Facebook 2014 Annual Report Download - page 13

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parties, or otherwise;
If we are unable to maintain or increase our user base and user engagement, our revenue and financial results may be adversely affected. Any
decrease in user retention, growth, or engagement could render our products less attractive to users, marketers, and developers, which is likely to have a
material and adverse impact on our revenue, business, financial condition, and results of operations. If our active user growth rate continues to slow, we
will become increasingly dependent on our ability to maintain or increase levels of user engagement and monetization in order to drive revenue growth.
We generate a substantial majority of our revenue from advertising. The loss of marketers, or reduction in spending by marketers with Facebook,
could seriously harm our business.
The substantial majority of our revenue is currently generated from third parties advertising on Facebook. For 2014, 2013, and 2012, advertising
accounted for 92% , 89% and 84% , respectively, of our revenue. As is common in the industry, our marketers do not have long-
term advertising
commitments with us. Many of our marketers spend only a relatively small portion of their overall advertising budget with us. We expect our ability to
grow advertising revenue will continue to be dependent on our ability to generate revenue from ads displayed on mobile devices. In addition, marketers
may view some of our products as experimental and unproven. Marketers will not continue to do business with us, or they will reduce the prices they are
willing to pay to advertise with us or the budgets they are willing to commit to us, if we do not deliver ads 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:
10
•
we fail to provide adequate customer service to users, marketers, or developers;
•
we, developers whose products are integrated with Facebook, 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 our development tools and application programming interfaces that enable developers to build,
grow, and monetize mobile and web applications, reduce user activity on Facebook by making it easier for our users to interact and share
on third-party mobile and web applications.
•
decreases in user engagement, including time spent on Facebook;
•
our inability to continue to increase user access to and engagement with Facebook through our mobile products;
•
product changes or inventory management decisions we may make that change the size, frequency, or relative prominence of ads displayed
on Facebook or of other unpaid content shared by marketers on Facebook;
•
our inability to maintain or increase marketer demand, the pricing of our ads, or both;
•
our inability to maintain or increase the quality of ads shown to users, particularly on mobile devices;
• changes to third-
party policies that limit our ability to deliver or target advertising on mobile devices;
•
the availability, accuracy, and utility of analytics and measurement solutions offered by us or third parties that demonstrate the value of our
ads to marketers, or our ability to further improve such tools;
•
loss of advertising market share to our competitors, including if prices for purchasing ads on Facebook increase or if competitors offer
lower priced or more integrated products;
•
adverse legal developments relating to advertising, including legislative and regulatory developments and developments in litigation;
•
decisions by marketers to reduce their advertising as a result of adverse media reports or other negative publicity involving us, content on
Facebook, developers with Facebook-integrated mobile and web applications, or other companies in our industry;
•
our inability to improve our existing products or create new products that sustain or increase the value of our ads or marketers' ability to
analyze and measure the value of our ads;
•
the degree to which users opt out of social ads or certain types of ad targeting;
•
the degree to which users cease or reduce the number of times they click on our ads;
•
changes in the way advertising on mobile devices or on personal computers is measured or priced;