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Who needs real friends, anyway? In a filing with the U.S. Securities and Exchange Commission, the social networking giant Facebook admitted that 8.7 percent of its 955 million members worldwide could in fact be in violation of its policies, with duplicate accounts, accounts that users maintain in addition to their principal accounts, make up 4.8 percent of that figure.
In addition, the filing reveals user-misclassified accounts may have represented approximately 2.4 percent of Facebooks worldwide users, and undesirable accounts may have represented approximately 1.5 percent of their worldwide users. User-misclassified accounts are classified as personal profiles for a business, organization or nonhuman entity such as a pet. These types of entities are permitted on Facebook using a Page rather than a personal profile under the companys terms of service.
We believe the percentage of 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, the filing said. However, these estimates are based on an internal review of a limited sample of accounts and we apply significant judgment in making this determination, such as identifying names that appear to be fake or other behavior that appears inauthentic to the reviewers. As such, our estimation of duplicate or false accounts may not accurately represent the actual number of such accounts.
The information is unlikely to assuage nervous investors who are watching the companys share price slide in the wake of a disastrous initial public offering in May. The stock price has dropped beneath $20 for the first time in the wake of the report, a steep slide from the $38 May debut. As a public company, the social networking site is under pressure to increase profits and drive revenue from advertising, while simultaneously staying relevant and adapting to the needs of its increasingly smartphone-based audience.
Our financial performance has been and will continue to be significantly determined by our success in adding, retaining and engaging active users. We anticipate that our active user growth rate will decline over time as the size of our active user base increases, and as we achieve higher market penetration rates, the filing stated. To the extent our active user growth rate slows, our business performance will become increasingly dependent on our ability to increase levels of user engagement and monetization in current and new markets. If people do not perceive our products to be useful, reliable and trustworthy, we may not be able to attract or retain users or otherwise maintain or increase the frequency and duration of their engagement.