Facebook Filed Its IPO!

Facebook finally filed its papers with the Securities and Exchange Commission announcing that it will sell shares to the public.

What the papers revealed is that the company is going to raise $5 billion, as opposed to the initial rumored $10 billion. And also, this is the first time that anyone is getting a look at Facebook’s financial information like income, revenue and expenses.

In 2011 Facebook’s net income was $1 billion, up from $606 million in 2010. That’s an increase of 65% over the previous year, and a huge increase of 337% over 2009. Revenue in 2011 was $3.711 billion, up from $1.974 billion in 2010 and $777 million in 2009. Over the past three years that is an increase of 378%.

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nother interesting section is the summary of risk factors, where Facebook outlines that loss of advertisers or a reduction in spending by advertisers can seriously harm the business. And money from advertisers generates “a substantial majority” of its revenue. In fact advertising revenue in 2011 was $3.2 billion.

However, advertising isn’t as much of revenue as it was in 2009, when advertising accounted for all of Facebook’s revenue. In 2011 advertising made up 85% of revenue. Other revenue comes from Zynga, a company which creates games for use on Facebook.

Another risk, and a very real one, is “improper access to or disclosure of” users’ information. Facebook has already faced several lawsuits on the matter, and it’s not out of the realm of possibility that this will continue to be an issue in the future.

There’s also the risk of regulation and legislation. If, for instance, something like SOPA gets passed, then Facebook’s business could be significantly harmed, and as a public company, this could really harm any of Facebook’s investors.

Also, chief executive officer Mark Zuckerberg owns 28.4% of the company, not the previously estimated 24%, which means that he is easily worth more than $25 billion now.

Finally, Zuckerberg did indeed include a letter explaining that “Facebook was not originally created to be a company. It was built to accomplish a social mission…” He added that “we don’t build services to make money; we make money to build better services.”

He then goes on to discuss hacker culture, which has apparently impacted the way Facebook cultivated its culture and management.

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“The Hacker Way is an approach to building that involves continuous improvement and iteration. Hackers believe that something can always be better, and that nothing is ever complete,” Zuckerberg wrote. “They just have to go fix it — often in the face of people who say it’s impossible or are content with the status quo.

Further down, Zuckerberg explained how the hacker culture fits in at Facebook.

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You can find the papers here.

Hackers believe that the best idea and implementation should always win — not the person who is best at lobbying for an idea or the person who manages the most people,” he wrote. “To encourage this approach, every few months we have a hackathon, where everyone builds prototypes for new ideas they have. At the end, the whole team gets together and looks at everything that has been built. Many of our most successful products came out of hackathons, including Timeline, chat, video, our mobile development framework and some of our most important infrastructure like the HipHop compiler.