Facebook Reveals 83 Million Accounts Are Fake

Facebook has revealed in its quarterly report (for the quarterly period ended June 30, 2012) that out of its 955 million monthly active users (MAUs) as of June 30, 2012, approximately 8.7% of them are false. The 8.7% represents an estimate of 83 million fake Facebook accounts.

Facebook broke down the 8.7% (83 million) fake accounts into:

1. Duplicate accounts (An account or accounts a user maintains in addition to his or her principal account)-4.8% or 46 million accounts.
2. User misclassified account (Accounts created for a business, organization or for non-human entities e.g. pets)-2.4% or 23 million accounts.
3. Undesirable accounts (These are user profiles that Facebook determines are intended to be used for purposes that violate their terms of service e.g. spamming)-1.5% or 14 million accounts.

In relation to the 83 million fake accounts, Facebook noted that- “accounts that are duplicate or false is meaningfully lower in developed markets such as the United States or Australia and higher in developing markets such as Indonesia and Turkey”.

Also in the report, Facebook highlighted the crucial role that advertising plays in its cash flow as it went on ahead to say, and I quote-“In the first six months of 2012 and 2011 and the full 2011, 2010, and 2009 years, advertising accounted for 83%, 87%, 85%, 95% and 98%, respectively, of our revenue.

From the very same report, it’s also clear that Zynga is a key player in Facebook’s revenue generation:

“In the first six months of 2012 and the full 2011 year, we estimate that up to 14% and 19% of our revenue, respectively, was derived from Payments processing fees from Zynga, direct advertising from Zynga, revenue from third parties for ads shown on pages generated by Zynga apps, and Facebook ads and Sponsored Stories displayed on Zynga.com. If Zynga does not maintain its level of engagement with our users or if we are unable to successfully maintain our relationship with Zynga, our financial results could be harmed.”-Facebook.

There were some other interesting things that caught my eye in the report and the following is just one of them.

Our CEO has control over key decision making as a result of his control of a majority of our voting stock.

As a result of voting agreements with certain stockholders, together with the shares he holds, Mark Zuckerberg, our founder, Chairman, and CEO, is able to exercise voting rights with respect to a majority of the voting power of our outstanding capital stock as of June 30, 2012. Mr. Zuckerberg therefore has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other stockholders do not support. This concentrated control could also discourage a potential investor from acquiring our Class A common stock due to the limited voting power of such stock relative to the Class B common stock and might harm the trading price of our Class A common stock. In addition, Mr. Zuckerberg has the ability to control the management and major strategic investments of our company as a result of his position as our CEO and his ability to control the election or replacement of our directors. In the event of his death, the shares of our capital stock that Mr. Zuckerberg owns will be transferred to the persons or entities that he designates. As a board member and officer, Mr. Zuckerberg owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Zuckerberg is entitled to vote his shares and shares over which he has voting control as a result of voting agreements, in his own interests, which may not always be in the interests of our stockholders generally.

Other relevant information

Revenue-$1.184 Billion (For the three months ended June 30, 2012)

Staff-Facebook has a staff of 3,976 as of June 30, 2012 which is an increment from 2,661 in June 30, 2011).