Why Facebook fears its growth could get hampered

Saturday, February 4, 2012

Why Facebook fears its growth could get hampered

Facebook has generated a lot of attention in recent times with its decision to come up with new funding ways. The social networking site has stated that it will raise $5 billion and therefore, the first step it took is to follow the IPO route. It is said that Facebook aims to grow bigger, and its CEO, Mark Zuckerberg has plans to lift the social networking site to the top of the list of some of the best American firms. It will also increase the value of Facebook in the financial market.

Though, the plan seems to be on the right track, yet, strangely enough, there are inherent fears that persist in the minds of those who run the show at Facebook. The fears are quite evident if one looks at the risk factors, mentioned by the company in its IPO prospectus. Here are few of the notable ones.

• The most remarkable change that is set to take place at Facebook is in the ownership configuration. With the IPO coming into the fold, the ownership of Facebook chief, Mark Zuckerberg, will suffer. The share holdings of Mr. Zuckerberg before the IPO was much higher, giving the chief more than 50% of the voting power, which enabled him to take decisions in a monopolistic way. But now, he will have to take along people who have good number of shares, which will certainly restrict his voting power.

• Some countries have chosen not to allow Facebook to be accessed by its people. These countries are China, Syria, Iran and North Korea. Very soon, Facebook feels that it could also take place somewhere else, and more countries might chose to restrict Facebook access. If that happens, then some other companies, notably the competitors might take advantage of the existing limitations and gain access to those countries, which will lead to restricted growth.

• Facebook has special place for Zynga. The online gaming company has helped Facebook increase its revenues considerably. In 2011 alone, Zynga has said to have affected Facebook revenue growth by more than 11%. Facebook has stated in its IPO risk factors that its growth will suffer, if the Zynga games cease to be popular. It will also face restricted growth, if Zynga decides to launch games on other platforms.

• The advent of mobile phones had also played its part in helping Facebook reach individuals, who do not have computers at home. Many mobile phone users play games or chat with their friends on Facebook, even when they travel. Some of the phones use Google’s Android, or Apple’s operating system. Any change in Google’s or Apple’s policies will surely affect Facebook’s growth.

Finally, Facebook also fear the increase in patent lawsuit cases. The company expects to grow more with the coming up of IPO, and also expects further increase in patent lawsuits, which may affect the company’s growth in future.

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