Facebook, Inc financial reports
Facebook, Inc. is a leading tech company with an interest in advertising based in California. The company generates its revenues from selling advertisements in its various social media websites which includes Facebook and Instagram. The corporation also owns Whatsapp which it acquired in 2014 at a fair price following a series of negotiations. The financial reports of Facebook, Inc. indicate that the company has been experiencing a growth in its revenue in the three years preceding 2020. One can note that in 2017 the company‘s total revenue was $40.65 billion with ad revenue of $39.94 billion representing more than 99% of its total revenues (Facebook, Inc. Annual Report 2017, 34). The following year the company had total revenue of $55.84 billion, followed by revenue of $70.70 billion in 2019, which happens to be the most recent revenue report. On the same note, it is quite exhilarating that over the three years, the company has successfully made an income for its investors of more than $5 per share.
Looking at the financial reports alone, Facebook, Inc. offers a good opportunity for investors with potential growth in both capital growth and dividend payments. For the year 2017, for example, an investor would have earnings per share of $5.39. However, it is important to look at other factors while considering an investment in tech companies such as Facebook, Inc. In this case, security and privacy of data is an important issue to look at since it is a potential risk factor which may affect the profitability of the company from time to time. The 2017 annual report indicates that Facebook, Inc. is in control of the potential risks that may arise from the usage of personal data and sharing of the same with third parties. Facebook, Inc. reiterates its position in ensuring the privacy of its subscribers and the safety of its user information from potential third party interference.
An investor in 2017 may not have a clear image of the potential data sharing risks from the 2017 annual report. The company is aware of these threats but does not in its report indicate the impact of these privacy and security concerns on its user base and a consequent impact on its revenues. According to Kimberly, and Voss (19), privacy and security issues expose companies like Facebook, Inc. to class-actions suits that could result in big losses in terms of payouts and legal fines. Further, the author explains that privacy concerns could equally lead to a sudden drop in the number of active users of the social media platform.
The 2017 report raises concern in the matter of decision making. The report clearly explains that CEO Mark Zuckerberg and a few other shareholders have a higher concentration of voting rights (Facebook, Inc. Annual Report 2017, 18). This exposes the company in terms of the decision making process with a possibility or the risk that a not so well-founded decision may sail right through the voting process potentially affecting the performance of the company (Kaitlin et al. n.p). This, therefore, calls for a close examination of the class B shareholders and their leadership qualities to ascertain that they do not have a history of wrong business decision which could potentially expose the company to commercial losses.
The 2018 and 2019 reports indicate the levels of control and measures that the company has put in place to avert future security and privacy risks following the Cambridge Analytica scandal. In the year 2017, the company maintains its innocence in the case and insists that Cambridge Analytica acted contrary to their agreement. Their 2017 report takes a more defensive role and passes the blame on to Cambridge Analytica. However, in 2018 and 2019, the company takes responsibility for the data breach and maintains that they have put in place measures to ensure the breach never happens again (Matthew n.p.).