UPDATED 09:49 EDT / FEBRUARY 02 2012

Facebook IPO: What Happens When Users Leave?

The much awaited filing for the initial public offering of Facebook finally happened late Wednesday when they filed the 197-page prospectus with the Securities and Exchange Commission.

In their filing, Facebook showed their massive revenue in 2011 of $3 billion with net income of $1 billion.  But aside from the impressive numbers, the social networking giant also showed how they want people to use their service not only to connect with people but also to generate money.  But with any business, there are risks, and Facebook warns prospective investors of what might happen and what they should consider before investing in their company.

In the prospectus summary, Facebook stated that:
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.

But they also warn investors of the possibility of decline in users or not adding new users and the negative effect of this such as decrease in revenue.  And a decline in users could greatly affect their advertising revenue – no one would advertise if there aren’t any people to see the ads.  Facebook also stated that the growing number of people using their mobile devices in logging into their service is harmful to them as they currently don’t have display ads on mobile devices.

Facebook CEO Mark Zuckerberg was right to fear an IPO, since no one knows what could happen next, especially with how fickle the market can be given our current economy.  MySpace and Friendster used to have throngs of users, but in just a blink of an eye, everything fell apart.  And with more social networks just waiting for the right opportunity to be the next “big thing,” Facebook could face the same fate.

But Zuckerberg shouldn’t worry too much about this, as they have their “Like” button to be thankful for.  The “Like” button revolutionized the sharing experience on the web.  Before, you had to type in the words to tell the world you like a certain product or brand, but now, it’s as easy as clicking a button.  Us users don’t think much about the things we “Like” on Facebook, sometimes, we just hit the button because we saw one of our friends “Liked” a certain page.  But for businesses, the “Like” button is akin to a lifeline, it makes their brand relevant.

But the biggest hurdle that Facebook will probably face is pleasing both the investors and the users.  Right now, a lot of users aren’t happy with the Timeline, though nothing has proved that users have declined in number because of Facebook’s most recent profile revamp.  But with going public and having a new hoard of investors holding Facebook accountable, there’s a risk of having rogue investors that would demand change at the slightest sign of a Facebook exodus.


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