time or indefinitely. For example, access to Facebook has been or is
currently restricted in whole or in part in China, Iran, North Korea, and Syria. In addition, governments in other countries may
seek to restrict access to Facebook if they consider us to be in violation of their laws. In the event that access to Facebook is
restricted, in whole or in part, in one or more countries or our competitors are able to successfully penetrate geographic
markets that we cannot access, our ability to retain or increase our user base and user engagement may be adversely affected,
we may not be able to maintain or grow our revenue as anticipated, and our financial results could be adversely affected.
Our efforts to expand the Facebook Platform may result in users increasingly engaging with our Platform developers’
Facebook-integrated websites instead of engaging on Facebook, which may negatively affect our advertising revenue and
harm our business.
We actively support Platform developers’ efforts to develop products that integrate with Facebook on the developers’
websites. Our Platform developers may choose to prioritize building or supporting Facebook-integrated websites as opposed
to building or supporting apps that run on the Facebook website. When users visit a Platform partner’s Facebook-integrated
website, we do not deliver advertisements, whereas we would have displayed advertisements to these users if their activity had
taken place on the Facebook website. If Facebook-integrated websites draw users away from our website, it may reduce or
slow the growth of our user activity that generates advertising opportunities, which could negatively affect our advertising
revenue. Although we believe that there are significant long-term benefits to Facebook resulting from increased engagement
on Facebook-integrated websites, these benefits may not offset the possible loss of advertising revenue, in which case our
business could be harmed.
Our new products and changes to existing products could fail to attract or retain users or generate revenue.
Our ability to retain, increase, and engage our user base and to increase our revenue will depend heavily on our ability to
create successful new products, both independently and in conjunction with Platform developers or other third parties. We
may introduce significant changes to our existing products or develop and introduce new and unproven products, including
using technologies with which we have little or no prior development or operating experience. If new or enhanced products
fail to engage users, developers, or advertisers, we may fail to
15

Table of Contents
attract or retain users or to generate sufficient revenue, operating margin, or other value to justify our investments, and our
business may be adversely affected. In the future, we may invest in new products and initiatives to generate revenue, but there
is no guarantee these approaches will be successful. If we are not successful with new approaches to monetization, we may not
be able to maintain or grow our revenue as anticipated or recover any associated development costs, and our financial results
could be adversely affected.
Our culture emphasizes rapid innovation and prioritizes user engagement over short-term financial results.
We have a culture that encourages employees to quickly develop and launch new and innovative products. As our
business grows and becomes more complex, our cultural emphasis on moving quickly may result in unintended outcomes or
decisions that are poorly received by users, developers, or advertisers. Our culture also prioritizes our user engagement over
short-term financial results, and we frequently make product decisions that may reduce our short-term revenue or profitability
if we believe that the decisions are consistent with our mission and benefit the aggregate user experience and will thereby
improve our financial performance over the long term. These decisions may not produce the long-term benefits that we
expect, in which case our user growth and engagement, our relationships with developers and advertisers, and our business
and results of operations could be harmed.
If we are not able to maintain and enhance our brand, or if events occur that damage our reputation and brand, our ability
to expand our base of users, developers, and advertisers may be impaired, and our business and financial results may be
harmed.
We believe that the Facebook brand has significantly contributed to the success of our business. We also believe that
maintaining and enhancing our brand is critical to expanding our base of users, developers, and advertisers. Many of our new
users are referred by existing users, and therefore we strive to ensure that our users remain favorably inclined towards
Facebook. Maintaining and enhancing our brand will depend largely on our ability to continue to provide useful, reliable,
trustworthy, and innovative products, which we may not do successfully. We may introduce new products or terms of service
that users do not like, which may negatively affect our brand. Additionally, the actions of our Platform developers may affect
our brand if users do not have a positive experience using third-party apps and websites integrated with Facebook. We have in
the past experienced, and we expect that in the future we will continue to experience, media, legislative, or regulatory
scrutiny of our decisions regarding user privacy or other issues, which may adversely affect our reputation and brand. We also
may fail to provide adequate customer service, which could erode confidence in our brand. Maintaining and enhancing our
brand may require us to make substantial investments and these investments may not be successful. If we fail to successfully
promote and maintain the Facebook brand or if we incur excessive expenses in this effort, our business and financial results
may be adversely affected.
Improper access to or disclosure of our users’ information could harm our reputation and adversely affect our business.
Our efforts to protect the information that our users have chosen to share using Facebook may be unsuccessful due to the
actions of third parties, software bugs or other technical malfunctions, employee error or malfeasance, or other factors. In
addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access
to our data or our users’ data. If any of these events occur, our users’ information could be accessed or disclosed improperly.
Our Data Use Policy governs the use of information that users have chosen to share using Facebook and how that information
may be used by third parties. Some Platform developers may store information provided by our users through apps on the
Facebook Platform or websites integrated with Facebook. If these third parties or Platform developers fail to adopt or adhere to
adequate data security practices or fail to comply with our terms and policies, or in the event of a breach of their networks, our
users’ data may be improperly accessed or disclosed. Any incidents involving unauthorized access to or improper use of the
information of our users could damage our reputation and our brand and diminish our competitive position. In addition, the
affected users or government authorities could initiate legal or regulatory
16

Table of Contents
action against us in connection with such incidents, which could cause us to incur significant expense and liability or result
in orders or consent decrees forcing us to modify our business practices. Any of these events could have a material and
adverse effect on our business, reputation, or financial results.
Unfavorable media coverage could negatively affect our business.
We receive a high degree of media coverage around the world. Unfavorable publicity regarding, for example, our privacy
practices, product changes, product quality, litigation or regulatory activity, or the actions of our Platform developers or our
users, could adversely affect our reputation. Such negative publicity also could have an adverse effect on the size,
engagement, and loyalty of our user base and result in decreased revenue, which could adversely affect our business and
financial results.
Our financial results will fluctuate from quarter to quarter, which makes them difficult to predict.
Our quarterly financial results have fluctuated in the past and will fluctuate in the future. Additionally, we have a limited
operating history with the current scale of our business, which makes it difficult to forecast our future results. As a result, you
should not rely upon our past quarterly financial results as indicators of future performance. You should take into account the
risks and uncertainties frequently encountered by companies in rapidly evolving markets. Our financial results in any given
quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control,
including:


our ability to maintain and grow our user base and user engagement;



our ability to attract and retain advertisers in a particular period;



seasonal fluctuations in spending by our advertisers;



the number of ads shown to users;



the pricing of our ads and other products;



our ability to increase payments and other fees revenue;



the diversification and growth of revenue sources beyond current advertising and Payments;



the development and introduction of new products or services by us or our competitors;



increases in marketing, sales, and other operating expenses that we may incur to grow and expand our operations
and to remain competitive;



our ability to maintain gross margins and operating margins;



our ability to obtain equipment and components for our data centers and other technical infrastructure in a timely
and cost-effective manner;



system failures or breaches of security or privacy;



inaccessibility of Facebook due to third-party actions;



share-based compensation expense including approximately $
million that we will incur in the quarter of the
completion of our initial public offering in connection with the vesting of restricted stock units (RSUs) granted
prior to 2011;



adverse litigation judgments, settlements, or other litigation-related costs;



changes in the legislative or regulatory environment, including with respect to privacy, or enforcement by
government regulators, including fines, orders, or consent decrees;



fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in
foreign currencies;
17

Table of Contents


fluctuations in the market values of our portfolio investments and in interest rates;



changes in U.S. generally accepted accounting principles; and



changes in business or macroeconomic conditions.

We currently generate significant revenue as a result of our relationship with Zynga, and, if we are unable to successfully
maintain this relationship, our financial results could be harmed.
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. If the use
of Zynga games on our Platform declines, if Zynga launches games on or migrates games to competing platforms, or if we fail
to maintain good relations with Zynga, we may lose Zynga as a significant Platform developer and our financial results may
be adversely affected.
We expect our rates of growth will decline in the future.
We believe that our rates of user and revenue growth will decline over time. For example, our annual revenue grew 154%
from 2009 to 2010 and 88% from 2010 to 2011. Historically, our user growth has been a primary driver of growth in our
revenue. Our user growth and revenue growth rates will inevitably slow as we achieve higher market penetration rates, as our
revenue increases to higher levels, and as we experience increased competition. As our growth rates decline, investors’
perceptions of our business may be adversely affected and the market price of our Class A common stock could decline.
Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection,
and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result
in claims, changes to our business practices, increased cost of operations, or declines in user growth or engagement, or
otherwise harm our business.
We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our
business, including user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic
contracts and other communications, competition, protection of minors, consumer protection, taxation, and online payment
services. Foreign data protection, privacy, and other laws and regulations are often more restrictive than those in the United
States. These U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant
change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the
new and rapidly evolving industry in which we operate. For example, the interpretation of some laws and regulations that
govern the use of names and likenesses in connection with advertising and marketing activities is unsettled and
developments in this area could affect the manner in which we design our products, as well as our terms of use. A number of
proposals are pending before federal, state, and foreign legislative and regulatory bodies that could significantly affect our
business. For example, a revision to the 1995 European Union Data Protection Directive is currently being considered by
European legislative bodies that may include more stringent operational requirements for data processors and significant
penalties for non-compliance. Similarly, there have been a number of recent legislative proposals in the United States, at both
the federal and state level, that would impose new obligations in areas such as privacy and liability for copyright
infringement by third parties. These existing and proposed laws and regulations can be costly to comply with and can delay
or impede the development of new products, result in negative publicity, increase our operating costs, require significant
management time and attention, and subject us to claims or other remedies, including fines or demands that we modify or
cease existing business practices.
18

Table of Contents
We have been subject to regulatory investigations and settlements and we expect to continue to be subject to such
proceedings in the future, which could cause us to incur substantial costs or require us to change our business practices in a
manner materially adverse to our business.
From time to time, we receive inquiries from regulators regarding our compliance with laws and other matters. For
example, in 2011, we reached agreement with the Federal Trade Commission (FTC) to resolve an investigation into various
practices by entering into a 20-year settlement agreement that, among other things, requires us to establish and refine certain
practices with respect to treatment of user data and privacy settings and also requires that we complete bi-annual independent
privacy audits. As another example, in 2011 the Irish Data Protection Commissioner (DPC) conducted an audit of the data,
security, and privacy practices and policies of Facebook Ireland, which is the data controller for Facebook users outside the
United States and Canada, and released a report of its conclusions in December 2011. The FTC and DPC have investigated
and audited aspects of our products and practices, and we expect to continue to be the subject of regulatory investigations
and audits in the future by these and other regulators throughout the world.
It is possible that a regulatory inquiry might result in changes to our policies or practices. Violation of existing or future
regulatory orders or consent decrees could subject us to substantial monetary fines and other penalties that could negatively
affect our financial condition and results of operations. In addition, it is possible that future orders issued by, or enforcement
actions initiated by, regulatory authorities could cause us to incur substantial costs or require us to change our business
practices in a manner materially adverse to our business.
If we are unable to protect our intellectual property, the value of our brand and other intangible assets may be diminished,
and our business may be adversely affected.
We rely and expect to continue to rely on a combination of confidentiality and license agreements with our employees,
consultants, and third parties with whom we have relationships, as well as trademark, copyright, patent, trade secret, and
domain name protection laws, to protect our proprietary rights. In the United States and internationally, we have filed various
applications for protection of certain aspects of our intellectual property, and we currently hold a number of issued patents in
multiple jurisdictions. However, third parties may knowingly or unknowingly infringe our proprietary rights, third parties
may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved.
In addition, effective intellectual property protection may not be available in every country in which we operate or intend to
operate our business. In any or all of these cases, we may be required to expend significant time and expense in order to
prevent infringement or to enforce our rights. Although we have taken measures to protect our proprietary rights, there can be
no assurance that others will not offer products or concepts that are substantially similar to ours and compete with our
business. In addition, we regularly contribute software source code under open source licenses and have made other
technology we developed available under other open licenses, and we include open source software in our products. For
example, we have contributed certain specifications and designs related to our data center equipment to the Open Compute
Project Foundation, a non-profit entity that shares and develops such information with the technology community, under the
Open Web Foundation License. As a result of our open source contributions and the use of open source in our products, we
may license or be required to license innovations that turn out to be material to our business and may also be exposed to
increased litigation risk. If the protection of our proprietary rights is inadequate to prevent unauthorized use or appropriation
by third parties, the value of our brand and other intangible assets may be diminished and competitors may be able to more
effectively mimic our service and methods of operations. Any of these events could have an adverse effect on our business
and financial results.
We are currently, and expect to be in the future, party to patent lawsuits and other intellectual property rights claims that
are expensive and time consuming, and, if resolved adversely, could have a significant impact on our business, financial
condition, or results of operations.
Companies in the Internet, technology, and media industries own large numbers of patents, copyrights, trademarks, and
trade secrets, and frequently enter into litigation based on allegations of infringement,
19

Table of Contents
misappropriation, or other violations of intellectual property or other rights. In addition, various “non-practicing entities” that
own patents and other intellectual property rights often attempt to aggressively assert their rights in order to extract value
from technology companies. We presently are involved in many such lawsuits, and as we face increasing competition and
gain an increasingly high profile, including in connection with our initial public offering, we expect the number of patent and
other intellectual property claims against us to grow. In addition, from time to time we may introduce new products, including
in areas where we currently do not compete, which could increase our exposure to patent and other intellectual property
claims from competitors and non-practicing entities.
Although the results of litigation and claims cannot be predicted with certainty, we do not believe that the final outcome
of intellectual property claims that we currently face will have a material adverse effect on our business, financial condition,
or results of operations. However, defending patent and other intellectual property claims is costly and can impose a
significant burden on management and employees, we may receive unfavorable preliminary or interim rulings in the course of
litigation, and there can be no assurances that favorable final outcomes will be obtained in all cases. We may decide to settle
such lawsuits and disputes on terms that are unfavorable to us. Similarly, if any litigation to which we are a party is resolved
adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. The terms of such a
settlement or judgment may require us to cease some or all of our operations or pay substantial amounts to the other party. In
addition, we may have to seek a license to continue practices found to be in violation of a third party’s rights, which may not
be available on reasonable terms, or at all, and may significantly increase our operating costs and expenses. As a result, we
may also be required to develop alternative non-infringing technology or practices or discontinue the practices. The
development of alternative non-infringing technology or practices could require significant effort and expense or may not be
feasible. Our business, financial condition, or results of operations could be adversely affected as a result.
We are involved in numerous class action lawsuits and other litigation matters that are expensive and time consuming, and,
if resolved adversely, could harm our business, financial condition, or results of operations.
In addition to intellectual property claims, we are also involved in numerous other lawsuits, including putative class
action lawsuits brought by users and advertisers, many of which claim statutory damages, and we anticipate that we will
continue to be a target for numerous lawsuits in the future. Because we have hundreds of millions of users, the plaintiffs in
class action cases filed against us typically claim enormous monetary damages even if the alleged per-user harm is small or
non-existent. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be
reversed upon appeal, or we may decide to settle lawsuits on similarly unfavorable terms. Any such negative outcome could
result in payments of substantial monetary damages or fines, or changes to our products or business practices, and accordingly
our business, financial condition, or results of operations could be materially and adversely affected. Although the results of
lawsuits and claims cannot be predicted with certainty, we do not believe that the final outcome of those matters that we
currently face will have a material adverse effect on our business, financial condition, or results of operations. However,
defending these claims is costly and can impose a significant burden on management and employees, and we may receive
unfavorable preliminary or interim rulings in the course of litigation, which could adversely affect the market price of our
Class A common stock. There can be no assurances that a favorable final outcome will be obtained in all cases.
Our CEO has control over key decision making as a result of his control of a majority of our voting stock.
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
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
20

Table of Contents
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. For a description of these voting agreements, see “Description of Capital Stock—
Voting Agreements.”
We anticipate that we will expend substantial funds in connection with the tax liabilities that arise upon the initial
settlement of RSUs following our initial public offering and the manner in which we fund that expenditure may have an
adverse effect.
We anticipate that we will expend substantial funds to satisfy tax withholding and remittance obligations on a date
approximately six months following our initial public offering, when we will settle a portion of our RSUs granted prior to
January 1, 2011 (Pre-2011 RSUs). On the settlement date, we plan to withhold and remit income taxes at applicable minimum
statutory rates based on the then-current value of the underlying shares. We currently expect that the average of these
withholding tax rates will be approximately 45%. If the price of our common stock at the time of settlement were equal to the
midpoint of the price range on the cover page of this prospectus, we estimate that this tax obligation would be approximately
$
billion in the aggregate. The amount of this obligation could be higher or lower, depending on the price of our shares
on the RSU settlement date. To settle these RSUs, assuming a 45% tax withholding rate, we anticipate that we will net settle
the awards by delivering approximately
shares of Class B common stock to RSU holders and simultaneously
withholding approximately
shares of Class B common stock. In connection with this net settlement we will withhold
and remit the tax liabilities on behalf of the RSU holders in cash to the applicable tax authorities.
To fund the withholding and remittance obligation, we expect to sell equity securities near the settlement date in an
amount that is substantially equivalent to the number of shares of common stock that we withhold in connection with the
initial settlement of the Pre-2011 RSUs, such that the newly issued shares should not be dilutive. However, in the event that
we issue equity securities, we cannot assure you that we will be able to successfully match the proceeds to the amount of this
tax liability. In addition, any such equity financing could result in a decline in our stock price. If we elect not to fully fund
our withholding and remittance obligations through the issuance of equity or we are unable to complete such an offering due
to market conditions or otherwise, we may choose to borrow funds from our credit facility, use a substantial portion of our
existing cash, or rely upon a combination of these alternatives. In the event that we elect to satisfy our withholding and
remittance obligations in whole or in part by drawing on our credit facility, our interest expense and principal repayment
requirements could increase significantly, which could have an adverse effect on our financial results.
We cannot be certain that additional financing will be available on reasonable terms when required, or at all.
From time to time, we may need additional financing, whether in connection with our RSU tax obligation or otherwise.
Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance,
the condition of the capital markets, and other factors. To the extent we draw on our credit facility to fund the RSU tax
obligation, we may need to raise additional funds and we cannot assure you that additional financing will be available to us
on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt
securities, those securities may have rights, preferences, or privileges senior to the rights of our Class A common stock, and
our existing stockholders may experience dilution.
Our costs may grow more quickly than our revenue, harming our business and profitability.
Providing our products to our users is costly and we expect our expenses to continue to increase in the future as we
broaden our user base, as users increase the number of connections and amount of data they share with us, as we develop and
implement new product features that require more computing infrastructure, and as we hire
21

Table of Contents
additional employees. Historically, our costs have increased each year due to these factors and we expect to continue to incur
increasing costs, in particular for servers, storage, power, and data centers, to support our anticipated future growth. We expect
to continue to invest in our global infrastructure in order to provide our products rapidly and reliably to all users around the
world, including in countries where we do not expect significant short-term monetization. Our expenses may be greater than
we anticipate, and our investments to make our business and our technical infrastructure more efficient may not be successful.
In addition, we may increase marketing, sales, and other operating expenses in order to grow and expand our operations and
to remain competitive. Increases in our costs may adversely affect our business and profitability.
Our business is dependent on our ability to maintain and scale our technical infrastructure, and any significant disruption
in our service could damage our reputation, result in a potential loss of users and engagement, and adversely affect our
financial results.
Our reputation and ability to attract, retain, and serve our users is dependent upon the reliable performance of Facebook
and our underlying technical infrastructure. Our systems may not be adequately designed with the necessary reliability and
redundancy to avoid performance delays or outages that could be harmful to our business. If Facebook is unavailable when
users attempt to access it, or if it does not load as quickly as they expect, users may not return to our website as often in the
future, or at all. As our user base and the amount and types of information shared on Facebook continue to grow, we will need
an increasing amount of technical infrastructure, including network capacity, and computing power, to continue to satisfy the
needs of our users. It is possible that we may fail to effectively scale and grow our technical infrastructure to accommodate
these increased demands. In addition, our business is subject to interruptions, delays, or failures resulting from earthquakes,
other natural disasters, terrorism, or other catastrophic events.
A substantial portion of our network infrastructure is provided by third parties. Any disruption or failure in the services
we receive from these providers could harm our ability to handle existing or increased traffic and could significantly harm our
business. Any financial or other difficulties these providers face may adversely affect our business, and we exercise little
control over these providers, which increases our vulnerability to problems with the services they provide.
We recently began to own and build key portions of our technical infrastructure, and, because of our limited experience in
this area, we could experience unforeseen difficulties.
In 2011, we began serving our products from data centers owned by Facebook using servers specifically designed for us.
We plan to continue to significantly expand the size of our infrastructure, primarily through data centers that we design and
own. The infrastructure expansion we are undertaking is complex, and unanticipated delays in the completion of these
projects or availability of components may lead to increased project costs, operational inefficiencies, or interruptions in the
delivery or degradation of the quality of our products. In addition, there may be issues related to this infrastructure that are not
identified during the testing phases of design and implementation, which may only become evident after we have started to
fully utilize the underlying equipment, that could further degrade the user experience or increase our costs.
Our software is highly technical, and if it contains undetected errors, our business could be adversely affected.
Our products incorporate software that is highly technical and complex. Our software has contained, and may now or in
the future contain, undetected errors, bugs, or vulnerabilities. Some errors in our software code may only be discovered after
the code has been released. Any errors, bugs, or vulnerabilities discovered in our code after release could result in damage to
our reputation, loss of users, loss of revenue, or liability for damages, any of which could adversely affect our business and
financial results.
22

Table of Contents
We cannot assure you that we will effectively manage our growth.
Our employee headcount and the scope and complexity of our business have increased significantly, with the number of
full-time employees increasing from 2,127 as of December 31, 2010, to 3,200 as of December 31, 2011, and we expect
headcount growth to continue for the foreseeable future. The growth and expansion of our business and products create
significant challenges for our management, operational, and financial resources, including managing multiple relations with
users, advertisers, Platform developers, and other third parties. In the event of continued growth of our operations or in the
number of our third-party relationships, our information technology systems or our internal controls and procedures may not
be adequate to support our operations. In addition, some members of our management do not have significant experience
managing a large global business operation, so our management may not be able to manage such growth effectively. To
effectively manage our growth, we must continue to improve our operational, financial, and management processes and
systems and to effectively expand, train, and manage our employee base. As our organization continues to grow, and we are
required to implement more complex organizational management structures, we may find it increasingly difficult to maintain
the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products. This
could negatively affect our business performance.
The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the
future, could harm our business.
We currently depend on the continued services and performance of our key personnel, including Mark Zuckerberg and
Sheryl K. Sandberg. In addition, many of our key technologies and systems are custom-made for our business by our
personnel. The loss of key personnel, including members of management as well as key engineering, product development,
marketing, and sales personnel, could disrupt our operations and have an adverse effect on our business.
As we continue to grow, we cannot guarantee we will continue to attract the personnel we need to maintain our
competitive position. In particular, we intend to hire a significant number of engineering and sales personnel in 2012, and we
expect to face significant competition from other companies in hiring such personnel, particularly in the San Francisco Bay
Area. As we mature, the incentives to attract, retain, and motivate employees provided by our equity awards or by future
arrangements, such as through cash bonuses, may not be as effective as in the past. Additionally, we have a number of current
employees whose equity ownership in our company gives them a substantial amount of personal wealth. Likewise, we have a
number of current employees whose equity awards are fully vested and shortly after the completion of our initial public
offering will be entitled to receive substantial amounts of our capital stock. As a result, it may be difficult for us to continue to
retain and motivate these employees, and this wealth could affect their decisions about whether or not they continue to work
for us. If we do not succeed in attracting, hiring, and integrating excellent personnel, or retaining and motivating existing
personnel, we may be unable to grow effectively.
We may incur liability as a result of information retrieved from or transmitted over the Internet or posted to Facebook and
claims related to our products.
We have faced, currently face, and will continue to face claims relating to information that is published or made
available on Facebook. In particular, the nature of our business exposes us to claims related to defamation, intellectual
property rights, rights of publicity and privacy, and personal injury torts. This risk is enhanced in certain jurisdictions outside
the United States where our protection from liability for third-party actions may be unclear and where we may be less
protected under local laws than we are in the United States. We could incur significant costs investigating and defending such
claims and, if we are found liable, significant damages. If any of these events occur, our business and financial results could be
adversely affected.
23

Table of Contents
Computer malware, viruses, hacking and phishing attacks, and spamming could harm our business and results of
operations.
Computer malware, viruses, and computer hacking and phishing attacks have become more prevalent in our industry,
have occurred on our systems in the past, and may occur on our systems in the future. Because of our prominence, we believe
that we are a particularly attractive target for such attacks. Though it is difficult to determine what, if any, harm may directly
result from any specific interruption or attack, any failure to maintain performance, reliability, security, and availability of our
products and technical infrastructure to the satisfaction of our users may harm our reputation and our ability to retain existing
users and attract new users.
In addition, spammers attempt to use our products to send targeted and untargeted spam messages to users, which may
embarrass or annoy users and make Facebook less user-friendly. We cannot be certain that the technologies and employees
that we have to attempt to defeat spamming attacks will be able to eliminate all spam messages from being sent on our
platform. As a result of spamming activities, our users may use Facebook less or stop using our products altogether.
Payment transactions on the Facebook Platform may subject us to additional regulatory requirements and other risks that
could be costly and difficult to comply with or that could harm our business.
Our users can use the Facebook Platform to purchase virtual and digital goods from our Platform developers using our
Payments infrastructure. Depending on how our Payments product evolves, we may be subject to a variety of laws and
regulations in the United States, Europe, and elsewhere, including those governing money transmission, gift cards and other
prepaid access instruments, electronic funds transfers, anti-money laundering, counter-terrorist financing, gambling, banking
and lending, and import and export restrictions. In some jurisdictions, the application or interpretation of these laws and
regulations is not clear. To increase flexibility in how our use of Payments may evolve and to mitigate regulatory uncertainty,
we have applied for certain money transmitter licenses and expect to apply for additional money transmitter licenses in the
United States, which will generally require us to demonstrate compliance with many domestic laws in these areas. Our efforts
to comply with these laws and regulations could be costly and result in diversion of management time and effort and may still
not guarantee compliance. In the event that we are found to be in violation of any such legal or regulatory requirements, we
may be subject to monetary fines or other penalties such as a cease and desist order, or we may be required to make product
changes, any of which could have an adverse effect on our business and financial results.
In addition, we may be subject to a variety of additional risks as a result of Payments on the Facebook Platform,
including:


increased costs and diversion of management time and effort and other resources to deal with bad transactions or
customer disputes;



potential fraudulent or otherwise illegal activity by users, developers, employees, or third parties;



restrictions on the investment of consumer funds used to transact Payments; and



additional disclosure and reporting requirements.
24

Table of Contents
We plan to continue expanding our operations abroad where we have limited operating experience and may be subject to
increased business and economic risks that could affect our financial results.
We plan to continue the international expansion of our business operations and the translation of our products. We
currently make Facebook available in more than 70 different languages, and we have offices or data centers in more than 20
different countries. We may enter new international markets where we have limited or no experience in marketing, selling, and
deploying our products. For example, we continue to evaluate entering China. However, this market has substantial legal and
regulatory complexities that have prevented our entry into China to date. If we fail to deploy or manage our operations in
international markets successfully, our business may suffer. In addition, we are subject to a variety of risks inherent in doing
business internationally, including:


political, social, or economic instability;



risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, and
unexpected changes in laws, regulatory requirements, and enforcement;



potential damage to our brand and reputation due to compliance with local laws, including potential censorship or
requirements to provide user information to local authorities;



fluctuations in currency exchange rates;



higher levels of credit risk and payment fraud;



enhanced difficulties of integrating any foreign acquisitions;



burdens of complying with a variety of foreign laws;



reduced protection for intellectual property rights in some countries;



difficulties in staffing and managing global operations and the increased travel, infrastructure, and legal compliance
costs associated with multiple international locations;



compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws in other jurisdictions;
and



compliance with statutory equity requirements and management of tax consequences.

If we are unable to expand internationally and manage the complexity of our global operations successfully, our
financial results could be adversely affected.
We plan to continue to make acquisitions, which could require significant management attention, disrupt our business,
result in dilution to our stockholders, and adversely affect our financial results.
As part of our business strategy, we have made and intend to make acquisitions to add specialized employees,
complementary companies, products, or technologies. However, we have not made any large acquisitions to date, and, as a
result, our ability to acquire and integrate larger or more significant companies, products, or technologies in a successful
manner is unproven. In the future, we may not be able to find other suitable acquisition candidates, and we may not be able to
complete acquisitions on favorable terms, if at all. Our previous and future acquisitions may not achieve our goals, and any
future acquisitions we complete could be viewed negatively by users, developers, advertisers, or investors. In addition, if we
fail to successfully integrate any acquisitions, or the technologies associated with such acquisitions, into our company, the
revenue and operating results of the combined company could be adversely affected. Any integration process may require
significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate
or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction,
including accounting charges. We may have to pay cash, incur debt, or issue equity securities to pay for any such acquisition,
any of which could adversely affect our financial results. The sale of equity or issuance of debt to finance any such
acquisitions could result in dilution to our stockholders. The
25

Table of Contents
incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions
that would impede our ability to manage our operations.
If we default on our leasing and credit obligations, our operations may be interrupted and our business and financial
results could be adversely affected.
We finance a significant portion of our expenditures through leasing arrangements, some of which are not required to be
reflected on our balance sheet, and we may enter into additional similar arrangements in the future. In particular, we have used
these types of arrangements to finance some of our equipment and data centers. In addition, we have a revolving credit facility
that we may draw upon to finance our operations or other corporate purposes, such as funding our tax withholding and
remittance obligations in connection with the settlement of RSUs. If we default on these leasing and credit obligations, our
leasing partners and lenders may, among other things:


require repayment of any outstanding lease obligations or amounts drawn on our credit facility;



terminate our leasing arrangements and credit facility;



terminate our access to the leased data centers we utilize;



stop delivery of ordered equipment;



sell or require us to return our leased equipment; or



require us to pay significant damages.

If some or all of these events were to occur, our operations may be interrupted and our ability to fund our operations or
obligations, as well as our business, financial results, and financial condition, could be adversely affected.
We may have exposure to greater than anticipated tax liabilities.
Our income tax obligations are based on our corporate operating structure and intercompany arrangements, including the
manner in which we develop, value, and use our intellectual property and the valuations of our intercompany transactions.
The tax laws applicable to our international business activities, including the laws of the United States and other
jurisdictions, are subject to interpretation. The taxing authorities of the jurisdictions in which we operate may challenge our
methodologies for valuing developed technology or intercompany arrangements, which could increase our worldwide
effective tax rate and harm our financial position and results of operations. In addition, our future income taxes could be
adversely affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than
anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and
liabilities, or by changes in tax laws, regulations, or accounting principles. We are subject to regular review and audit by both
U.S. federal and state and foreign tax authorities. Any adverse outcome of such a review or audit could have a negative effect
on our financial position and results of operations. In addition, the determination of our worldwide provision for income taxes
and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax
determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from
the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for
which such determination is made.
The enactment of legislation implementing changes in the U.S. taxation of international business activities or the adoption
of other tax reform policies could materially affect our financial position and results of operations.
The current administration has made public statements indicating that it has made international tax reform a priority, and
key members of the U.S. Congress have conducted hearings and proposed a wide variety of
26

Table of Contents
potential changes. Certain changes to U.S. tax laws, including limitations on the ability to defer U.S. taxation on earnings
outside of the United States until those earnings are repatriated to the United States, could affect the tax treatment of our
foreign earnings, as well as cash and cash equivalent balances we currently maintain outside of the United States. Due to the
large and expanding scale of our international business activities, any changes in the U.S. taxation of such activities may
increase our worldwide effective tax rate and harm our financial position and results of operations.
Risks Related to Our Initial Public Offering and Ownership of Our Class A Common Stock
The market price of our Class A common stock may be volatile or may decline regardless of our operating performance,
and you may not be able to resell your shares at or above the initial public offering price.
The initial public offering price for our Class A common stock will be determined through negotiations between the
underwriters and us and may vary from the market price of our Class A common stock following our initial public offering. If
you purchase shares of our Class A common stock in our initial public offering, you may not be able to resell those shares at
or above the initial public offering price. We cannot assure you that the initial public offering price of our Class A common
stock, or the market price following our initial public offering, will equal or exceed prices in privately negotiated transactions
of our shares that have occurred from time to time prior to our initial public offering. The market price of our Class A common
stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:


actual or anticipated fluctuations in our revenue and other operating results;



the financial projections we may provide to the public, any changes in these projections or our failure to meet these
projections;



actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any
securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;



additional shares of our common stock being sold into the market by us or our existing stockholders or the
anticipation of such sales, including if we issue shares to satisfy RSU-related tax obligations or if existing
stockholders sell shares into the market when applicable “lock-up” periods end;



announcements by us or our competitors of significant products or features, technical innovations, acquisitions,
strategic partnerships, joint ventures, or capital commitments;



announcements by us or estimates by third parties of actual or anticipated changes in the size of our user base or the
level of user engagement;



changes in operating performance and stock market valuations of technology companies in our industry, including
our Platform developers and competitors;



price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;



lawsuits threatened or filed against us;



developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by
judicial or regulatory bodies; and



other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue
to affect the market prices of equity securities of many technology companies. Stock prices of many
27

Table of Contents
technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those
companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we
were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of
management from our business, and adversely affect our business.
Substantial blocks of our total outstanding shares may be sold into the market when “lock-up” or “market standoff”
periods end. If there are substantial sales of shares of our common stock, the price of our Class A common stock could
decline.
The price of our Class A common stock could decline if there are substantial sales of our common stock, particularly
sales by our directors, executive officers, employees, and significant stockholders, or when there is a large number of shares of
our common stock available for sale. After our initial public offering, we will have outstanding
shares of our Class A
common stock and
shares of our Class B common stock, based on the number of shares outstanding as of December 31,
2011. This includes
shares that we and the selling stockholders are selling in our initial public offering, which shares
may be resold in the public market immediately following our initial public offering, and assumes no additional exercises of
outstanding options (other than the exercise of the option held by Mr. Zuckerberg described elsewhere in this prospectus). In
addition, we expect to issue
shares of our Class B common stock upon the net settlement of RSUs approximately six
months following our initial public offering. Shares of our Class B common stock are convertible into an equivalent number
of shares of our Class A common stock and generally convert into shares of our Class A common stock upon transfer. The
shares of our Class A common stock and
shares of our Class B common stock that are not offered and sold in
our initial public offering as well as the shares underlying outstanding RSUs will be eligible for sale in the public market in
the near future as set forth below.
Date Available for Sale into Public Market

Number of Shares of Common Stock

91 days after the date of this prospectus

shares held by the selling stockholders other
than Mr. Zuckerberg

Approximately six months after the date of this prospectus

approximately
RSUs

shares underlying net- settled

181 days after the date of this prospectus

shares

211 days after the date of this prospectus

shares held by the selling stockholders

One year after the date of this prospectus

shares held by Mail.ru Group Limited and DST
Global Limited and their respective affiliates

18 months after the date of this prospectus

shares held by Mail.ru Group Limited and DST
Global Limited and their respective affiliates

Of the 138,539,434 shares of our Class B common stock that were subject to stock options outstanding (and not held by
Mr. Zuckerberg) as of December 31, 2011, options to purchase 124,848,924 shares of Class B common stock were vested as of
December 31, 2011 and the Class B common stock underlying such options will be eligible for sale approximately six months
after the date of this prospectus. We expect an additional
shares of Class B common stock to be delivered upon the net
settlement of RSUs between the date that is approximately six months after the date of this prospectus and December 31,
2012, which shares would be eligible for sale in the public market immediately following settlement.
After our initial public offering, certain holders of our Class A common stock and Class B common stock will have
rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in
registration statements that we may file for ourselves or our stockholders. All of these shares are subject to market standoff or
lock-up agreements restricting their sale for specified periods of time after the date of this prospectus. We also intend to
register shares of common stock that we have issued and may
28

Table of Contents
issue under our employee equity incentive plans. Once we register these shares, they will be able to be sold freely in the
public market upon issuance, subject to existing market standoff or lock-up agreements.
Morgan Stanley & Co. LLC may, in its sole discretion, permit our executive officers, our directors, and the selling
stockholders to sell shares prior to the expiration of the restrictive provisions contained in the “lock-up” agreements with the
underwriters. In addition, we may, in our sole discretion, permit our employees and current stockholders who are subject to
market standoff agreements or arrangements with us and who are not subject to a lock-up agreement with the underwriters to
sell shares prior to the expiration of the restrictive provisions contained in those market standoff agreements or arrangements.
The market price of the shares of our Class A common stock could decline as a result of the sale of a substantial number
of our shares of common stock in the public market or the perception in the market that the holders of a large number of shares
intend to sell their shares.
In making your investment decision, you should not rely on information in public media that is published by third parties.
You should rely only on statements made in this prospectus in determining whether to purchase our shares.
You should carefully evaluate all of the information in this prospectus. We have in the past received, and may continue
to receive, a high degree of media coverage, including coverage that is not directly attributable to statements made by our
officers and employees, that incorrectly reports on statements made by our officers or employees, or that is misleading as a
result of omitting information provided by us, our officers, or employees. You should rely only on the information contained
in this prospectus in determining whether to purchase our shares of Class A common stock.
We have broad discretion in the use of the net proceeds from our initial public offering and may not use them effectively.
We cannot specify with any certainty the particular uses of the net proceeds that we will receive from our initial public
offering. Our management will have broad discretion in the application of the net proceeds, including working capital,
possible acquisitions, and other general corporate purposes, and we may spend or invest these proceeds in a way with which
our stockholders disagree. The failure by our management to apply these funds effectively could harm our business and
financial condition. Pending their use, we may invest the net proceeds from our initial public offering in a manner that does
not produce income or that loses value.
If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price could
decline.
The trading market for our Class A common stock will depend in part on the research and reports that securities or
industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our Class A
common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price would
likely decline.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to
finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable
future. As a result, you may only receive a return on your investment in our Class A common stock if the market price of our
Class A common stock increases. In addition, our credit facility contains restrictions on our ability to pay dividends.
29

Table of Contents
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may
lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common
stock may be negatively affected.
As a public company, we will be required to maintain internal controls over financial reporting and to report any material
weaknesses in such internal controls. In addition, beginning with our 2013 Annual Report on Form 10-K to be filed in 2014,
we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting
pursuant to Section 404 of the Sarbanes-Oxley Act. We are in the process of designing, implementing, and testing the internal
control over financial reporting required to comply with this obligation, which process is time consuming, costly, and
complicated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply
with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective,
or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal
control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and
the market price of our Class A common stock could be negatively affected, and we could become subject to investigations
by the stock exchange on which our securities are listed, the Securities and Exchange Commission, or other regulatory
authorities, which could require additional financial and management resources.
The requirements of being a public company may strain our resources and divert management’s attention.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended (Exchange Act), the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the
, and other
applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial
compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and
resources. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to
our business and operating results.
As a result of disclosure of information in this prospectus and in filings required of a public company, our business and
financial condition will become more visible, which we believe may result in threatened or actual litigation, including by
competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even
if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to
resolve them, could divert the resources of our management and harm our business and operating results.
If you purchase shares of our Class A common stock in our initial public offering, you will experience substantial and
immediate dilution.
If you purchase shares of our Class A common stock in our initial public offering, you will experience substantial and
immediate dilution in the pro forma net tangible book value per share of $
per share as of December 31, 2011, based on
an assumed initial public offering price of our Class A common stock of $
per share, the midpoint of the price range on
the cover page of this prospectus, because the price that you pay will be substantially greater than the pro forma net tangible
book value per share of the Class A common stock that you acquire. This dilution is due in large part to the fact that our
earlier investors paid substantially less than the initial public offering price when they purchased their shares of our capital
stock. You will experience additional dilution upon exercise of options to purchase common stock under our equity incentive
plans, upon vesting of RSUs, if we issue restricted stock to our employees under our equity incentive plans, or if we otherwise
issue additional shares of our common stock. For more information, see “Dilution.”
30

Table of Contents
The dual class structure of our common stock and the voting agreements among certain stockholders have the effect of
concentrating voting control with our CEO, and also with employees and directors and their affiliates.
Our Class B common stock has ten votes per share, and our Class A common stock, which is the stock we are offering in
our initial public offering, has one vote per share. Stockholders who hold shares of Class B common stock, including our
executive officers, employees, and directors and their affiliates, will together hold approximately % of the voting power of
our outstanding capital stock following our initial public offering. Because of the ten-to-one voting ratio between our Class B
and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the
combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for
approval so long as the shares of Class B common stock represent at least 9.1% of all outstanding shares of our Class A and
Class B common stock. This concentrated control will limit your ability to influence corporate matters for the foreseeable
future.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common
stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of Class B
common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those
holders of Class B common stock who retain their shares in the long term. If, for example, Mr. Zuckerberg retains a significant
portion of his holdings of Class B common stock for an extended period of time, he could, in the future, continue to control a
majority of the combined voting power of our Class A common stock and Class B common stock. For a description of the dual
class structure, see “Description of Capital Stock—Anti-Takeover Provisions.”
We have elected to take advantage of the “controlled company” exemption to the corporate governance rules for publiclylisted companies.
Because we qualify as a “controlled company” under the corporate governance rules for publicly-listed companies, we
are not required to have a majority of our board of directors be independent, nor are we required to have a compensation
committee or an independent nominating function. In light of our status as a controlled company, our board of directors has
determined not to have an independent nominating function and has chosen to have the full board of directors be directly
responsible for nominating members of our board, and in the future we could elect not to have a majority of our board of
directors be independent or not to have a compensation committee. Our status as a controlled company could cause our
Class A common stock to look less attractive to certain investors or otherwise harm our trading price.
Delaware law and provisions in our restated certificate of incorporation and bylaws that will be in effect at the closing of
our initial public offering could make a merger, tender offer, or proxy contest difficult, thereby depressing the trading price
of our Class A common stock.
Following the closing of our initial public offering, our status as a Delaware corporation and the anti-takeover provisions
of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from
engaging in a business combination with an interested stockholder for a period of three years after the person becomes an
interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated
certificate of incorporation and bylaws that will be in effect at the closing of our initial public offering will contain provisions
that may make the acquisition of our company more difficult, including the following:


any transaction that would result in a change in control of our company will require the approval of a majority of
our outstanding Class B common stock voting as a separate class;



we have a dual class common stock structure, which provides Mr. Zuckerberg with the ability to control the
outcome of matters requiring stockholder approval, even if he owns significantly less than a majority of the shares
of our outstanding Class A and Class B common stock;
31

Table of Contents


when the outstanding shares of our Class B common stock represent less than a majority of the combined voting
power of common stock, certain amendments to our restated certificate of incorporation or bylaws will require the
approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock;



when the outstanding shares of our Class B common stock represent less than a majority of the combined voting
power of our common stock, vacancies on our board of directors will be able to be filled only by our board of
directors and not by stockholders;



when the outstanding shares of our Class B common stock represent less than a majority of the combined voting
power of our common stock, our board of directors will be classified into three classes of directors with staggered
three-year terms and directors will only be able to be removed from office for cause;



when the outstanding shares of our Class B common stock represent less than a majority of the combined voting
power of our common stock, our stockholders will only be able to take action at a meeting of stockholders and not
by written consent;



only our chairman, our chief executive officer, our president, or a majority of our board of directors will be
authorized to call a special meeting of stockholders;



advance notice procedures will apply for stockholders to nominate candidates for election as directors or to bring
matters before an annual meeting of stockholders;



our restated certificate of incorporation will authorize undesignated preferred stock, the terms of which may be
established, and shares of which may be issued, without stockholder approval; and



certain litigation against us can only be brought in Delaware.

For information regarding these and other provisions, see “Description of Capital Stock—Anti-Takeover Provisions.”
32

Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements contained in this prospectus other than statements
of historical fact, including statements regarding our future results of operations and financial position, our business strategy
and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,”
“estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking
statements. We have based these forward-looking statements largely on our current expectations and projections about future
events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and
long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number
of risks, uncertainties and assumptions, including those described in the “Risk Factors” section. Moreover, we operate in a
very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements
we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus
may not occur and actual results could differ materially and adversely from those anticipated or implied in the forwardlooking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances
reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or
achievements. We are under no duty to update any of these forward-looking statements after the date of this prospectus or to
conform these statements to actual results or revised expectations.
INDUSTRY DATA AND USER METRICS
This prospectus contains estimates and information concerning our industry, including market position, market size, and
growth rates of the markets in which we participate, that are based on industry publications and reports. This information
involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We
have not independently verified the accuracy or completeness of the data contained in these industry publications and
reports. The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of factors,
including those described in the “Risk Factors” section. These and other factors could cause results to differ materially from
those expressed in these publications and reports.
The numbers of monthly active users (MAUs) and daily active users (DAUs) presented in this prospectus are based on
internal company data and we use these numbers in managing our business. We believe that our MAU and DAU numbers are
reasonable estimates, and we take measures to improve their accuracy, such as eliminating known fictitious or duplicate
accounts. There are inherent challenges in measuring usage across large online and mobile populations around the world. For
example, there may be individuals who have multiple Facebook accounts in violation of our terms of service, despite our
efforts to detect and suppress such behavior. As another example, applications on certain mobile devices may automatically
contact our servers for regular updates with no user action involved, and this activity may cause our system to count the user
associated with such a device as an active user of Facebook. We estimate that less than 5% of our estimate of worldwide DAUs
as of December 31, 2011 could have resulted from this type of automatic mobile activity and that this type of activity had an
even smaller effect on our estimate of worldwide MAUs. The impact of this automatic activity on our metrics may vary by
geography, as mobile usage varies in different regions of the world. In addition, our data regarding the geographic location of
our users is based on a number of factors, such as IP address, which may not always accurately reflect user location. We
regularly review and may adjust our processes for calculating these metrics to improve their accuracy. In addition, our MAU
and DAU estimates will differ from estimates published by third parties due to differences in methodology. For example, some
third parties do not count mobile users.
33

Table of Contents
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the Class A common stock that we are offering will be approximately
$
billion, or approximately $
billion if the underwriters exercise in full their right to purchase additional shares to
cover over-allotments, assuming an initial public offering price of $
per share, which is the midpoint of the price range on
the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $
per share
would increase (decrease) the net proceeds to us from our initial public offering by $
million, assuming the number of
shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting estimated
underwriting discounts and commissions.
The principal purposes of our initial public offering are to create a public market for our Class A common stock and
thereby enable future access to the public equity markets by us and our employees, obtain additional capital, and facilitate an
orderly distribution of shares for the selling stockholders. We intend to use the net proceeds to us from our initial public
offering for working capital and other general corporate purposes; however, we do not currently have any specific uses of the
net proceeds planned. We may use a portion of the net proceeds to us to satisfy a portion of the anticipated tax withholding
and remittance obligations related to the initial settlement of our outstanding RSUs, which will become due approximately
six months following the completion of our initial public offering. Additionally, we may use a portion of the proceeds to us
for acquisitions of complementary businesses, technologies, or other assets. However, we have no commitments with respect
to any such acquisitions or investments at this time.
Pending other uses, we intend to invest the proceeds to us in investment-grade, interest-bearing securities such as money
market funds, certificates of deposit, or direct or guaranteed obligations of the U.S. government, or hold as cash. We cannot
predict whether the proceeds invested will yield a favorable return. Our management will have broad discretion in the
application of the net proceeds we receive from our initial public offering, and investors will be relying on the judgment of
our management regarding the application of the net proceeds.
We will not receive any proceeds from the sale of shares of Class A common stock by the selling stockholders. Mark
Zuckerberg, our founder, Chairman, and CEO, will offer and sell
shares in our initial public offering. We expect that
substantially all of the net proceeds Mr. Zuckerberg will receive upon such sale will be used to satisfy taxes that he will incur
upon his exercise of an outstanding stock option to purchase 120,000,000 shares of our Class B common stock.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings for
use in the operation of our business and do not intend to declare or pay any cash dividends in the foreseeable future. Any
further determination to pay dividends on our capital stock will be at the discretion of our board of directors, subject to
applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business
conditions, and other factors that our board of directors considers relevant. In addition, the terms of our credit facility contain
restrictions on our ability to pay dividends.
34

Table of Contents
CAPITALIZATION
The following table sets forth our cash, cash equivalents, and marketable securities and capitalization as of December 31,
2011:


on an actual basis;



on a pro forma basis to give effect to (i) the automatic conversion of all of our outstanding shares convertible
preferred stock into Class B common stock, (ii) the amendment and restatement of our certificate of incorporation in
connection with our initial public offering, and (iii) a share-based compensation expense of approximately $639
million, net of income taxes, associated with restricted stock units (RSUs) granted prior to January 1, 2011 (Pre2011 RSUs) for which the service condition was satisfied as of December 31, 2011, and which we expect to record
upon completion of our initial public offering, as described in footnote (1) below; and



on a pro forma as adjusted basis to give further effect to (i) the issuance and sale by us of
shares of Class A
common stock in our initial public offering, and the receipt of the net proceeds from our sale of these shares at an
assumed initial public offering price of the Class A common stock of $
per share, the midpoint of the price
range on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us, and (ii) the exercise by Mark Zuckerberg, our founder, Chairman, and
CEO, of an outstanding stock option to purchase 120,000,000 shares of our Class B common stock and the
automatic conversion of
of those shares into an equal number of shares of our Class A common stock upon
their sale in our initial public offering.

The pro forma and pro forma as adjusted information below is illustrative only, and cash, cash equivalents, and
marketable securities, additional paid-in capital, retained earnings, total stockholders’ equity, and total capitalization
following the completion of our initial public offering will be adjusted based on the actual initial public offering price and
other terms of our initial public offering determined at pricing. You should read this table in conjunction with the sections
entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of
Capital Stock” and our consolidated financial statements and related notes included elsewhere in this prospectus.
35

Table of Contents
As of December 31, 2011
Pro Forma
Actual
Pro Forma(1)
As Adjusted (2)(3)
(in millions, except share and per share data)

Cash, cash equivalents, and marketable securities
Stockholders’ equity:
Convertible preferred stock, $0.000006 par value; 569,001,400
shares authorized, 543,366,110 shares issued and
outstanding actual; no shares authorized, issued and
outstanding, pro forma and pro forma as adjusted
Preferred stock, $0.000006 par value; no shares authorized,
issued and outstanding, actual;
shares authorized, no
shares issued and outstanding, pro forma and pro forma as
adjusted
Class A common stock, $0.000006 par value; 4,141,000,000
shares authorized, 117,097,143 shares issued and
outstanding, actual;
shares authorized, 117,097,143
shares issued and outstanding, pro forma;
shares
authorized,
shares issued and outstanding, pro forma
as adjusted
Class B common stock, $0.000006 par value; 4,141,000,000
shares authorized, 1,213,350,999 shares issued and
outstanding, actual;
shares authorized,
1,758,902,390 shares issued and outstanding, pro forma;
shares authorized,
shares issued and
outstanding, pro forma as adjusted
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total stockholders’ equity
Total capitalization

$3,908

$

3,908

$

$ 615

$



$










2,684
(6)
1,606
4,899
$4,899

$


4,267
(6)
967
5,228
5,228

$

(1) The pro forma data as of December 31, 2011 presents our cash, cash equivalents, and marketable securities, total stockholders’ equity, and total capitalization, and
gives effect to a share-based compensation expense of approximately $968 million associated with Pre-2011 RSUs, for which the service condition was completed
as of December 31, 2011 and which we expect to record upon completion of our initial public offering, as further described in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Share-based Compensation.” The pro forma adjustment
related to share-based compensation expense of approximately $968 million has been reflected as an increase to additional paid-in capital and the associated tax
effect of $329 million has been netted against this charge, resulting in a net reduction of $639 million to retained earnings. The income tax effects have been
reflected as an increase to deferred tax assets included in prepaid expenses and other current assets, to reflect the anticipated future tax benefits upon settlement of
these RSUs.
(2) A $1.00 increase (decrease) in the assumed initial public offering price of $
per share would increase (decrease) each of cash, cash equivalents, and marketable
securities, additional paid-in capital, total stockholders’ equity, and total capitalization by $
million, assuming that the number of shares offered by us, as set
forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. If the underwriters’ option
to purchase additional shares to cover over-allotments is exercised in full, the pro forma as adjusted amount of each of cash, cash equivalents, and marketable
securities, additional paid-in capital, total stockholders’ equity, and total capitalization would increase by approximately $
million, after deducting estimated
underwriting discounts and commissions, and we would have
shares of our Class A common stock and
shares of our Class B common stock
issued and outstanding, pro forma as adjusted.
(3) The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of
our initial public offering determined at pricing.

36

Table of Contents
The table above excludes the following shares:


138,539,434 shares of Class B common stock issuable upon the exercise of options outstanding as of December 31,
2011 under our 2005 Stock Plan, with a weighted-average exercise price of approximately $0.83 per share;



378,772,184 shares of Class B common stock subject to RSUs outstanding as of December 31, 2011 under our 2005
Stock Plan;



1,947,208 shares of Class B common stock subject to RSUs granted between January 1, 2012 and January 31, 2012
under our 2005 Stock Plan; and



77,185,000 shares of our common stock reserved for future issuance under our equity compensation plans,
consisting of 25,000,000 shares of Class A common stock reserved for issuance under our 2012 Equity Incentive
Plan, and 52,185,000 shares of Class B common stock reserved for issuance under our 2005 Stock Plan. On the date
of this prospectus, any remaining shares available for issuance under our 2005 Stock Plan will be added to the
shares to be reserved under our 2012 Equity Incentive Plan and we will cease granting awards under the 2005 Stock
Plan. Our 2012 Equity Incentive Plan also provides for automatic annual increases in the number of shares reserved
thereunder, as more fully described in “Executive Compensation—Employee Benefit Plans.”
37

Table of Contents
DILUTION
If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial
public offering price per share of our Class A common stock and the pro forma as adjusted net tangible book value per share
of our Class A common stock immediately after our initial public offering.
Our pro forma net tangible book value as of December 31, 2011 was $
billion, or $
per share of common stock.
Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of
our total liabilities and divided by the total number of shares of our common stock outstanding as of December 31, 2011, after
giving effect to the automatic conversion of all outstanding shares of our convertible preferred stock into Class B common
stock in connection with our initial public offering.
After giving effect to (1) our sale in our initial public offering of
shares of Class A common stock at an assumed
initial public offering price of the Class A common stock of $
per share, the midpoint of the price range on the cover page
of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses
payable by us and (2) the exercise by Mark Zuckerberg, our founder, Chairman, and CEO, of an outstanding stock option to
purchase 120,000,000 shares of our Class B common stock, our pro forma as adjusted net tangible book value as of
December 31, 2011 would have been approximately $
billion, or $
per share of common stock. This represents an
immediate increase in pro forma as adjusted net tangible book value of $
per share to our existing stockholders and an
immediate dilution of $
per share to investors purchasing shares in our initial public offering.
The following table illustrates this per share dilution.
Assumed initial offering price per share
Pro forma net tangible book value per share as of December 31, 2011
Increase in pro forma net tangible book value per share attributable to investors purchasing
shares in our initial public offering
Pro forma as adjusted net tangible book value per share after our initial public offering
Dilution in pro forma net tangible book value per share to investors in this offering

$
$

$

A $1.00 increase (decrease) in the assumed initial public offering price of $
per share would increase (decrease) our
pro forma as adjusted net tangible book value per share after our initial public offering by $
, assuming that the number of
shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated
underwriting discounts and commissions payable by us.
If the underwriters’ option to purchase additional shares to cover over-allotments is exercised in full, the pro forma net
tangible book value per share after giving effect to our initial public offering would be approximately $
per share, and the
dilution in pro forma net tangible book value per share to investors in our initial public offering would be approximately
$
per share.
38

Table of Contents
The following table summarizes, as of December 31, 2011, the differences between the number of shares of our common
stock purchased from us, after giving effect to the conversion of our convertible preferred stock into Class B common stock,
the total cash consideration paid, and the average price per share paid by our existing stockholders and by our new investors
purchasing shares in our initial public offering at the assumed initial public offering price of the Class A common stock of
$
per share, the midpoint of the price range on the cover page of this prospectus, before deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us:
Shares Purchased
Number
Percent

Existing stockholders
New investors
Total

%
100%

Average
Price Per
Share

Total Consideration
Amount
Percent

%
$

$

100%

A $1.00 increase (decrease) in the assumed initial public offering price of $
per share would increase (decrease) total
consideration paid by new investors by $
million, assuming that the number of shares offered by us, as set forth on the
cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions
payable by us.
Sales of shares of Class A common stock by the selling stockholders in our initial public offering will reduce the number
of shares of common stock held by existing stockholders to
, or approximately % of the total shares of common stock
outstanding after our initial public offering, and will increase the number of shares held by new investors to
, or
approximately % of the total shares of common stock outstanding after our initial public offering.
If the underwriters’ option to purchase additional shares to cover over-allotments is exercised in full, our existing
stockholders would own
% and our new investors would own
% of the total number of shares of our common stock
outstanding after our initial public offering.
The above table and discussion are based on 117,097,143 shares of our Class A common stock and 1,758,902,390 shares
of our Class B common stock outstanding as of December 31, 2011, as well as the exercise by Mark Zuckerberg, our founder,
Chairman, and CEO, of an outstanding stock option to purchase 120,000,000 shares of our Class B common stock, and
exclude:


138,539,434 shares of Class B common stock issuable upon the exercise of options outstanding as of December 31,
2011 under our 2005 Stock Plan, with a weighted-average exercise price of approximately $0.83 per share;



378,772,184 shares of Class B common stock subject to RSUs outstanding as of December 31, 2011 under our 2005
Stock Plan;



1,947,208 shares of Class B common stock subject to RSUs granted between January 1, 2012 and January 31, 2012
under our 2005 Stock Plan; and



77,185,000 shares of our common stock reserved for future issuance under our equity compensation plans,
consisting of 25,000,000 shares of Class A common stock reserved for issuance under our 2012 Equity Incentive
Plan, and 52,185,000 shares of Class B common stock reserved for issuance under our 2005 Stock Plan. On the date
of this prospectus, any remaining shares available for issuance under our 2005 Stock Plan will be added to the
shares to be reserved under our 2012 Equity Incentive Plan and we will cease granting awards under the 2005 Stock
Plan. Our 2012 Equity Incentive Plan also provides for automatic annual increases in the number of shares reserved
thereunder, as more fully described in “Executive Compensation—Employee Benefit Plans.”

To the extent that any outstanding options are exercised or RSUs are settled, there will be further dilution to new
investors.
39

Table of Contents
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statements of income data for each of the years ended December 31, 2009, 2010, and 2011 and the
consolidated balance sheets data as of December 31, 2010 and 2011 are derived from our audited consolidated financial
statements that are included elsewhere in this prospectus. The consolidated statements of operations data for the years ended
December 31, 2007 and 2008 and the consolidated balance sheets data as of December 31, 2007, 2008, and 2009 are derived
from audited consolidated financial statements that are not included in this prospectus.
You should read this information together with “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.
Year Ended December 31,
2008
2009
2010
(in millions, except per share data)

2007

2011

Consolidated Statements of Operations Data:
Revenue

$ 153

$ 272

$ 777

$1,974

$3,711

Costs and expenses(1) :
Cost of revenue
Marketing and sales
Research and development
General and administrative
Total costs and expenses
Income (loss) from operations
Other expense, net
Income (loss) before provision for income taxes
Provision for income taxes
Net income (loss)

41
32
81
123
277
(124)
11
(135)
3
$ (138)

124
76
47
80
327
(55)
1
(56)

$ (56)

223
115
87
90
515
262
8
254
25
$ 229

493
184
144
121
942
1,032
24
1,008
402
$ 606

860
427
388
280
1,955
1,756
61
1695
695
$1,000

Net income (loss) attributable to Class A and Class B common
stockholders

$ (138)

$ (56)

$ 122

$ 372

$ 668

Earnings (loss) per share attributable to Class A and Class B common
stockholders(2):
Basic

$(0.16)

$(0.06)

$0.12

$ 0.34

$ 0.52

$(0.16)

$(0.06)

$0.10

$ 0.28

$ 0.46

Diluted
Pro forma earnings per share attributable to Class A and Class B
common stockholders(2):
Basic

$ 0.49

Diluted

$ 0.43

(1) Costs and expenses include share-based compensation expense as follows:

$

1
3
56
13

Year Ended December 31,
2008
2009
2010
(in millions)
$

$

$

4
2
2
7
6
9
19
19
9

$

73

$

2007
Cost of revenue
Marketing and sales
Research and development
General and administrative
Total share-based compensation expense

30

$

27

$

20

2011
$

9
43
114
51

$

217

(2) See note 2 of the notes to our consolidated financial statements for a description of how we compute basic and diluted earnings (loss) per share attributable to
Class A and Class B common stockholders and pro forma basic and diluted earnings per share attributable to Class A and Class B common stockholders.

40

Table of Contents

Consolidated Balance Sheets Data:
Cash, cash equivalents, and marketable securities
Working capital
Property and equipment, net
Total assets
Total liabilities
Total stockholders’ equity

2007

2008

As of December 31,
2009
(in millions)

2010

2011

$ 305
250
82
448
174
273

$ 297
279
131
505
170
335

$ 633
703
148
1,109
241
868

$1,785
1,857
574
2,990
828
2,162

$3,908
3,705
1,475
6,331
1,432
4,899

Free Cash Flow
In addition to other financial measures presented in accordance with U.S. generally accepted accounting principles
(GAAP), we monitor free cash flow (FCF) as a non-GAAP measure to manage our business, make planning decisions, evaluate
our performance, and allocate resources. We define FCF as net cash provided by operating activities reduced by purchases of
property and equipment and property and equipment acquired under capital leases.
We believe that FCF is one of the key financial indicators of our business performance over the long term and provides
useful information regarding whether cash provided by operating activities is sufficient to fund the ongoing property and
equipment investments required to maintain and grow our business. We have chosen to subtract both purchases of property
and equipment and property and equipment acquired under capital leases in our calculation of FCF because we believe that
these two items collectively represent the amount of property and equipment we need to procure to support our business,
regardless of whether we finance such property or equipment with a capital lease. The market for financing servers and other
technical equipment is dynamic and we expect our use of capital leases could vary significantly from year to year.
We have chosen our definition for FCF because we believe that this methodology can provide useful supplemental
information to help investors better understand underlying trends in our business. We present FCF in this document in the
same manner it is shared with our senior management and board of directors.
FCF has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of
other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of FCF are:


FCF does not reflect our future contractual commitments; and



other companies in our industry present similarly titled measures differently than we do, limiting their usefulness as
comparative measures.

Management compensates for the inherent limitations associated with using the FCF measure through disclosure of such
limitations, presentation of our financial statements in accordance with GAAP, and reconciliation of FCF to the most directly
comparable GAAP measure, net cash provided by operating activities, as presented below.
The following is a reconciliation of FCF to the most comparable GAAP measure, net cash provided by operating
activities:
Year Ended December 31,
2008
2009
2010
(in millions)

2007

Net cash provided by operating activities
Purchases of property and equipment
Property and equipment acquired under capital leases
Free cash flow

$

$
41

11
(55)
(11)
(55)

$

$

8
(70)
(26)
(88)

$ 155
(33)
(56)
$ 66

$ 698
(293)
(217)
$ 188

2011

$1,549
(606)
(473)
$ 470

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements and related notes that appear in this prospectus. In addition to
historical consolidated financial information, the following discussion contains forward-looking statements that reflect our
plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this
prospectus, particularly in “Risk Factors.”
Overview
Our mission is to make the world more open and connected. Facebook enables you to express yourself and connect with
the world around you instantly and freely.
We build products that support our mission by creating utility for users, developers, and advertisers:
Users. We enable people who use Facebook to stay connected with their friends and family, to discover what is going on
in the world around them, and to share and express what matters to them to the people they care about.
Developers. We enable developers to use the Facebook Platform to build applications (apps) and websites that integrate
with Facebook to reach our global network of users and to build products that are more personalized, social, and engaging.
Advertisers. We enable advertisers to engage with more than 800 million monthly active users (MAUs) on Facebook or
subsets of our users based on information they have chosen to share with us such as their age, location, gender, or interests.
We offer advertisers a unique combination of reach, relevance, social context, and engagement to enhance the value of their
ads.
We generate substantially all of our revenue from advertising and from fees associated with our Payments infrastructure
that enables users to purchase virtual and digital goods from our Platform developers. For the year ended December 31, 2011,
we recorded revenue of $3,711 million, operating income of $1,756 million, and net income of $1,000 million. We were
incorporated in July 2004 and are headquartered in Menlo Park, California.
Highlights in our history are depicted in the graphic on the next page.
42


Documentos relacionados


Documento PDF primer cuatrimestre portfolio
Documento PDF red control corporativo
Documento PDF economy and business terms charlie your teacher of english
Documento PDF i will do 2000 social signals on your site with shares tweets pins in 10 days drip feed for 5
Documento PDF numatics catalogo entrega inmediata
Documento PDF amd cvsept12


Palabras claves relacionadas