Analysis of Risks and Management Performance in Facebook

The assignment explores the significant return delivered by Facebook amidst various financial risks such as industry competition from players like MySpace, market valuation challenges due to lower mobile ad conversions, and currency fluctuations impacting international revenues. Despite these obstacles, Facebook's growth is largely attributed to effective management strategies including key acquisitions, hiring specialized employees, and investing in core services. Management has successfully expanded the company by enhancing video special effects through acquisitions such as faciometrics and spreading advertising business via photo sharing applications. This comprehensive analysis highlights how strategic efforts by Facebook's management have contributed to its enhanced growth and expansion.

Running head: CORPORATE FINANCE
Corporate finance
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Author’s Note:

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Various risks to Facebook:
Facebook has delivered significant return over the period
Industry risk- Facebook success can be disrupted due to evolving competing social
networks in terms of strength of network of company, user base and monetization. One of the
biggest players in industry is MySpace. Increasing competition in industry has the possibility of
weakening and displacing the competitive position of Facebook.
Market risk- The valuation of company cannot be justified despite of leveraging to their
massive users. The advertising model of company is although generating remarkable results, the
conversion of sales from mobile ads is low compared to desktop alternatives. There exist risk
whether organization will have any considerable improvement over this matter.
Currency risk- Business of Facebook is ever growing at international level and it is
exposed to risk of fluctuation in level of currency of different operating companies. A total
revenue of $ 3.54 billion is recorded in year 2014 and it was said that revenue growth would
have been higher by 49% if there would not been any fluctuation in currency level. Therefore, it
is inferred that revenue generated by organization is significantly impacted by fluctuation in
foreign currency level as the recorded revenue would have been higher due to general
strengthening dollars outside United Sates.
Performance attributed to management of organization:
The bulk of growth of Facebook is lured to ability of management to keep engage more
and more visitors to site. Facebook experiences incredible increase in revenue generated and net
income year on year. Performance of company is generated from several efforts of management
such as making key acquisitions and hiring specialized employees. In order to serve the existing

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customers in a better way, organization continues to make investment in core services and
products. One of the long part of management strategy of Facebook is acquisitions for adding
complementary services, products and specialized companies. In year 2016, acquisition of
faciometrics by Facebook enhanced video special effects and photo of Facebook. Creative news
ways are developed by management for selling their services and products through applications.
Advertising business has been spread by companies through development of photo sharing
applications and popular messaging (Berk et al. 2012). Therefore, it can be said that efforts of
management has contributed to enhanced growth and expansion of business.

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References:
Berk, Jonathan; DeMarzo, Peter & Harford, Jarrad. 2012. Fundamentals of corporate
finance. Harlow: Pearson.
Ezez. 2017. "Facebook – log in or sign up". Facebook. http://www.facebook.com.