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Personal Letter To Mark Zuckerberg

Feb. 12, 2012 10:26 AM ETAAPL, GOOG, MSFT, AABA, TTWO, AOL
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Everyone is talking about Facebook IPO these days. Well, a debut with a market cap of around $100 billion sure captivates attention, compared to Google's (GOOG) debut of $23 billion, which raised just $1.67 billion in 2004. Facebook is aiming straight for $5 billion on the first delivery.

With 845 million active users, 483 daily active users, over 425 mobile active users and 100 billion friends on the social network, Facebook is certainly a big player in the industry. Now, the time has come for Facebook to go ahead and prove itself in front of the whole world.

Here are a few concerns that Facebook probably faces in the future, obstructing its path to success.

  • If we fail to retain existing users or add new users, or if our users decrease their level of engagement with Facebook, our revenue, financial results, and business may be significantly harmed;
  • We generate a substantial majority of our revenue from advertising. The loss of advertisers, or reduction in spending by advertisers with Facebook, could seriously harm our business;
  • Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results;
  • Facebook user growth and engagement on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that we do not control. ;
  • We may not be successful in our efforts to grow and further monetize the Facebook Platform;
  • Our business is highly competitive, and competition presents an ongoing threat to the success of our business;
  • Improper access or disclosure of our users' information could harm our reputation and adversely affect our business;
  • Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, and other matters. May of these laws and regulation are subject to change and uncertain interpretation, and could harm our business;
  • Our CEO has control over key decision making as a result of his control of a majority of our voting stock;
  • The loss of Mark Zuckerberg, Sheryl K. Sandberg, or other key personnel could harm our business;
  • We anticipate that we will expand substantial funds in connection with tax withholding and remittance obligations related to the initial settlement of our restricted stock units (RSUs) approximately six months following our initial public offering;
  • The market price of our Class A common stock may be volatile or may decline, and you may not be able to resell your shares at or above the initial public offering price; and
  • Substantial blocks of our total outstanding shares may be sold into the market as "lock-up" periods end, as further described in "Shares Eligible for Future Sale." If there are substantial sales of shares of our common stock, the price of our Class A common stock could decline.

Although economists and analysts doubt Facebook's greatness, I am routing for Mark. After all, I am an avid user of Facebook, with around 3000 friends and 2 FB pages. And just as a sign of respect and support, I write a short letter to Mark below, from a user's view point.

"Dear Mark,

I totally understand your reasons. Don't you worry; we are all there for you…as long as you don't start charging a membership fee for being on Facebook. That could really mean problem for you, if the "next big thing" suddenly pops out of nowhere.

You should also watch out Google and Twitter. I totally like how you have incorporated the "subscribe" option in Facebook, which more or less gives us the same benefit as Twitter does. Moreover, it's definitely not as noisy as Twitter. Regarding Google Plus, you might not have to worry now. But do keep a watch all the time.

Why? Google has a nasty habit of integrating each and every of its products and services, and it does well nonetheless. Talk about Google Offers, and Google is already doing better than Facebook Marketplace. It's highly likely that Google might try to incorporate Google Plus in every Android piece. Sadly, this will eat away from your user base over time. And when we have come to the smart phone and tablet business, you should also lookout for Apple (AAPL). It's definitely going to launch a few goods and services of its own for the iPads it sells.

We all know that mobile advertising is your weak point. Focus on it.

Nevertheless, it's going to be hard. Why? We all see Facebook as a hangout place. It's the only place online where you expect to have "disturbance-free" communication. If you wish to include more ads, it can only hamper the user experience. Again a glitch! Of course, your advertising reach and revenue is over that of Microsoft (MSFT) and Yahoo (YHOO), but still a long way to go.

Moreover, you have around 12% of your annual revenue coming from Zynga (ZNGA). Have you ever thought about the instance if Zynga were to pull out from sharing games and applications on Facebook? Please do give it a thought.

Lastly, your revenue per registered user is around $4.39, compared to Google's $30, Yahoo's $7 and AOL's (AOL) $10. It's seriously something you got to work toward, if you are to survive in the future. The public listing will lead to immense pressure on the profitability ratios of the company. So better buckle up!

And just before ending the letter, I thank you once again for creating such a wonderful online place.

Regards,

Ron."

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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