Facebook 2014 Annual Report Download - page 19

Our costs are continuing to grow, which could harm our business and profitability.
Operating our business is costly and we expect our expenses to continue to increase in the future as we broaden our user base, as users increase
the number of connections and amount of data they share with us, as we develop and implement new products, and as we continue to hire additional
employees to support our expanding operations. Historically, our costs have increased each year due to these factors and we expect to continue to incur
increasing costs, in particular for servers, storage, power, data centers, security systems, and talent to support our anticipated future growth. We expect
to continue to invest in these and other efforts to operate and expand our business around the world, including in countries and/or projects where we may
not have a clear path to monetization, such as our commitment to the Internet.org initiative to increase global Internet access. Our costs will increase as a
result of integrating and operating larger and more complex business acquisitions, including our recent acquisitions of Oculus and WhatsApp. In
addition, we intend to increase marketing, sales, and other operating expenses in order to continue to grow and expand our operations and to remain
competitive. Increases in our costs may adversely affect our business and profitability. Our expenses are expected to grow faster than our revenue in the
near term and may be greater than we anticipate, and our investments may not be successful.
Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, and other matters. Many
of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices,
monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.
We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including privacy
and data protection, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion,
personal information, electronic contracts and other communications, competition, protection of minors, consumer protection, telecommunications,
product liability, taxation, economic or other trade prohibitions or sanctions, securities law compliance, and online payment services. The introduction of
new products or expansion of our activities in certain jurisdictions may subject us to additional laws and regulations. In addition, foreign data protection,
privacy, and other laws and regulations can be more restrictive than those in the United States. These U.S. federal and state and foreign laws and
regulations, which can be enforced by private parties or government entities, are constantly evolving and can be subject to significant change. In
addition, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving
industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and
practices. For example, the interpretation of some laws and regulations that govern the use of names and likenesses in connection with advertising and
marketing activities is unsettled, and developments in this area could affect the manner in which we design our products and offer services. Similarly,
any regulatory or legislative action affecting the manner in which we display content to our users could adversely affect user growth and engagement. A
number of proposals are pending before federal, state, and foreign legislative and regulatory bodies that could significantly affect our business. For
example, the European Commission is currently considering a data protection regulation that may include operational requirements for companies that
receive personal data that are different than those currently in place in the European Union, and that may also include significant penalties for non-
compliance. Similarly, there are a number of legislative proposals in the United States, at both the federal and state level, that could impose new
obligations in areas affecting our business, such as privacy or liability for copyright infringement by third parties. In addition, some countries are
considering or have passed legislation requiring local storage and processing of data or similar requirements that could increase the cost and complexity
of delivering our services. These existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of
new products, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to inquiries or
investigations, claims or other remedies, including fines or demands that we modify or cease existing business practices.
We have been subject to regulatory investigations and settlements and we expect to continue to be subject to such proceedings in the future, which
could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business.
From time to time, we receive formal and informal inquiries from government authorities and regulators regarding our compliance with laws and
other matters. We expect to continue to be the subject of investigations and audits in the future as we continue to grow and expand our operations.
Violation of existing or future regulatory orders or consent decrees could subject us to substantial monetary fines and other penalties that could
negatively affect our financial condition and results of operations. In addition, it is possible that future orders issued by, or inquiries or enforcement
actions initiated by, government or regulatory authorities could cause us to incur substantial costs, expose us to unanticipated civil and criminal liability
or penalties, or require us to change our business practices in a manner materially adverse to our business.
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