Social-networking leader Facebook filed paperwork on Wednesday for a $5 billion IPO, paving the way for what will likely be the largest and most-hyped global Internet offering ever.

By filing its preliminary prospectus with the Securities and Exchange Commission, Facebook is giving potential investors their first official glimpse into the company's financial vitals.


Silicon Valley and Wall Street have been buzzing about the Facebook offering, hoping it will breathe new life into the IPO and venture capital markets as well as generate tens of millions of dollars in fees for investment banks.

In the SEC filing, called an "S-1," Facebook said it generated 2011 revenue of $3.71 billion. Net income soared 65% to $1 billion.

Facebook said Zynga (ZNGA: 10.60, +0.11, +1.05%), the online game maker that went public last year, accounted for about 12% of its revenue. Income from operations hit $1.76 billion.

Advertising sales -- the principal way Facebook makes money -- soared 69% in 2011 from 2010 to $3.15 billion. Ad revenue was up 145% from 2009’s $764 million. Facebook said it saw a 42% rise in the number of ads delivered last year, coupled with an 18% jump in the average price paid per ad.

Ad sales accounted for the vast majority -- 85% -- of Facebook’s revenue last year. However, that marked a decrease from the year before went it made up 95% of total revenue, underscoring the company’s diversification efforts.

Facebook also said it had 845 million active monthly users as of the end of last year. The company warned it expects its active user growth rate to fall over time as its base builds up and it reaches higher market penetration rates.

As of December, Facebook laid claim to more than 425 million active users on the company's mobile products as of December. However, Facebook said it doesn’t currently generate “meaningful” revenue from the use of these mobile products.

While Facebook grows its revenues, the company is also adding to its payrolls, employing 3,200 full-time workers as of the end of 2011. That compares with 2,127 full-time employees as of the end of 2010.
Facebook said acknowledged there is "no guarantee" it won't see an erosion of engagement levels like other social networks have in the past.

Facebook said Mark Zuckerberg, its CEO and co-founder, was awarded total 2011 compensation of $1.49 million, while chief operating officer Sheryl Sandberg earned $300 million. Zuckerberg's salary will be cut to $1 a year effective January 2013, the company said.

The company also said a drop in retention, growth or engagement by users could make the social network “less attractive” to both developers and advertisers.

Facebook identified Google (GOOG: 580.83, +0.72, +0.12%), Microsoft (MSFT: 29.89, +0.36, +1.22%) and Twitter as some of its main competitors.

“We face significant competition in almost every aspect of our business,” the company said in the filing.
Facebook listed $3.91 billion in cash and marketable securities as of the end of last year.

The $5 billion offering is just half of what reports had previously indicated before this week, but would still easily rank as the largest global Internet IPO ever.

According to Dealogic, World Online's $2.8 billion offering in March 2000 holds the record for the largest global Internet-related IPO, while Google's (GOOG: 580.83, +0.72, +0.12%) 2004 $1.9 billion IPO is the largest in the U.S.

If it raised just $5 billion, Facebook would also trail only Infineon Technologies as the largest global technology IPO on record, Dealogic said.

Visa (V: 102.51, +1.87, +1.86%), which raised $19.7 billion in 2008, holds the record for the largest all-time U.S. IPO, but Facebook's offering would still crack the top 20 and be the largest since General Motors (GM: 24.37, +0.35, +1.46%) in November 2010.

Led by Zuckerberg, Facebook was created in 2004 and has quickly become the world's largest social network.

Zuckerberg and Facebook management resisted pressure to go public years ago, choosing instead to patiently grow the company's business model away from the scrutiny of analysts and shareholders. That decision has paid off as private markets now believe Facebook is worth more than $80 billion and some believe its offering will value the company at $100 billion -- more than twice as largest as eBay (EBAY: 32.20, +0.60, +1.91%).

Confirming a number of published reports, Facebook said it tapped Morgan Stanley (MS: 19.39, +0.74, +3.97%) for the coveted "lead left" position to run the massive offering. The selection marks a huge coup for Morgan, which led more Internet IPOs than anyone last year.

It also marks a setback for archrival Goldman Sachs (GS: 113.45, +1.98, +1.78%), which will also help run the IPO but had fought hard for the No. 1 spot.

Facebook tapped JPMorgan Chase (JPM: 37.60, +0.30, +0.80%) as the second bookrunner and also announced the selection of Bank of America Merrill Lynch (BAC: 7.36, +0.23, +3.23%), Barclays (BCS: 14.24, +0.71, +5.25%) and Allen & Co. for the other spots.

While the race to land Facebook's IPO is officially over for Wall Street, it' not clear yet which exchange won the war over listing the social network's stock. Both Nasdaq OMX Group's (NDAQ: 24.77, +0.01, +0.04%) Nasdaq Stock Market and NYSE Euronext's (NYX: 26.43, -0.13, -0.49%) New York Stock Exchange have been angling to land the premium listing.

Even though Facebook didn't say which exchange it would list its shares on, it did say its symbol will be "FB."