The risk factors section of public filings is usually full of boilerplate — lawsuits, unfavorable regulatory environment, competition, locusts, all the usual stuff.
But Facebook’s S-1 filing today revealed some interesting concerns about its mobile business.
First, Facebook’s mobile apps are not making any money — Facebook doesn’t show any ads to mobile users.
Facebook has to figure out how to show ads fast. Otherwise, as more users turn to Facebook on mobile devices, and away from Facebook on their computers, that could hurt ad revenues.
Second, Facebook has no control over the platforms on which its mobile products are used. If Apple or Google limit or block what Facebook can do on their mobile platforms, that could also hurt.
It’s doubtful that mobile platform makers will ban Facebook entirely — it’s too popular.
But they will certainly exercise control.
For instance, last year Facebook introduced a version of its Credits payment platform for mobile developers of Facebook apps. But Apple won’t let developers use Credits on iPhone or iPad apps — they have to route payments through Apple’s App Store instead, giving Apple (rather than Facebook) the 30% cut of each transaction.
Here’s how Facebook lays out the risk in its S-1:
We are dependent on the interoperability of Facebook with popular mobile operating systems that we do not control, such as Android and iOS, and any changes in such systems that degrade our products’ functionality or give preferential treatment to competitive products could adversely affect Facebook usage on mobile devices. Additionally, in order to deliver high quality mobile products, it is important that our products work well with a range of mobile technologies, systems, networks, and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks, or standards.
Reading between the lines: this is why Facebook is making a phone.