Facebook IPO: A look at what we learned from the filings

February 3, 2012

In filing its IPO paperwork with the Securities and Exchange Commission on Wednesday, Facebook provided a long-awaited glimpse into the inner workings of one of the world’s most closely-watched companies. Cecilia Kang and Hayley Tsukayama report:

The government-required filing revealed details about the company that were previously unknown because the firm was private. The paperwork portrays a company that makes the vast majority of its money from selling display ads targeted to its users who have revealed to Facebook much about their lives. Those connections and activities among its 845 million members are an advertiser’s dream, experts say.

The filing stated that Facebook users upload 250 million photos a day, signal that they “like” items posted by friends about 2.7 billion times a day, and have created a web of 100 billion friends and connections on its site.

Last year, the company had $3.7 billion in revenue and $1 billion in profits — astounding figures for an 8-year-old enterprise, though slightly less than what some analysts had expected. Google, perhaps Facebook’s primary rival, brought in just shy of $38 billion in revenue last year. It launched its own a social network, Google+, in June.

Another key question answered by the documents is just how much the firm’s top executives rake in each year. Hayley Tsukayama writes:

The base salaries for all of Facebook’s top executives were divulged in the company’s Wednesday S-1 filing. Here’s how it broke down:

Mark Zuckerberg, CEO: Zuckerberg made a salary of $483,333 in 2011, in addition to a $220,500 bonus for the first half of 2011. He also received “other” compensation — which covers such things as chartered travel costs and security details — that totaled $783,529. Overall, Zuckerberg received $1,487,362 for 2011, excluding his substantial stake in the company.

Effective Jan. 1, 2013, Zuckerberg will reduce his base annual salary to $1.

Sheryl Sandberg, COO: As important as Mark Zuckerberg is to Facebook, the S-1 filing also reveals that the company is very concerned about keeping its chief operations office, Sheryl Sandberg.

Losing Sandberg, who has often been identified as the “grown-up” public face of the company, would be a big blow to the social network.

The document also reveals that if Sandberg is “terminated without cause” for a reason other than death or disability, she will be able to vest her stock immediately. Losing Sandberg (or Zuckerberg) is also listed as a risk for the company.

“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,” the filing said.

Sandberg had a salary and bonus of $381,966 in 2011, but was also granted about $30 million in stock awards.

David Ebersman, CFO: David Ebersman, one of the most important Facebook executives that you’ve never heard of, also made $381,966 in salary and bonuses. With stock, his total compensation comes to $18.6 million.

Mike Schroepfer, VP of Engineering:Mike Schroepfer, the vice president of engineering, made $333,833 in salary and bonuses in 2011. Combined with his bonus and stock awards, he made $24.7 million last year.

Theodore W. Ullyot, VP, General Counsel and Secretary: Theodore Ullyot made $749,583 in salary and bonus and was granted about $6 million in stock awards and $110,644 in other compensation. As the company’s general counsel, he has the same provision in his employment agreement as Sandberg — if he’s ever terminated without cause, he will be able to vest his shares immediately.

Another revelation that the filing provided was the extent of Facebook’s deep entwinement with social gaming company Zynga. Hayley Tsukayama explains:

When Zynga went public, analysts dinged the social gaming company for its heavy reliance on Facebook. Now that Facebook’s filed to go public, it appears that the same is true of the social media giant.

In its S-1 filing, the company revealed that its partnership with Zynga accounts for 12 percent of its total revenue — a very surprising amount for a single vendor.

And, just as Zynga listed the possibility of its Facebook partnership going south as a risk factor on its paperwork to go public, Facebook listed a similar provision when discussing the Farmville maker Wednesday.

According to the filing: “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.”

Facebook is also working hard on expanding its platform to more developers and will have to keep up good relationships with new partners, such as Spotify and Ticketmaster, to keep it robust.

Zynga, of course, has already been exploring other platforms, including iOS, Google + and its own proprietary platform. But it’s unlikely that this relationship will break up any time soon. Zynga still needs Facebook, but it turns out Facebook needs Zynga just as badly.

And investors have taken note of that relationship. Zynga shares skyrocketed Thursday after the filing, up nearly 15 percent in late morning trading.

More from The Washington Post:

What the filing reveals about Facebook’s feelings on China

Facebook’s reach: 845 million and counting

What happens if Mark Zuckerberg were to die?

Facebook site briefly down for some users

How does Facebook make its money?

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