Thursday, February 2, 2012

The 150-plus page Facebook IPO S1 filing could turn out to be one of the most extensively read documents since Walter Isaacson’s Steve Job’s biography. Everyone is poring over it, examining the details like tea leaf sediment at the bottom of a soothsayer’s cup. There’s hard evidence in there of Facebook’s business, growth, competitions and plans for the future. Still, there’s another, somewhat more subtle story here, woven throughout the passages and you can only see it by stepping back and looking at the words or, more precisely, the frequency of those words.

When a phrase is repeated until it spreads over your conversation (or S1) like a fine mist, you really mean it. In Facebook’s S1 there are hundreds of thousands of words and some are said more than others. A standard word cloud is pretty much a mess that’s impossible to decipher. Instead, we can look at some key words and the frequency with which they appear. I did a similar exercise with President Obama’s State of the Union Address.

For Facebook, I looked at almost two dozen critical words or phrases, each with a special meaning to Facebook and the social space, and each, with one exception, mentioned at least once in this massive document. I have some ideas about why, for example, “Privacy” was mentioned 35 times, yet “Twitter” received just two mentions.

Advertising: 123

As we learned by reading the S1 document, Facebook relies heavily on advertising for revenue. “Advertising” comes up 123 times, matched only by “Mobile” (also with 123 mentions). Interestingly, Facebook is not really making much money from mobile but still considers it a key component for future development.

Capital: 111

It should come as no surprise that “Capital” (111) and “Expenses” (110) were second-most mentioned terms. This is a financial document after all, and never have Facebook’s profits, losses, expenses and gains been spelled out so clearly. “Revenue,” by the way, had 214 mentions (more than any other word we analyzed), but “Profit,” a sometimes uncomfortable word in an S1 document, was only mentioned 12 times. (“Revenue” was left out of the Word Cloud image from Wordle because it would have overwhelmed the image).

Facebook Platform: 44

Facebook’s intention to build its social network into a true platform has never been clearer. The phrase “Facebook Platform” gets 44 mentions and most of them with “Platform” capitalized. Facebook defines the Facebook Platform as, “a set of development tools and application programming interfaces (APIs).” Facebook is sounding more and more like an Operating System.

Privacy: 35

Here’s the good news: 35 mentions of “Privacy” means Facebook is serious about it. The bad news is that the majority of those mentions revolve around the risk that screwing up privacy (by Facebook, its partners or through external perceptions of it) could pose to Facebook’s business.

From the document: “We have in the past experienced, and we expect that in the future we will continue to experience, media, legislative, or regulatory scrutiny of our decisions regarding user privacy”

Facebook later dives into its privacy practices and all the ways in which it lets Facebook users control it:
“Privacy and Sharing. People come to Facebook to connect and share. Protecting user privacy is an important part of our product development process. “

Zynga: 24

Okay, we get it, Farmville-maker Zynga is an important part of the Facebook story. It got 24 mentions in the S1 and many were about all the money Zynga and its virtual currency program brings into the giant social network -- 12% of Facebook’s revenues! Oddly “Virtually Goods” are mentioned just six times.

Google: 14

It’s now quite clear that Facebook considers Google its chief competitor. Yes, the document notes how Facebook competes not only online with Google and Google+, but with other offline entities. Yet, no other digital brand receives even half as many mentions. Twitter, by contrast, is mentioned just twice. If I were Dick Costollo, I’d be a little miffed. Apple and Microsoft also had just two mentions a piece.

Timeline: 13

Timeline, one of Facebook’s most recent and arguably biggest, innovations has 13 mentions. The feature, which allows uses to organize their Facebook activities in chronological order is clearly a highlight of 2011 and will play a critical role as it spreads across Facebook’s user base throughout the early part of this year.

Sean Parker: 1

The founding member/investor and former company President retains stock voting rights but his one mention pales in comparisons to Zuckerberg’s 113.

Winklevoss Twins: 0

Cameron Winklevoss and Tyler Winklevoss have maintained that Mark Zuckerberg broke a verbal contract with them and stole their idea for Facebook. They have lost virtually all the legal battles surrounding the issue. So, perhaps, we should not be surprised that they did not even warrant a mention as one of the many “Risks” (29 mentions) Facebook might face in the future.