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Meta Platforms, Inc.

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FY2020 Annual Report · Meta Platforms, Inc.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-K
__________________________

(Mark One)
☒    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020
or

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number: 001-35551
__________________________

Facebook, Inc.

(Exact name of registrant as specified in its charter)
__________________________ 

Delaware
(State or other jurisdiction of incorporation or organization)

20-1665019
(I.R.S. Employer Identification Number)

1601 Willow Road, Menlo Park, California 94025
(Address of principal executive offices and Zip Code)
(650) 543-4800
(Registrant's telephone number, including area code)
__________________________
Securities registered pursuant to Section 12(b) of the Act

Title of each class
Class A Common Stock, $0.000006 par value

Trading symbol(s)
FB

Name of each exchange on which registered
The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐  No   ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No  ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate  by  check  mark  whether  the  registrant  has  submitted  electronically  every  Interactive  Data  File  required  to  be  submitted  pursuant  to  Rule  405  of  Regulation  S-T  (§  232.405  of  this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated filer

☒

☐

Accelerated filer

Smaller reporting company

Emerging growth company

☐

☐

☐

If  an  emerging  growth  company,  indicate  by  check  mark  if  the  registrant  has  elected  not  to  use  the  extended  transition  period  for  complying  with  any  new  or  revised  financial  accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate  by  check  mark  whether  the  registrant  has  filed  a  report  on  and  attestation  to  its  management's  assessment  of  the  effectiveness  of  its  internal  control  over  financial  reporting  under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No   ☒

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of June 30, 2020, the last business day of the registrant's most recently
completed second fiscal quarter, was $563 billion based upon the closing price reported for such date on the Nasdaq Global Select Market. On January 22, 2021, the registrant
had 2,405,448,410 shares of Class A common stock and 442,221,541 shares of Class B common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement for the 2021 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to
the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31,
2020.

Facebook, Inc.
Form 10-K

TABLE OF CONTENTS

Note About Forward-Looking Statements
Limitations of Key Metrics and Other Data

PART I
Item 1.

Item 1A.

Item 1B.

Item 2.

Item 3.

Item 4.

PART II
Item 5.

Item 6.

Item 7.

Item 7A.

Item 8.

Item 9.

Item 9A.

Item 9B.

PART III
Item 10.

Item 11.

Item 12.

Item 13.

Item 14.

PART IV
Item 15.

Item 16.

Signatures

Business

Risk Factors

Unresolved Staff Comments

Properties

Legal Proceedings

Mine Safety Disclosures

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Selected Financial Data

Management's Discussion and Analysis of Financial Condition and Results of Operations

Quantitative and Qualitative Disclosures About Market Risk

Financial Statements and Supplementary Data

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Controls and Procedures

Other Information

Directors, Executive Officers and Corporate Governance

Executive Compensation

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Certain Relationships and Related Transactions, and Director Independence

Principal Accounting Fees and Services

Exhibits, Financial Statement Schedules

Form 10-K Summary

Page
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7

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NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. All statements contained in this Annual Report on Form 10-K other than statements
of  historical  fact,  including  statements  regarding  our  future  results  of  operations  and  financial  position,  our  business  strategy  and  plans,  and  our  objectives  for
future  operations,  are  forward-looking  statements.  The  words  "believe,"  "may,"  "will,"  "estimate,"  "continue,"  "anticipate,"  "intend,"  "expect,"  and  similar
expressions  are  intended  to  identify  forward-looking  statements.  We  have  based  these  forward-looking  statements  largely  on  our  current  expectations  and
projections  about  future  events  and  trends  that  we  believe  may  affect  our  financial  condition,  results  of  operations,  business  strategy,  short-term  and  long-term
business  operations  and  objectives,  and  financial  needs.  These  forward-looking  statements  are  subject  to  a  number  of  risks,  uncertainties  and  assumptions,
including those described in Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing
environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our
business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Annual Report on Form 10-K may not
occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given

these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless expressly indicated or the context requires otherwise, the terms "Facebook," "company," "we," "us," and "our" in this document refer to Facebook,
Inc., a Delaware corporation, and, where appropriate, its subsidiaries. The term "Facebook" may also refer to our products, regardless of the manner in which they
are  accessed.  The  term  "Family"  refers  to  our  Facebook,  Instagram,  Messenger,  and  WhatsApp  products.  For  references  to  accessing  Facebook  or  our  other
products on the "web" or via a "website," such terms refer to accessing such products on personal computers. For references to accessing Facebook or our other
products  on  "mobile,"  such  term  refers  to  accessing  such  products  via  a  mobile  application  or  via  a  mobile-optimized  version  of  our  websites  such  as
m.facebook.com, whether on a mobile phone or tablet.

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LIMITATIONS OF KEY METRICS AND OTHER DATA

The  numbers  for  our  key  metrics  are  calculated  using  internal  company  data  based  on  the  activity  of  user  accounts.  We  have  historically  reported  the
numbers of our daily active users (DAUs), monthly active users (MAUs), and average revenue per user (ARPU) (collectively, our "Facebook metrics") based on
user activity only on Facebook and Messenger and not on our other products. Beginning with our Annual Report on Form 10-K for the year ended December 31,
2019,  we  also  report  our  estimates  of  the  numbers  of  our  daily  active  people  (DAP),  monthly  active  people  (MAP),  and  average  revenue  per  person  (ARPP)
(collectively, our "Family metrics") based on the activity of users who visited at least one of Facebook, Instagram, Messenger, and WhatsApp (collectively, our
"Family" of products) during the applicable period of measurement. We believe our Family metrics better reflect the size of our community and the fact that many
people are using more than one of our products. As a result, over time we intend to report our Family metrics as key metrics in place of DAUs, MAUs, and ARPU
in our periodic reports filed with the Securities and Exchange Commission.

While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent
challenges in measuring usage of our products across large online and mobile populations around the world. The methodologies used to measure  these metrics
require significant judgment and are also susceptible to algorithm or other technical errors. In addition, we are continually seeking to improve our estimates of our
user base, and such estimates may change due to improvements or changes in our methodology. We regularly review our processes for calculating these metrics,
and from time to time we discover inaccuracies in our metrics or make adjustments to improve their accuracy, which can result in adjustments to our historical
metrics. Our ability to recalculate our historical metrics may be impacted by data limitations or other factors that require us to apply different methodologies for
such  adjustments.  We  generally  do  not  intend  to  update  previously  disclosed  Family  metrics  for  any  such  inaccuracies  or  adjustments  that  are  within  the  error
margins disclosed below.

In addition, our Facebook metrics and Family metrics estimates will differ from estimates published by third parties due to differences in methodology.

Facebook Metrics

We regularly evaluate our Facebook metrics to estimate the number of "duplicate" and "false" accounts among our MAUs. A duplicate account is one that a
user maintains in addition to his or her principal account. We divide "false" accounts into two categories: (1) user-misclassified accounts, where users have created
personal profiles for a business, organization, or non-human entity such as a pet (such entities are permitted on Facebook using a Page rather than a personal profile
under our terms of service); and (2) violating accounts, which represent user profiles that we believe are intended to be used for purposes that violate our terms of
service,  such  as  bots  and  spam.  The  estimates  of  duplicate  and  false  accounts  are  based  on  an  internal  review  of  a  limited  sample  of  accounts,  and  we  apply
significant judgment in making this determination. For example, to identify duplicate accounts we use data signals such as identical IP addresses and similar user
names, and to identify false accounts we look for names that appear to be fake or other behavior that appears inauthentic to the reviewers. Any loss of access to
data signals we use in this process, whether as a result of our own product decisions, actions by third-party browser or mobile platforms, regulatory or legislative
requirements, limitations while our personnel work remotely during the COVID-19 pandemic, or other factors, also may impact the stability or accuracy of our
estimates of duplicate and false accounts. Our estimates also may change as our methodologies evolve, including through the application of new data signals or
technologies or product changes that may allow us to identify previously undetected duplicate or false accounts and may improve our ability to evaluate a broader
population  of  our users.  Duplicate  and  false  accounts  are  very  difficult  to  measure  at  our scale,  and it  is possible  that  the  actual  number  of duplicate  and false
accounts may vary significantly from our estimates.

In  the  fourth  quarter  of  2020,  we  estimated  that  duplicate  accounts  may  have  represented  approximately  11%  of  our  worldwide  MAUs.  We  believe  the
percentage of duplicate accounts is meaningfully higher in developing markets such as the Philippines and Vietnam, as compared to more developed markets. In
the fourth quarter of 2020, we estimated that false accounts may have represented approximately 5% of our worldwide MAUs. Our estimation of false accounts can
vary  as  a  result  of  episodic  spikes  in  the  creation  of  such  accounts,  which  we  have  seen  originate  more  frequently  in  specific  countries  such  as  Indonesia  and
Vietnam. From time to time, we disable certain user accounts, make product changes, or take other actions to reduce the number of duplicate or false accounts
among our users, which may also reduce our DAU and MAU estimates in a particular period. We intend to disclose our estimates of the number of duplicate and
false accounts among our MAUs on an annual basis.

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The numbers of DAUs and MAUs discussed in this Annual Report on Form 10-K, as well as ARPU, do not include users on Instagram, WhatsApp, or our

other products, unless they would otherwise qualify as DAUs or MAUs, respectively, based on their other activities on Facebook.

Family Metrics

Many people in our community have user accounts on more than one of our products, and some people have multiple user accounts within an individual
product. Accordingly, for our Family metrics, we do not seek to count the total number of user accounts across our products because we believe that would not
reflect  the  actual  size  of  our  community.  Rather,  our  Family  metrics  represent  our  estimates  of  the  number  of  unique  people  using  at  least  one  of  Facebook,
Instagram, Messenger, and WhatsApp. We do not require people to use a common identifier  or link their accounts to use multiple products in our Family, and
therefore  must  seek  to  attribute  multiple  user  accounts  within  and  across  products  to  individual  people.  To  calculate  these  metrics,  we  rely  upon  complex
techniques, algorithms and machine learning models that seek to count the individual people behind user accounts, including by matching multiple user accounts
within an individual product and across multiple products when we believe they are attributable to a single person, and counting such group of accounts as one
person. These techniques and models require significant judgment, are subject to data and other limitations discussed below, and inherently are subject to statistical
variances and uncertainties. We estimate the potential error in our Family metrics primarily based on user survey data, which itself is subject to error as well. While
we  expect  the  error  margin  for  our  Family  metrics  to  vary  from  period  to  period,  we  estimate  that  such  margin  generally  will  be  approximately  4%  of  our
worldwide MAP. At our scale,  it  is very  difficult  to attribute  multiple  user accounts  within and across products  to individual  people,  and it is possible that  the
actual numbers of unique people using our products may vary significantly from our estimates, potentially beyond our estimated error margins. As a result, it is
also possible that our Family metrics may indicate changes or trends in user numbers that do not match actual changes or trends.

To calculate our estimates of Family DAP and MAP, we currently use a series of machine learning models that are developed based on internal reviews of
limited samples of user accounts and calibrated against user survey data. We apply significant judgment in designing these models and calculating these estimates.
For example, to match user accounts within individual products and across multiple products, we use data signals such as similar device information, IP addresses,
and user names. We also calibrate our models against data from periodic user surveys of varying sizes and frequency across our products, which are inherently
subject  to  error.  The  timing  and  results  of  such  user  surveys  have  in  the  past  contributed,  and  may  in  the  future  contribute,  to  changes  in  our  reported  Family
metrics from period to period. In addition, our data limitations may affect our understanding of certain details of our business and increase the risk of error for our
Family metrics estimates. Our techniques and models rely on a variety of data signals from different products, and we rely on more limited data signals for some
products compared to others. For example, as a result of limited visibility into encrypted products, we have fewer data signals from WhatsApp user accounts and
primarily rely on phone numbers and device information to match WhatsApp user accounts with accounts on our other products. Similarly, although Messenger
Kids users are included in our Family metrics, we do not seek to match their accounts with accounts on our other applications for purposes of calculating DAP and
MAP. Any loss of access to data signals we use in our process for calculating Family metrics, whether as a result of our own product decisions, actions by third-
party browser or mobile platforms, regulatory or legislative requirements, limitations while our personnel work remotely during the COVID-19 pandemic, or other
factors, also may impact the stability or accuracy of our reported Family metrics. Our estimates of Family metrics also may change as our methodologies evolve,
including through the application of new data signals or technologies, product changes, or other improvements in our user surveys, algorithms, or machine learning
that may improve our ability to match accounts within and across our products or otherwise evaluate the broad population of our users. In addition, such evolution
may allow us to identify previously undetected violating accounts (as defined below).

We regularly evaluate our Family metrics to estimate the percentage of our MAP consisting solely of "violating" accounts. We define "violating" accounts
as accounts which we believe are intended to be used for purposes that violate our terms of service, including bots and spam. In the fourth quarter of 2020, we
estimated that approximately 3% of our worldwide MAP consisted solely of violating accounts. Such estimation is based on an internal review of a limited sample
of  accounts,  and  we  apply  significant  judgment  in  making  this  determination.  For  example,  we  look  for  account  information  and  behaviors  associated  with
Facebook and Instagram accounts that appear to be inauthentic to the reviewers, but we have limited visibility into WhatsApp user activity due to encryption. In
addition, if we believe an individual person has one or more violating accounts, we do not include such person in our violating accounts estimation as long as we
believe they have one account that does not constitute a violating account. From time to time, we disable certain user accounts, make product changes, or take other
actions  to  reduce  the number  of  violating  accounts  among  our users,  which  may  also  reduce  our  DAP and  MAP estimates  in  a  particular  period.  We  intend  to
disclose our estimates of the percentage of our MAP consisting solely

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of violating accounts on an annual basis. Violating accounts are very difficult to measure at our scale, and it is possible that the actual number of violating accounts
may vary significantly from our estimates.

The numbers of Family DAP and MAP discussed in this Annual Report on Form 10-K, as well as ARPP, do not include users on our other products, unless

they would otherwise qualify as DAP or MAP, respectively, based on their other activities on our Family products.

User Geography

Our data regarding the geographic location of our users is estimated based on a number of factors, such as the user's IP address and self-disclosed location.
These factors may not always accurately reflect the user's actual location. For example, a user may appear to be accessing Facebook from the location of the proxy
server that the user connects to rather than from the user's actual location. The methodologies used to measure our metrics are also susceptible to algorithm or other
technical errors, and our estimates for revenue by user location and revenue by user device are also affected by these factors.

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PART I

Item 1. Business

Overview

Our mission is to give people the power to build community and bring the world closer together.

We build useful and engaging products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual
reality  headsets,  and  in-home  devices.  We  also  help  people  discover  and  learn  about  what  is  going  on  in  the  world  around  them,  enable  people  to  share  their
opinions,  ideas,  photos  and  videos,  and  other  activities  with  audiences  ranging  from  their  closest  family  members  and  friends  to  the  public  at  large,  and  stay
connected everywhere by accessing our products, including:

•

•

•

•

•

Facebook. Facebook enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers. There
are a number of different ways to engage with people on Facebook and build community, including Facebook News Feed, Stories, Groups, Shops,
Marketplace, News, and Watch.

Instagram. Instagram  brings  people  closer  to  the  people  and  things  they  love.  It  is  a  place  where  people  can  express  themselves  through  photos,
videos,  and  private  messaging,  and  connect  with  and  shop  from  their  favorite  businesses  and  creators.  They  can  do  this  through  Instagram  Feed,
Stories, Reels, IGTV, Live, Shops, and messaging.

Messenger.  Messenger  is  a  simple  yet  powerful  messaging  application  for  people  to  connect  with  friends,  family,  groups,  and  businesses  across
platforms and devices through chat, video, and Rooms.

WhatsApp. WhatsApp is a simple, reliable, and secure messaging application that is used by people and businesses around the world to communicate
and transact in a private way.

Facebook Reality Labs. Facebook Reality Labs' augmented and virtual reality products help people feel connected, anytime, anywhere. Oculus Quest
lets people defy distance with cutting-edge virtual reality (VR) hardware, software, and content, while Portal helps friends and families stay connected
and share the moments that matter in meaningful ways.

We generate substantially all of our revenue from selling advertising placements to marketers. Our ads enable marketers to reach people based on a variety
of factors including age, gender, location, interests, and behaviors. Marketers purchase ads that can appear in multiple places including on Facebook, Instagram,
Messenger, and third-party applications and websites.

Competition

Our  business  is  characterized  by  innovation,  rapid  change,  and  disruptive  technologies.  We  compete  with  companies  providing  connection  and
communication products and services to users online, as well as companies that sell advertising to businesses looking to reach consumers and/or develop tools and
systems  for  managing  and  optimizing  advertising  campaigns.  We  face  significant  competition  in  every  aspect  of  our  business,  including,  but  not  limited  to,
companies  that  facilitate  the  ability  of  users  to  share,  communicate,  and  discover  content  and  information  online  or  enable  marketers  to  reach  their  existing  or
prospective  audiences,  including,  for  example,  Google,  Apple,  YouTube,  Tencent,  Snap,  Twitter,  ByteDance,  Microsoft,  and  Amazon.  We  compete  to  attract,
engage, and retain people who use our products, to attract and retain businesses who use our free or paid business and advertising services, and to attract and retain
developers to build compelling mobile and web applications that integrate with our products. We also compete with companies that develop and deliver consumer
hardware and virtual reality products and services. As we introduce or acquire new products, as our existing products evolve, or as other companies introduce new
products and services, we may become subject to additional competition.

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Technology

Our product development philosophy is centered on continuous innovation in creating and improving products that are social by design, which means that
our products are designed to place people and their social interactions at the core of the product experience. As our user base grows, as engagement with products
like video and VR increases, and as we deepen our investment in new technologies like artificial intelligence, our computing needs continue to expand. We make
significant investments in technology both to improve our existing products and services and to develop new ones, as well as for our marketers and developers. We
are also investing in protecting the security, privacy, and integrity of our platform by investing in both people and technology to strengthen our systems against
abuse.

Sales and Operations

The majority of our marketers use our self-service ad platform to launch and manage their advertising campaigns. We also have a global sales force that is
focused on attracting and retaining advertisers and providing support to them throughout the stages of the marketing cycle from pre-purchase decision-making to
real-time optimizations to post-campaign analytics. We work directly with these advertisers, as well as through advertising agencies and resellers. We operate in
more  than  80  cities  around  the  globe,  the  majority  of  which  have  a  sales  presence.  We  also  invest  in  and  rely  on  self-service  tools  to  provide  direct  customer
support to our users and partners.

Marketing

Historically,  our  communities  have  generally  grown  organically  with  people  inviting  their  friends  to  connect  with  them,  supported  by  internal  efforts  to
stimulate awareness and interest. In addition, we have invested and will continue to invest in marketing our products and services to grow our brand and help build
community around the world.

Intellectual Property

To  establish  and  protect  our  proprietary  rights,  we  rely  on  a  combination  of  patents,  trademarks,  copyrights,  trade  secrets,  including  know-how,  license
agreements,  confidentiality  procedures,  non-disclosure  agreements  with  third  parties,  employee  disclosure  and  invention  assignment  agreements,  and  other
contractual rights. In addition, to further protect our proprietary rights, from time to time we have purchased patents and patent applications from third parties. We
do not believe that our proprietary technology is dependent on any single patent or copyright or groups of related patents or copyrights. We believe the duration of
our patents is adequate relative to the expected lives of our products.

Government Regulation

We are  subject  to a variety  of laws and regulations  in the  United States and abroad  that involve matters  central  to our business, many of which are still
evolving and being tested in courts, and could be interpreted in ways that could harm our business. These laws and regulations involve matters including privacy,
data  use,  data  protection  and  personal  information,  rights  of  publicity,  content,  intellectual  property,  advertising,  marketing,  distribution,  data  security,  data
retention and deletion, data localization and storage, data disclosure, artificial intelligence, electronic contracts and other communications, competition, protection
of  minors,  consumer  protection,  telecommunications,  product  liability,  e-commerce,  taxation,  economic  or  other  trade  prohibitions  or  sanctions,  anti-corruption
and political law compliance, securities law compliance, and online payment services. In particular, we are subject to federal, state, and foreign laws regarding
privacy and protection of people's data. Foreign data protection, privacy, content, competition, and other laws and regulations can impose different obligations or
be more restrictive than those in the United States.

These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities,
are constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often
uncertain, particularly in the new and rapidly evolving industry in which we operate, and may be interpreted and applied inconsistently from country to country and
inconsistently with our current policies and practices. For example, regulatory or legislative actions affecting the manner in which we display content to our users
or obtain consent to various practices, or otherwise relating to content that is made available on our products, could adversely affect our financial results. In the
United States, there have been, and continue to be, various efforts to remove or restrict the scope of the protections available to online platforms under Section 230
of the Communications Decency Act, and any such changes may increase our costs or require significant changes to our products, business practices, or operations,
which could adversely affect our business and financial results.

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We are also subject to evolving laws and regulations that dictate whether, how, and under what circumstances we can transfer, process and/or receive
certain  data  that  is  critical  to  our  operations,  including  data  shared  between  countries  or  regions  in  which  we  operate  and  data  shared  among  our  products  and
services.  If  we  are  unable  to  transfer  data  between  and  among  countries  and  regions  in  which  we operate,  or  if  we  are  restricted  from  sharing  data  among  our
products and services,  it could affect  our ability  to provide our services,  the manner in which we provide our services  or our ability  to target  ads, which could
adversely affect our financial results. For example, the Privacy Shield, a transfer framework we relied upon for data transferred from the European Union to the
United States, was invalidated  in July 2020 by the Court of Justice of the European Union (CJEU). In addition, the other bases upon which Facebook relies to
transfer  such  data,  such  as  Standard  Contractual  Clauses  (SCCs),  have  been  subjected  to  regulatory  and  judicial  scrutiny.  In  August  2020,  we  received  a
preliminary draft decision from the Irish Data Protection Commission (IDPC) that preliminarily concluded that Facebook Ireland's reliance on SCCs in respect of
European user data does not achieve compliance with the GDPR and preliminarily proposed that such transfers of user data from the European Union to the United
States should therefore be suspended. Facebook Ireland challenged procedural aspects of this IDPC inquiry in a judicial review commenced in the Irish High Court
in September 2020. While we also rely upon alternative  legal bases for data transfers, if a new transatlantic  data transfer framework is not adopted and we are
unable to continue to rely on SCCs or validly rely upon other alternative means of data transfers from Europe to the United States, we may be unable to operate
material portions of our business in Europe as a result of the CJEU's invalidation of the Privacy Shield and any final decision of IDPC, which would materially and
adversely affect our business, financial condition, and results of operations.

Proposed or new legislation and regulations could also significantly affect our business. For example, the European General Data Protection Regulation
(GDPR)  took  effect  in  May  2018  and  applies  to  all  of  our  products  and  services  used  by  people  in  Europe.  The  GDPR  includes  operational  requirements  for
companies that receive or process personal data of residents of the European Union that are different from those previously in place in the European Union, and
includes significant penalties for non-compliance. The Brazilian General Data Protection Law recently took effect and imposes data privacy-related requirements
similar to GDPR on products and services offered to users in Brazil. The California Consumer Privacy Act, which took effect in January 2020, also establishes
certain transparency rules and creates new data privacy rights for users. In addition, effective December 2020, the European Union's ePrivacy Directive includes
additional  limitations  on  the  use  of  data  across  messaging  products  and  includes  significant  penalties  for  non-compliance.  Changes  to  our  products  or  business
practices as a result of these developments may adversely affect our advertising business. Similarly, there are a number of legislative proposals in the European
Union, the United States, at both the federal and state level, as well as other jurisdictions that could impose new obligations or limitations in areas affecting our
business,  such  as  liability  for  copyright  infringement.  In  addition,  some  countries  are  considering  or  have  passed  legislation  implementing  data  protection
requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.

We are, and expect to continue to be, the subject of investigations, inquiries, data requests, requests for information, actions, and audits by government
authorities  and  regulators  in  the  United  States,  Europe,  and  around  the  world,  particularly  in  the  areas  of  privacy,  data  protection,  law  enforcement,  consumer
protection, and competition, as we continue to grow and expand our operations. We are also currently, and may in the future be, subject to regulatory orders or
consent decrees, including the modified consent order we entered into with the U.S. Federal Trade Commission (FTC), which took effect in April 2020 and, among
other  matters,  requires  us to  implement  a  comprehensive  expansion  of  our  privacy  program.  Orders  issued  by, or  inquiries  or  enforcement  actions  initiated  by,
government  or  regulatory  authorities  could  cause  us  to  incur  substantial  costs,  expose  us  to  unanticipated  civil  and  criminal  liability  or  penalties  (including
substantial monetary remedies), interrupt or require us to change our business practices in a manner materially adverse to our business, result in negative publicity
and reputational harm, divert resources and the time and attention of management from our business, or subject us to other structural or behavioral remedies that
adversely affect our business.

For additional information about government regulation applicable to our business, see Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-

K.

Human Capital

At Facebook, we design products to bring the world closer together, one connection at a time. As a company, we believe that people are at the heart of every
connection  we  build.  We  are  proud  of  our  unique  company  culture  where  ideas,  innovation,  and  impact  win,  and  we  work  hard  to  build  strong  teams  across
engineering, product design, marketing, and other areas to further our mission.

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We had a global workforce of 58,604 employees as of December 31, 2020, which represents a 30% year-over-year increase in employee headcount. We
expect headcount growth to continue for the foreseeable future, particularly as we continue to focus on recruiting employees in technical functions. In addition, we
plan to continue to hire a number of employees and contractors to continue to bolster various privacy, safety, security, and content review initiatives as well as
other functions to support our expected growth.

Our headquarters are located in Menlo Park, California and we have offices in more than 80 cities around the globe. The vast majority of our personnel are
currently working remotely as a result of the COVID-19 pandemic, and in the long term, we expect some personnel to transition to working remotely on a regular
basis.

Diversity and Inclusion

Diversity  and  inclusion  are  core  to  our  work  at  Facebook.  We  seek  to  build  a  diverse  and  inclusive  workplace  where  we  can  leverage  our  collective
cognitive diversity to build the best products and make the best decisions for the global community we serve. While we have made progress, we still have more
work to do.

We  publish  our  global  gender  diversity  and  U.S.  ethnic  diversity  workforce  data  annually.  In  2020,  we  announced  that  as  of  June  30,  2020,  our  global
employee base was comprised of 37% females and 63% males, and our U.S. employee base was comprised of the following ethnicities: 44.4% Asian, 41% White,
6.3% Hispanic, 4% two or more ethnicities, 3.9% Black, and 0.4% additional groups (including American Indian or Alaska Native and Native Hawaiian or Other
Pacific Islander). We also announced our goals to have 50% of our workforce made up of underrepresented populations by 2024, and to increase the representation
of people of color in leadership positions in the United States, including Black leadership, by 30% from 2020 to 2025. We will also continue our ongoing efforts to
increase the representation of women in leadership.

We work to support our goals of diversifying our workforce through recruiting, retention, people development, and inclusion. We employ our Diverse
Slate  Approach  in  our  global  recruitment  efforts,  which  ensures  that  teams  and  hiring  managers  have  the  opportunity  to  consider  qualified  people  from
underrepresented  groups  for  open  roles.  We  have  seen  steady  increases  in  hiring  rates  of  people  from  underrepresented  groups  since  we  started  testing  this
approach  in  2015.  We  also  continue  to  provide  diversity  and  inclusion  training  for  our  recruiting  team  and  develop  inclusive  internship  programs.  Facebook
University, our training program for college freshmen and sophomores with an interest in Computer Science, also utilizes a proactive and inclusive approach to
promote participation by people from underrepresented groups. To help build community among our people and support their professional development, we invest
in our internal Facebook Resource Groups and our annual Community events such as Women's Community Summit, Black Community Summit, Latin Community
Summit,  and  Pride  Community  Summit.  We  also  offer  Managing  Unconscious  Bias,  Managing  Inclusion,  and  Be  the  Ally  trainings  to  promote  an  inclusive
workplace by helping people understand the issues that affect underrepresented communities and how to reduce the effects of bias in the workplace.

Compensation and Benefits

We offer competitive compensation to attract and retain the best people, and we help care for our people so they can focus on our mission. Our employees'
total compensation package includes market-competitive salary, bonuses or sales commissions, and equity. We generally offer full-time employees equity at the
time of hire and through annual equity grants because we want them to be owners of the company and committed to our long-term success. We have conducted pay
equity analyses for many years, and continue to be committed to pay equity. In 2020, we announced that our analyses indicate that we continue to have pay equity
across gender globally and race in the United States for people in similar jobs, accounting for factors such as location, role, and level.

Through Life@ Facebook, our holistic approach to benefits, we provide our employees and their loved ones resources to help them thrive. We offer a wide
range  of  benefits  across  areas  such  as  health,  family,  finance,  community,  and  time  away,  including  healthcare  and  wellness  benefits,  adoption  and  surrogacy
assistance, family care resources, a 401(k) plan, access to tax and legal services, Facebook Resource Groups to build community at Facebook, family leave, and
paid time off.

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Corporate Information

We were incorporated in Delaware in July 2004. We completed our initial public offering in May 2012 and our Class A common stock is listed on The
Nasdaq Global Select Market under the symbol "FB." Our principal executive offices are located at 1601 Willow Road, Menlo Park, California 94025, and our
telephone number is (650) 543-4800.

Facebook, the Facebook logo, FB, the Like button, Instagram, Oculus, WhatsApp, and our other registered or common law trademarks, service marks, or
trade names appearing in this Annual Report on Form 10-K are the property of Facebook, Inc. or its affiliates. Other trademarks, service marks, or trade names
appearing in this Annual Report on Form 10‑K are the property of their respective owners.

Available Information

Our  website  address  is  www.facebook.com.  Our  Annual  Reports  on  Form  10-K,  Quarterly  Reports  on  Form  10-Q,  Current  Reports  on  Form  8-K,  and
amendments  to reports  filed  pursuant  to Sections  13(a)  and 15(d) of the Securities  Exchange  Act of 1934, as amended  (Exchange  Act), are  filed  with the U.S.
Securities and Exchange Commission (SEC). We are subject to the informational requirements of the Exchange Act and file or furnish reports, proxy statements,
and other information with the SEC. Such reports and other information filed by us with the SEC are available free of charge on our website at investor.fb.com
when such reports are available on the SEC's website. We use our investor.fb.com and about.fb.com/news/ websites as well as Mark Zuckerberg's Facebook Page
(https://www.facebook.com/zuck) as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically

with the SEC at www.sec.gov.

The contents of the websites referred to above are not incorporated into this filing. Further, our references to the URLs for these websites are intended to be

inactive textual references only.

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Item 1A. Risk Factors

Certain  factors  may have  a material  adverse  effect  on  our business,  financial  condition,  and results  of  operations.  You should  consider  carefully  the risks  and
uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and
related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we
currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business,
financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the trading price of our Class A common
stock could decline, and you could lose part or all of your investment.

Summary Risk Factors

Our  business  is  subject  to  a  number  of  risks,  including  risks  that  may  prevent  us  from  achieving  our  business  objectives  or  may  adversely  affect  our
business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks
related to:

Risks Related to Our Product Offerings

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our ability to add and retain users and maintain levels of user engagement with our products;

the loss of, or reduction in spending by, our marketers;

reduced availability of data signals used by our ad targeting and measurement tools;

ineffective operation with mobile operating systems or changes in our relationships with mobile operating system partners;

failure of our new products, or changes to our existing products, to attract or retain users or generate revenue;

Risks Related to Our Business Operations and Financial Results

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the COVID-19 pandemic, including its impact on our advertising business;

our ability to compete effectively;

unfavorable media coverage and other risks affecting our ability to maintain and enhance our brands;

volatile or slower user and revenue growth rates in the future;

acquisitions and our ability to successfully integrate our acquisitions;

our ability to build, maintain, and scale our technical infrastructure, and risks associated with disruptions in our service;

operating our business in multiple countries around the world;

litigation, including class action lawsuits;

Risks Related to Government Regulation and Enforcement

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government restrictions on access to Facebook or our other products, or other actions that impair our ability to sell advertising, in their countries;

complex and evolving U.S. and foreign privacy, data use and data protection, content, competition, consumer protection, and other laws and regulations;

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the  impact  of  government  investigations,  enforcement  actions,  and  settlements,  including  litigation  and  investigations  by  privacy  and  competition
authorities;

our ability to comply with regulatory and legislative privacy requirements, including our consent order with the Federal Trade Commission;

Risks Related to Data, Security, and Intellectual Property

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the occurrence of security breaches, improper access to or disclosure of our data or user data, and other cyber incidents or undesirable activity on our
platform;

our ability to obtain, maintain, protect, and enforce our intellectual property rights; and

Risks Related to Ownership of Our Class A Common Stock

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limitations on the ability of holders of our Class A Common Stock to influence corporate matters due to the dual class structure of our common stock and
the control of a majority of the voting power of our outstanding capital stock by our founder, Chairman, and CEO.

Risks Related to Our Product Offerings

If we fail to retain existing users or add new users, or if our users decrease their level of engagement with our products, our revenue, financial results, and
business may be significantly harmed.

The  size  of  our  user  base  and  our  users'  level  of  engagement  are  critical  to  our  success.  Our  financial  performance  has  been  and  will  continue  to  be
significantly determined by our success in adding, retaining, and engaging active users of our products, particularly for Facebook and Instagram. We anticipate that
our active user growth rate will generally decline over time as the size of our active user base increases, and we expect that the size of our active user base will
fluctuate or decline in one or more markets from time to time, particularly in markets where we have achieved higher penetration rates. For example, beginning in
the first quarter  of 2020, we experienced  significant  increases  in the size and engagement  of our active  user base across a number of regions as a result of the
COVID-19 pandemic. More recently, we have seen user growth and engagement returning to pre-pandemic trends, and in each of the third and fourth quarters of
2020, we experienced slight declines on a quarter-over-quarter basis in the number of daily active users on Facebook in the United States & Canada region. We are
unable to predict the impact of the pandemic on user growth and engagement with any certainty, and we expect these trends to continue to be subject to volatility.
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. A number of other social networking companies that achieved early popularity have since seen their active user bases
or  levels  of  engagement  decline,  in  some  cases  precipitously.  There  is  no  guarantee  that  we  will  not  experience  a  similar  erosion  of  our  active  user  base  or
engagement levels. Our user engagement patterns have changed over time, and user engagement can be difficult to measure, particularly as we introduce new and
different products and services. Any number of factors can negatively affect user retention, growth, and engagement, including if:

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users increasingly engage with other competitive products or services;

we  fail  to  introduce  new  features,  products,  or  services  that  users  find  engaging  or  if  we  introduce  new  products  or  services,  or  make  changes  to
existing products and services, that are not favorably received;

users feel that their experience is diminished as a result of the decisions we make with respect to the frequency, prominence, format, size, and quality
of ads that we display;

users have difficulty installing, updating, or otherwise accessing our products on mobile devices as a result of actions by us or third parties that we
rely on to distribute our products and deliver our services;

user behavior on any of our products changes, including decreases in the quality and frequency of content shared on our products and services;

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we are unable to continue to develop products for mobile devices that users find engaging, that work with a variety of mobile operating systems and
networks, and that achieve a high level of market acceptance;

there are decreases in user sentiment due to questions about the quality or usefulness of our products or our user data practices, concerns about the
nature of content made available on our products, or concerns related to privacy, safety, security, well-being, or other factors;

we are unable to manage and prioritize information to ensure users are presented with content that is appropriate, interesting, useful, and relevant to
them;

we are unable to obtain or attract engaging third-party content;

we are unable to successfully maintain  or grow usage of and engagement with mobile and web applications  that integrate with Facebook and our
other products;

users  adopt  new  technologies  where  our  products  may  be  displaced  in  favor  of  other  products  or  services,  or  may  not  be  featured  or  otherwise
available;

there are changes mandated by legislation, government and regulatory authorities, or litigation that adversely affect our products or users;

we are unable to operate material portions of our business in Europe, or are otherwise limited in such operations, as a result of European regulators,
courts, or legislative bodies determining that our reliance on Standard Contractual Clauses (SCCs) or other legal bases we rely upon to transfer user
data from the European Union to the United States is invalid;

there  is  decreased  engagement  with  our  products,  or  failure  to  accept  our  terms  of  service,  as  part  of  privacy-focused  changes  that  we  have
implemented or may implement in the future, whether voluntarily, in connection with the General Data Protection Regulation (GDPR), the European
Union's ePrivacy Directive, the California Consumer Privacy Act (CCPA), or other laws, regulations, or regulatory actions, or otherwise;

technical or other problems prevent us from delivering our products in a rapid and reliable manner or otherwise affect the user experience, such as
security breaches or failure to prevent or limit spam or similar content;

we adopt terms, policies, or procedures related to areas such as sharing, content, user data, or advertising, or take actions to enforce our policies, that
are perceived negatively by our users or the general public, including as a result of decisions or recommendations from the independent Oversight
Board regarding content on our platform;

we elect to focus our product decisions on longer-term initiatives that do not prioritize near-term user growth and engagement;

we make changes in how we promote different products and services across our family of products;

initiatives designed to attract and retain users and engagement are unsuccessful or discontinued, whether as a result of actions by us, third parties, or
otherwise;

third-party initiatives that may enable greater use of our products, including low-cost or discounted data plans, are discontinued;

there  is  decreased  engagement  with  our  products  as  a  result  of  taxes  imposed  on  the  use  of  social  media  or  other  mobile  applications  in  certain
countries, internet shutdowns, or other actions by governments that affect the accessibility of our products in their countries;

we fail to provide adequate customer service to users, marketers, developers, or other partners;

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we, developers whose products are integrated with our products, or other partners and companies in our industry are the subject of adverse media
reports or other negative publicity, including as a result of our or their user data practices; or

our  current  or  future  products,  such  as  our  development  tools  and  application  programming  interfaces  that  enable  developers  to  build,  grow,  and
monetize  mobile  and  web  applications,  reduce  user  activity  on  our  products  by  making  it  easier  for  our  users  to  interact  and  share  on  third-party
mobile and web applications.

From time to time, certain of these factors have negatively affected user retention, growth, and engagement to varying degrees. If we are unable to maintain
or increase our user base and user engagement, particularly for our significant revenue-generating products like Facebook and Instagram, our revenue and financial
results may be adversely affected. Any significant decrease in user retention, growth, or engagement could render our products less attractive to users, marketers,
and developers, which is likely to have a material and adverse impact on our revenue, business, financial condition, and results of operations. If our active user
growth rate continues to slow, we will become increasingly dependent on our ability to maintain or increase levels of user engagement and monetization in order to
drive revenue growth.

We  generate  substantially  all  of  our  revenue  from  advertising.  The  loss  of  marketers,  or  reduction  in  spending  by  marketers,  could  seriously  harm  our
business.

Substantially  all  of  our  revenue  is  currently  generated  from  third  parties  advertising  on  Facebook  and  Instagram.  As  is  common  in  the  industry,  our
marketers do not have long-term advertising commitments with us. Many of our marketers spend only a relatively small portion of their overall advertising budget
with us. Marketers will not continue to do business with us, or they will reduce the budgets they are willing to commit to us, if we do not deliver ads in an effective
manner, or if they do not believe that their investment in advertising with us will generate a competitive return relative to other alternatives. We have implemented,
and we will continue to implement, changes to our user data practices. Some of these changes reduce our ability to effectively target ads, which has to some extent
adversely affected, and will continue to adversely affect, our advertising business. If we are unable to provide marketers with a suitable return on investment, the
pricing of our ads may not increase, or may decline, in which case our revenue and financial results may be harmed.

Our advertising revenue can also be adversely affected by a number of other factors, including:

decreases in user engagement, including time spent on our products;

our inability to continue to increase user access to and engagement with our products;

product changes or inventory management decisions we may make that change the size, format, frequency, or relative prominence of ads displayed
on our products or of other unpaid content shared by marketers on our products;

our inability to maintain or increase marketer demand, the pricing of our ads, or both;

our inability to maintain or increase the quantity or quality of ads shown to users;

changes  to  third-party  policies  that  limit  our  ability  to  deliver,  target,  or  measure  the  effectiveness  of  advertising,  including  changes  by  mobile
operating system and browser providers such as Apple and Google;

adverse government actions or legislative, regulatory, or other legal developments relating to advertising, including developments that may impact
our ability to deliver, target, or measure the effectiveness of advertising;

user  behavior  or  product  changes  that  may  reduce  traffic  to  features  or  products  that  we  successfully  monetize,  including  as  a  result  of  increased
usage of the Stories format or our messaging products;

reductions of advertising by marketers due to our efforts to implement or enforce advertising policies that protect the security and integrity of our
platform;

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the availability, accuracy, utility, and security of analytics and measurement solutions offered by us or third parties that demonstrate the value of our
ads to marketers, or our ability to further improve such tools;

loss  of  advertising  market  share  to  our  competitors,  including  if  prices  to  purchase  our  ads  increase  or  if  competitors  offer  lower  priced,  more
integrated, or otherwise more effective products;

limitations  on  our  ability  to  operate  material  portions  of  our  business  in  Europe  as  a  result  of  European  regulators,  courts,  or  legislative  bodies
determining that our reliance on SCCs or other legal bases we rely upon to transfer user data from the European Union to the United States is invalid;

changes in our marketing and sales or other operations that we are required to or elect to make as a result of risks related to complying with foreign
laws or regulatory requirements or other government actions;

decisions by marketers to reduce their advertising as a result of adverse media reports or other negative publicity involving us, our user data practices,
our advertising metrics or tools, content on our products, our efforts to implement or enforce policies relating to content on our products (including as
a result of decisions or recommendations from the independent Oversight Board), developers with mobile and web applications that are integrated
with our products, or other companies in our industry;

reductions of advertising by marketers due to objectionable content made available on our products by third parties, questions about our user data
practices, concerns about brand safety or potential legal liability, or uncertainty regarding their own legal and compliance obligations (for example, a
number of marketers announced that they paused advertising with us in July 2020 due to concerns about content on our products);

the effectiveness of our ad targeting or degree to which users opt out of the use of data for ads, including as a result of product changes and controls
that  we  have  implemented  or  may  implement  in  the  future  in  connection  with  the  GDPR,  ePrivacy  Directive,  California  Consumer  Privacy  Act
(CCPA), other laws, regulations, or regulatory actions, or otherwise, that impact our ability to use data for advertising purposes;

the degree to which users cease or reduce the number of times they engage with our ads;

changes in the way advertising on mobile devices or on personal computers is measured or priced;

the success of technologies designed to block the display of ads or ad measurement tools;

changes in the composition of our marketer base or our inability to maintain or grow our marketer base; and

the impact of macroeconomic conditions, whether in the advertising industry in general, or among specific types of marketers or within particular
geographies.

From  time  to  time,  certain  of  these  factors  have  adversely  affected  our  advertising  revenue  to  varying  degrees.  The  occurrence  of  any  of  these  or  other
factors in the future could result in a reduction in demand for our ads, which may reduce the prices we receive for our ads, or cause marketers to stop advertising
with us altogether, either of which would negatively affect our revenue and financial results. For example, macroeconomic conditions have affected, and may in
the future affect, marketers' ability or willingness to spend with us, as we have seen with the regional and worldwide economic disruption related to the COVID-19
pandemic and associated declines in advertising activity on our products. The effects of the pandemic previously resulted in reduced demand for our ads, a related
decline in pricing of our ads, and additional demands on our technical infrastructure as a result of increased usage of our services, and any similar occurrences in
the future may impair our ability to maintain or increase the quantity or quality of ads shown to users and adversely affect our revenue and financial results.

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Our advertising revenue is dependent on targeting and measurement tools that incorporate data signals from user activity on websites and services that we do
not  control,  and  changes  to  the  regulatory  environment,  third-party  mobile  operating  systems  and  browsers,  and  our  own  products  have  impacted,  and  we
expect will continue to impact, the availability of such signals, which will adversely affect our advertising revenue.

We rely on data signals from user activity on websites and services that we do not control in order to deliver relevant and effective ads to our users. Our
advertising  revenue  is  dependent  on  targeting  and  measurement  tools  that  incorporate  these  signals,  and  any  changes  in  our  ability  to  use  such  signals  will
adversely affect our business. For example, legislative and regulatory developments, such as the GDPR, ePrivacy Directive, and CCPA, have impacted, and we
expect will continue to impact, our ability to use such signals in our ad products. In particular, we have seen an increasing number of users opt out of certain types
of  ad  targeting  in  Europe  following  adoption  of  the  GDPR,  and  we  have  introduced  product  changes  that  limit  data  signal  use  for  certain  users  in  California
following adoption of the CCPA. Regulatory guidance or decisions or new legislation may require us to make additional changes to our products in the future that
further reduce our ability to use these signals. In addition, mobile operating system and browser providers, such as Apple and Google, have announced product
changes as well as future plans to limit the ability of application developers to collect and use these signals to target and measure advertising. For example, in June
2020, Apple announced that it plans to make certain changes to its products and data use policies in connection with the release of its iOS 14 operating system that
will  reduce  our  and  other  iOS  developers'  ability  to  target  and  measure  advertising,  which  we  expect  will  in  turn  reduce  the  budgets  marketers  are  willing  to
commit to us and other advertising platforms. In addition, we have implemented, and may continue to implement, product changes that give users the ability to
limit our use of such data signals to improve ads and other experiences on our products and services, including our Off-Facebook Activity tool and our worldwide
offering  of  certain  product  changes  we  implemented  in  connection  with  the  GDPR.  These  developments  have  limited  our  ability  to  target  and  measure  the
effectiveness of ads on our platform, and negatively impacted our advertising revenue, and if we are unable to mitigate these developments as they take further
effect  in  the  future,  our  targeting  and  measurement  capabilities  will  be  materially  and  adversely  affected,  which  would  in  turn  significantly  impact  our  future
advertising revenue growth.

Our  user growth,  engagement,  and monetization  on  mobile  devices  depend  upon effective  operation  with mobile  operating  systems,  networks,  technologies,
products, and standards that we do not control.

The substantial majority of our revenue is generated from advertising on mobile devices. There is no guarantee that popular mobile devices will continue to
feature Facebook or our other products, or that mobile device users will continue to use our products rather than competing products. We are dependent on the
interoperability of Facebook and our other products with popular mobile operating systems, networks, technologies, products, and standards that we do not control,
such as the Android and iOS operating systems and mobile browsers. Any changes, bugs, or technical issues in such systems, or changes in our relationships with
mobile operating system partners, handset manufacturers, browser developers, or mobile carriers, or in their terms of service or policies that degrade our products'
functionality, reduce or eliminate our ability to update or distribute our products, give preferential treatment to competitive products, limit our ability to deliver,
target,  or  measure  the  effectiveness  of  ads,  or  charge  fees  related  to  the  distribution  of  our  products  or  our  delivery  of  ads  could  adversely  affect  the  usage  of
Facebook or our other products and monetization on mobile devices. For example, Apple previously released an update to its Safari browser that limits the use of
third-party cookies, which reduces our ability to provide the most relevant ads to our users and impacts monetization, and more recently announced changes to
iOS 14 that will limit our ability to target and measure ads effectively. We expect that any similar changes to its, Google's, or other browser or mobile platforms
will further limit our ability to target and measure the effectiveness of ads and impact monetization. Additionally, in order to deliver high quality mobile products,
it is important that our products work well with a range of mobile technologies, products, systems, networks, and standards that we do not control, and that we have
good relationships with handset manufacturers, mobile carriers, and browser developers. We may not be successful in maintaining or developing relationships with
key participants in the mobile ecosystem or in developing products that operate effectively with these technologies, products, systems, networks, or standards. In
the event that it is more difficult for our users to access and use Facebook or our other products on their mobile devices, or if our users choose not to access or use
Facebook or our other products on their mobile devices or use mobile products that do not offer access to Facebook or our other products, our user growth and user
engagement could be harmed. From time to time, we may also take actions regarding the distribution of our products or the operation of our business based on
what we believe to be in our long-term best interests. Such actions may adversely affect our users and our relationships with the operators of mobile operating
systems, handset manufacturers, mobile carriers, browser developers, other business partners, or advertisers, and there is no assurance that these actions will result
in the anticipated long-term benefits. In the event that our users are adversely affected by these actions or if our relationships with such third parties deteriorate, our
user growth, engagement, and monetization could be adversely affected

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and our business could be harmed. We have in the past experienced challenges in operating with mobile operating systems, networks, technologies, products, and
standards that we do not control, and any such occurrences in the future may negatively impact our user growth, engagement, and monetization on mobile devices,
which may in turn materially and adversely affect our business and financial results.

Our new products and changes to existing products could fail to attract or retain users or generate revenue and profits.

Our  ability  to  retain,  increase,  and  engage  our  user  base  and  to  increase  our  revenue  depends  heavily  on  our  ability  to  continue  to  evolve  our  existing
products and to create successful new products, both independently and in conjunction with developers or other third parties. We may introduce significant changes
to our existing products or acquire or introduce new and unproven products, including using technologies with which we have little or no prior development or
operating experience. For example, we do not have significant experience with consumer hardware products or virtual or augmented reality technology, which may
adversely  affect  our  ability  to  successfully  develop  and  market  these  products  and  technologies.  We  continue  to  incur  substantial  costs,  and  we  may  not  be
successful in generating profits, in connection with these efforts. In addition, the introduction of new products, or changes to existing products, may result in new
or  enhanced  governmental  or  regulatory  scrutiny,  litigation,  or  other  complications  that  could  adversely  affect  our  business  and  financial  results.  We  have  also
invested, and expect to continue to invest, significant resources in growing our WhatsApp and Messenger products to support increasing usage of such products.
We have historically monetized messaging in only a limited fashion, and we may not be successful in our efforts to generate meaningful revenue or profits from
messaging  over  the  long  term.  In  addition,  we  are  moving  forward  with  plans  to  implement  end-to-end  encryption  across  our  messaging  services,  as  well  as
facilitate cross-app communication between these platforms, which plans have drawn governmental and regulatory scrutiny in multiple jurisdictions. If our new or
enhanced products fail to engage users, marketers, or developers, or if our business plans are unsuccessful, we may fail to attract or retain users or to generate
sufficient revenue, operating margin, or other value to justify our investments, and our business may be adversely affected.

We make product and investment decisions that may not prioritize short-term financial results and may not produce the long-term benefits that we expect.

We frequently make product and investment decisions that may not prioritize short-term financial results if we believe that the decisions are consistent with
our mission and benefit the aggregate user experience and will thereby improve our financial performance over the long term. For example, we have implemented,
and we will continue to implement, changes to our user data practices. Some of these changes reduce our ability to effectively target ads, which has to some extent
adversely affected, and will continue to adversely affect, our advertising business. For example, our Off-Facebook Activity tool enables users to place limits on our
storage and use of information about their interactions with advertisers' apps and websites, which reduces our ability to deliver the most relevant and effective ads
to our users. Similarly, from time to time we update our News Feed ranking algorithm to optimize the user experience, and these changes have had, and may in the
future have, the effect of reducing time spent and some measures of user engagement with Facebook, which could adversely affect our financial results. From time
to time, we may also change the size, frequency, or relative prominence of ads in order to improve ad quality and overall user experience. In addition, we have
made,  and  we  expect  to  continue  to  make,  other  changes  to  our  products  which  may  adversely  affect  the  distribution  of  content  of  publishers,  marketers,  and
developers, and could reduce their incentive to invest in their efforts on Facebook or our other products. We also may introduce new features or other changes to
existing  products,  or  introduce  new  stand-alone  products,  that  attract  users  away  from  properties,  formats,  or  use  cases  where  we  have  more  proven  means  of
monetization. For example, we previously introduced the Stories format, which we do not currently monetize at the same rate as News Feed. In addition, as we
focus on growing users and engagement across our family of products, from time to time these efforts have reduced, and may in the future reduce, engagement
with one or more products and services in favor of other products or services that we monetize less successfully or that are not growing as quickly. These decisions
may adversely affect our business and results of operations and may not produce the long-term benefits that we expect.

If we are not able to maintain and enhance our brands, our ability to expand our base of users, marketers, and developers may be impaired, and our business
and financial results may be harmed.

We  believe  that  our  brands  have  significantly  contributed  to  the  success  of  our  business.  We  also  believe  that  maintaining  and  enhancing  our  brands  is
critical to expanding our base of users, marketers, and developers. Many of our new users are referred by existing users. Maintaining and enhancing our brands will
depend largely on our ability to continue to provide useful, reliable, trustworthy, and innovative products, which we may not do successfully. We may introduce
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products or terms of service or policies that users do not like, which may negatively affect our brands. Additionally, the actions of our developers or advertisers
may affect our brands if users do not have a positive experience using third-party mobile and web applications integrated with our products or interacting with
parties that advertise through our products. We will also continue to experience media, legislative, or regulatory scrutiny of our actions or decisions regarding user
privacy,  data  use,  encryption,  content,  advertising,  competition,  and  other  issues,  including  actions  or  decisions  in  connection  with  elections  or  the  COVID‑19
pandemic, which has in the past adversely affected, and may in the future adversely affect, our reputation and brands. For example, in March 2018, we announced
developments regarding the misuse of certain data by a developer that shared such data with third parties in violation of our terms and policies. We also may fail to
respond  expeditiously  or  appropriately  to  the  sharing  of  objectionable  content  on  our  services  or  objectionable  practices  by  advertisers  or  developers,  or  to
otherwise address user concerns, which has occurred in the past and which could erode confidence in our brands. Our brands may also be negatively affected by
the actions of users that are deemed to be hostile or inappropriate to other users, by the actions of users acting under false or inauthentic identities, by the use of our
products  or  services  to  disseminate  information  that  is  deemed  to  be  misleading  (or  intended  to  manipulate  opinions),  by  perceived  or  actual  efforts  by
governments to obtain access to user information for security-related purposes or to censor certain content on our platform, by the use of our products or services
for illicit or objectionable ends, including, for example, any such actions around the pandemic or elections in the United States and around the world, by decisions
or recommendations regarding content on our platform from the independent Oversight Board, or by our decisions to remove content or suspend participation on
our  platform  by  persons  who  violate  our  community  standards  or  terms  of  service.  Maintaining  and  enhancing  our  brands  will  require  us  to  make  substantial
investments and these investments may not be successful. Certain of our past actions, such as the foregoing matter regarding developer misuse of data and concerns
around  our  handling  of  political  speech  and  advertising,  hate  speech,  and  other  content,  have  eroded  confidence  in  our  brands,  and  if  we  fail  to  successfully
promote and maintain our brands or if we incur excessive expenses in this effort, our business and financial results may be adversely affected.

We may not be able to continue to successfully maintain or grow usage of and engagement with mobile and web applications that integrate with Facebook and
our other products.

We have made and are continuing to make investments to enable developers to build, grow, and monetize mobile and web applications that integrate with
Facebook  and  our  other  products.  Such  existing  and  prospective  developers  may  not  be  successful  in  building,  growing,  or  monetizing  mobile  and/or  web
applications that create and maintain user engagement. Additionally, developers may choose to build on other platforms, including mobile platforms controlled by
third parties, rather than building products that integrate with Facebook and our other products. We are continuously seeking to balance the distribution objectives
of our developers with our desire to provide an optimal user experience, and we may not be successful in achieving a balance that continues to attract and retain
such developers. For example, from time to time, we have taken actions to reduce the volume of communications from these developers to users on Facebook and
our  other  products  with  the  objective  of  enhancing  the  user  experience,  and  such  actions  have  reduced  distribution  from,  user  engagement  with,  and  our
monetization  opportunities  from,  mobile  and  web  applications  integrated  with  our  products.  In  addition,  as  part  of  our  efforts  related  to  privacy,  safety,  and
security,  we  conduct  investigations  and  audits  of  platform  applications  from  time  to  time,  and  we  also  have  announced  several  product  changes  that  restrict
developer access to certain user data. In some instances, these actions, as well as other actions to enforce our policies applicable  to developers, have adversely
affected,  or  will  adversely  affect,  our  relationships  with  developers.  If  we  are  not  successful  in  our  efforts  to  maintain  or  grow  the  number  of  developers  that
choose  to  build  products  that  integrate  with  Facebook  and  our  other  products  or  if  we  are  unable  to  continue  to  build  and  maintain  good  relations  with  such
developers, our user growth and user engagement and our financial results may be adversely affected.

Risks Related to Our Business Operations and Financial Results

The COVID-19 pandemic has had, and may in the future have, a significant adverse impact on our advertising revenue and also exposes our business to other
risks.

The COVID-19 pandemic has resulted in authorities implementing numerous preventative measures to contain or mitigate the outbreak of the virus, such
as travel bans and restrictions, limitations on business activity, quarantines, and shelter-in-place orders. These measures have caused, and are continuing to cause,
business slowdowns or shutdowns in affected areas, both regionally and worldwide, which have significantly impacted our business and results of operations. For
example, in the second quarter of 2020, our advertising revenue grew 10% year-over-year, which was the slowest growth rate for any fiscal quarter since our initial
public offering. While our advertising revenue growth rate improved in subsequent

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quarters,  there  can  be  no  assurance  that  it  will  not  decrease  again  as  a  result  of  the  effects  of  the  pandemic.  In  addition,  we  believe  that  the  pandemic  has
contributed  to  an  acceleration  in  the  shift  of  commerce  from  offline  to  online,  as  well  as  increasing  consumer  demand  for  purchasing  products  as  opposed  to
services, which in turn have increased demand for our advertising services; however, it is possible that this increased demand may not continue in future periods
and  may  even  recede  as  the  effects  of  the  pandemic  subside,  which  could  adversely  affect  our  advertising  revenue  growth.  The  demand  for  and  pricing  of  our
advertising services may be materially and adversely impacted by the pandemic for the foreseeable future, and we are unable to predict the duration or degree of
such impact with any certainty. In addition to the impact on our advertising business, the pandemic exposes our business, operations, and workforce to a variety of
other risks, including:

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volatility in the size of our user base and user engagement, particularly for our messaging products, whether as a result of shelter-in-place measures
or other factors;

decreased user engagement as a result of users' inability to purchase data packs or devices to access our products and services;

interruptions in the accessibility or performance of our products and services due to capacity constraints from increased usage, or product changes we
implement to maintain accessibility of our services, such as reducing the quality of video to reduce bandwidth usage;

delays  in  product  development  or  releases,  or  reductions  in  manufacturing  production  and  sales  of  consumer  hardware,  as  a  result  of  inventory
shortages, supply chain or labor shortages, or diversion of our efforts and resources to projects related to COVID-19;

increased misuse of our products and services or user data by third parties, including improper advertising practices or other activity inconsistent with
our terms, contracts, or policies, misinformation or other illicit or objectionable material on our platforms, election interference, or other undesirable
activity; 

adverse  impacts  to  our  efforts  to  combat  misuse  of  our  products  and  services  and  user  data  as  a  result  of  limitations  on  our  safety,  security,  and
content review efforts while our workforce is working remotely, such as the necessity to rely more heavily on artificial intelligence to perform tasks
that our workforce is unable to perform; 

our inability to recognize revenue, collect payment, or generate future revenue from marketers, including from those that have been or may be forced
to close their businesses or are otherwise impacted by the economic downturn;

increased expenses resulting from our initiatives or donations related to the pandemic;

significant volatility and disruption of global financial markets, which could cause fluctuations in currency exchange rates or negatively impact our
ability to access capital in the future;

negative impact on our workforce productivity, product development, and research and development due to difficulties resulting from our personnel
working remotely; 

illnesses to key employees, or a significant portion of our workforce, which may result in inefficiencies, delays, and disruptions in our business; and

increased volatility and uncertainty in the financial projections we use as the basis for estimates used in our financial statements.

Any of these developments may adversely affect our business, harm our reputation, or result in legal or regulatory actions against us. The persistence of
COVID-19, and the preventative measures implemented to help limit the spread of the illness, have impacted, and will continue to impact, our ability to operate
our business and may materially and adversely impact our business, financial condition, and results of operations.

Our business is highly competitive. Competition presents an ongoing threat to the success of our business.

We compete with companies providing connection and communication products and services to users online, as well as companies that sell advertising to

businesses looking to reach consumers and/or develop tools and systems for managing

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and optimizing advertising campaigns. We face significant competition in every aspect of our business, including, but not limited to, companies that facilitate the
ability of users to share, communicate, and discover content and information online or enable marketers to reach their existing or prospective audiences, including,
for example, Google, Apple, YouTube, Tencent, Snap, Twitter, ByteDance, Microsoft, and Amazon. We compete to attract, engage, and retain people who use our
products,  to  attract  and  retain  businesses  that  use  our  free  or  paid  business  and  advertising  services,  and  to  attract  and  retain  developers  who  build  compelling
mobile and web applications that integrate with our products. We also compete with companies that develop and deliver consumer hardware and virtual reality
products and services. As we introduce or acquire new products, as our existing products evolve, or as other companies introduce new products and services, we
may become subject to additional competition.

Some of our current and potential competitors may have greater resources or stronger competitive positions in certain product segments, geographic regions,
or user  demographics  than  we do. For example,  some  of our  competitors  may be  domiciled  in different  countries  and subject  to political,  legal,  and regulatory
regimes that enable them to compete more effectively than us. These factors may allow our competitors to respond more effectively than us to new or emerging
technologies and changes in market conditions. We believe that some users, particularly younger users, are aware of and actively engaging with other products and
services similar to, or as a substitute for, our products and services, and we believe that some users have reduced their use of and engagement with our products
and  services  in  favor  of  these  other  products  and  services.  In  the  event  that  users  increasingly  engage  with  other  products  and  services,  we  may  experience  a
decline in use and engagement in key user demographics or more broadly, in which case our business would likely be harmed.

Our competitors may develop products, features, or services that are similar to ours or that achieve greater acceptance, may undertake more far-reaching and
successful  product  development  efforts  or  marketing  campaigns,  or  may  adopt  more  aggressive  pricing  policies.  Some  competitors  may  gain  a  competitive
advantage against us in areas where we operate, including: by making acquisitions; by limiting our ability to deliver, target, or measure the effectiveness of ads; by
imposing  fees  or  other  charges  related  to  our  delivery  of  ads;  by  making  access  to  our  products  more  difficult  or  impossible;  by  making  it  more  difficult  to
communicate with our users; or by integrating competing platforms, applications, or features into products they control such as mobile device operating systems,
search  engines,  browsers,  or  e-commerce  platforms.  For  example,  each  of  Apple  and  Google  have  integrated  competitive  products  with  iOS  and  Android,
respectively. In addition, Apple has announced changes to iOS 14 that will limit our ability, and the ability of others in the digital advertising industry, to target and
measure ads effectively. As a result, our competitors may, and in some cases will, acquire and engage users or generate advertising or other revenue at the expense
of our own efforts, which would negatively affect our business and financial results. In addition, from time to time, we may take actions in response to competitive
threats, but we cannot assure you that these actions will be successful or that they will not negatively affect our business and financial results.

We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including:

the popularity, usefulness, ease of use, performance, and reliability of our products compared to our competitors' products;

the size and composition of our user base;

the engagement of users with our products and competing products;

our ability to attract and retain businesses who use our free or paid business and advertising services;

the timing and market acceptance of products, including developments and enhancements to our or our competitors' products;

our safety and security efforts and our ability to protect user data and to provide users with control over their data;

our ability to distribute our products to new and existing users;

our ability to monetize our products;

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the frequency, size, format, quality, and relative prominence of the ads displayed by us or our competitors;

customer service and support efforts;

marketing and selling efforts, including our ability to measure the effectiveness of our ads and to provide marketers with a compelling return on their
investments;

our ability to establish and maintain developers' interest in building mobile and web applications that integrate with Facebook and our other products;

our ability to establish and maintain publisher interest in integrating their content with Facebook and our other products;

changes mandated by legislation, regulatory authorities, or litigation, some of which may have a disproportionate effect on us;

acquisitions or consolidation within our industry, which may result in more formidable competitors;

our ability to attract, retain, and motivate talented employees, particularly software engineers, designers, and product managers;

our ability to cost-effectively manage and grow our operations; and

our reputation and brand strength relative to those of our competitors.

If  we  are  not  able  to  compete  effectively,  our  user  base  and  level  of  user  engagement  may  decrease,  we  may  become  less  attractive  to  developers  and

marketers, and our revenue and results of operations may be materially and adversely affected.

Unfavorable media coverage negatively affects our business from time to time.

We  receive  a  high  degree  of  media  coverage  around  the  world.  Unfavorable  publicity  regarding,  for  example,  our  privacy  practices,  terms  of  service,
advertising policies, product changes, product quality, litigation or regulatory activity, government surveillance, the actions of our advertisers, the actions of our
developers whose products are integrated with our products, the use of our products or services for illicit or objectionable ends, the substance or enforcement of our
community standards, the actions of our users, the quality and integrity of content shared on our platform, or the actions of other companies that provide similar
services  to  ours,  has  in  the  past,  and  could  in  the  future,  adversely  affect  our  reputation.  For  example,  we  have  been  the  subject  of  significant  media  coverage
involving concerns around our handling of political speech and advertising, hate speech, and other content, and we continue to receive negative publicity related to
these topics. In addition, we have been, and may in the future be, subject to negative publicity in connection with our handling of misinformation and other illicit or
objectionable use of our products or services, including in connection with the COVID-19 pandemic and elections in the United States and around the world. Any
such negative publicity could have an adverse effect on the size, engagement, and loyalty of our user base and marketer demand for advertising on our products,
which could result in decreased revenue and adversely affect our business and financial results, and we have experienced such adverse effects to varying degrees
from time to time.

Our financial results will fluctuate from quarter to quarter and are difficult to predict.

Our quarterly financial results have fluctuated in the past and will fluctuate in the future. Additionally, we have a limited operating history with the current
scale of our business, which makes it difficult to forecast our future results. As a result, you should not rely upon our past quarterly financial results as indicators of
future  performance.  You  should  take  into  account  the  risks  and  uncertainties  frequently  encountered  by  companies  in  rapidly  evolving  markets.  Our  financial
results in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including:

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our ability to attract and retain marketers in a particular period;

our  ability  to  recognize  revenue  or  collect  payments  from  marketers  in  a  particular  period,  including  as  a  result  of  the  effects  of  the  COVID-19
pandemic;

fluctuations in spending by our marketers due to seasonality, such as historically strong spending in the fourth quarter of each year, episodic regional
or global events, including the COVID-19 pandemic, or other factors;

the frequency, prominence, size, format, and quality of ads shown to users;

the success of technologies designed to block the display of ads;

changes  to  third-party  policies  that  limit  our  ability  to  deliver,  target,  or  measure  the  effectiveness  of  advertising,  including  changes  by  mobile
operating system and browser providers such as Apple and Google;

the pricing of our ads and other products;

the diversification and growth of revenue sources beyond advertising on Facebook and Instagram;

our ability to generate revenue from Payments, or the sale of our consumer hardware products or other products we may introduce in the future;

changes to existing products or services or the development and introduction of new products or services by us or our competitors;

user behavior or product changes that may reduce traffic to features or products that we successfully monetize;

increases in marketing, sales, and other operating expenses that we will incur to grow and expand our operations and to remain competitive, including
costs related to our data centers and technical infrastructure;

costs  related  to  our  privacy,  safety,  security,  and  content  review  efforts,  including  as  a  result  of  implementing  changes  to  our  practices,  whether
voluntarily,  in  connection  with  laws,  regulations,  regulatory  actions,  or  decisions  or  recommendations  from  the  independent  Oversight  Board,  or
otherwise;

costs and expenses related to the development and delivery of our consumer hardware products;

our ability to maintain gross margins and operating margins;

costs related to acquisitions, including costs associated with amortization and additional investments to develop the acquired technologies;

charges associated with impairment of any assets on our balance sheet;

our ability to obtain equipment, components, and labor for our data centers and other technical infrastructure in a timely and cost-effective manner;

system failures or outages or government blocking, which could prevent us from serving ads for any period of time;

breaches of security or privacy, and the costs associated with any such breaches and remediation;

changes in the manner in which we distribute our products or inaccessibility of our products due to third-party actions;

fees paid to third parties for content or the distribution of our products;

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refunds or other concessions provided to advertisers;

share-based compensation expense, including acquisition-related expense;

adverse litigation judgments, settlements, or other litigation-related costs;

changes in the legislative or regulatory environment, including with respect to privacy and data protection, or actions by governments or regulators,
including fines, orders, or consent decrees;

the overall tax rate for our business, which is affected by the mix of income we earn in the U.S. and in jurisdictions with different tax rates, the effects
of share-based compensation, the effects of integrating intellectual property from acquisitions, the effects of changes in our business or structure, and
the effects of discrete items such as legal and tax settlements and tax elections;

the  impact  of  changes  in  tax  laws  or  judicial  or  regulatory  interpretations  of  tax  laws,  which  are  recorded  in  the  period  such  laws  are  enacted  or
interpretations are issued, and may significantly affect the effective tax rate of that period;

tax obligations that may arise from resolutions of tax examinations, including the examination we are currently under by the Internal Revenue Service
(IRS), that materially differ from the amounts we have anticipated;

fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies;

trading activity in our share repurchase program;

fluctuations in the market values of our investments in marketable securities, in the valuation of our equity investments, and in interest rates;

changes in U.S. generally accepted accounting principles; and

changes in regional or global business or macroeconomic conditions, including as a result of the COVID-19 pandemic, which may impact the other
factors described above.

We expect our rates of growth to be volatile in the near term as a result of the COVID-19 pandemic and to decline over time in the future.

We expect our user and revenue growth rates to be volatile in the near term as a result of the COVID-19 pandemic, although we are unable to predict the
duration or degree of such volatility with any certainty. In the long term, we expect that our user growth rate will generally decline over time as the size of our
active  user  base  increases,  and  the  size  of  our  active  user  base  may  fluctuate  or  decline  in  one  or  more  markets,  particularly  as  we  achieve  greater  market
penetration. We also expect our revenue growth rate will continue to decline over time as our revenue increases to higher levels. As our growth rates experience
volatility or decline, investors' perceptions of our business may be adversely affected and the trading price of our Class A common stock could decline.

Our costs are continuing to grow, and some of our investments, particularly our investments in virtual and augmented reality, have the effect of reducing our
operating margin and profitability. If our investments are not successful longer-term, our business and financial performance will be harmed.

Operating our business is costly, and we expect our expenses to continue to increase in the future as we broaden our user base, as users increase the amount
and types of content they consume and the data they share with us, for example with respect to video, as we develop and implement new products, as we market
new  and  existing  products  and  promote  our  brands,  as  we  continue  to  expand  our  technical  infrastructure,  as  we  continue  to  invest  in  new  and  unproven
technologies,  and  as  we  continue  to  hire  additional  employees  and  contractors  to  support  our  expanding  operations,  including  our  efforts  to  focus  on  privacy,
safety, security, and content review. In addition, from time to time we are subject to settlements, judgments,

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fines, or other monetary penalties in connection with legal and regulatory developments that may be material to our business. We are also continuing to increase
our  investments  in  new  platforms  and  technologies.  Some  of  these  investments,  particularly  our  significant  investments  in  virtual  and  augmented  reality,  have
generated only limited revenue and reduced our operating margin and profitability, and we expect the adverse financial impact of such investments to continue for
the foreseeable future. If our investments are not successful longer-term, our business and financial performance will be harmed.

We plan to continue to make acquisitions and pursue other strategic transactions, which could harm our financial condition or results of operations and may
adversely affect the price of our common stock.

As part of our business strategy, we have made and intend to continue to make acquisitions to add specialized employees and complementary companies,
products, or technologies, and from time to time may enter into other strategic transactions such as investments and joint ventures. We may not be able to find
suitable acquisition candidates, and we may not be able to complete acquisitions or other strategic transactions on favorable terms, if at all, including as a result of
regulatory challenges. In some cases, the costs of such acquisitions or other strategic transactions may be substantial, and there is no assurance that we will receive
a favorable return on investment for our acquisitions or other strategic transactions.

We  may  pay  substantial  amounts  of  cash  or  incur  debt  to  pay  for  acquisitions  or  other  strategic  transactions,  which  has  occurred  in  the  past  and  could
adversely  affect  our  liquidity.  The  incurrence  of  indebtedness  would  also  result  in  increased  fixed  obligations  and  increased  interest  expense,  and  could  also
include covenants or other restrictions that would impede our ability to manage our operations. We may also issue equity securities to pay for acquisitions and we
regularly  grant  RSUs  to  retain  the  employees  of  acquired  companies,  which  could  increase  our  expenses,  adversely  affect  our  financial  results,  and  result  in
dilution to our stockholders. In addition, any acquisitions or other strategic transactions we announce could be viewed negatively by users, marketers, developers,
or investors, which may adversely affect our business or the price of our Class A common stock.

We may also discover liabilities, deficiencies, or other claims associated with the companies or assets we acquire that were not identified in advance, which
may  result  in  significant  unanticipated  costs.  The  effectiveness  of  our  due  diligence  review  and  our  ability  to  evaluate  the  results  of  such  due  diligence  are
dependent upon the accuracy and completeness of statements and disclosures made or actions taken by the companies we acquire or their representatives, as well
as the limited amount of time in which acquisitions are executed. In addition, we may fail to accurately forecast the financial impact of an acquisition or other
strategic transaction, including tax and accounting charges. Acquisitions or other strategic transactions may also result in our recording of significant additional
expenses  to  our  results  of  operations  and  recording  of  substantial  finite-lived  intangible  assets  on  our  balance  sheet  upon  closing.  Any  of  these  factors  may
adversely affect our financial condition or results of operations.

We may not be able to successfully integrate our acquisitions, and we incur significant costs to integrate and support the companies we acquire.

The  integration  of  acquisitions  requires  significant  time  and  resources,  and  we may not  manage  these  processes  successfully.  Our ability  to  successfully
integrate complex acquisitions is unproven, particularly with respect to companies that have significant operations or that develop products where we do not have
prior experience. We continue to make substantial investments of resources to support our acquisitions, which will result in significant ongoing operating expenses
and may divert resources and management attention from other areas of our business. We cannot assure you that these investments will be successful. If we fail to
successfully integrate the companies we acquire, we may not realize the benefits expected from the transaction and our business may be harmed.

Our business is dependent on our ability to maintain and scale our technical infrastructure, and any significant disruption in our service, including as a result
of the COVID-19 pandemic, could damage our reputation, result in a potential loss of users and engagement, and adversely affect our financial results.

Our reputation and ability to attract, retain, and serve our users is dependent upon the reliable performance of our products and our underlying technical
infrastructure. We have in the past experienced, and may in the future experience, interruptions in the availability or performance of our products from time to
time. Our systems may not be adequately designed or may not operate with the reliability and redundancy necessary to avoid performance delays or outages that
could be harmful to our business. If our products are unavailable when users attempt to access them, or if they do not load as quickly as expected, users may not
use our products as often in the future, or at all, and our ability to serve ads may be

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disrupted, any of which could adversely affect our business and financial performance. As the amount and types of information shared on Facebook and our other
products continue to grow and evolve, as the usage patterns of our global community continue to evolve, and as our internal operational demands continue to grow,
we will need an increasing amount of technical infrastructure, including network capacity and computing power, to continue to satisfy our needs. It is possible that
we may fail to continue to effectively scale and grow our technical infrastructure to accommodate these increased demands, which may adversely affect our user
engagement  and  advertising  revenue  growth.  In  addition,  our  business  may  be  subject  to  interruptions,  delays,  or  failures  resulting  from  earthquakes,  adverse
weather conditions, other natural disasters, power loss, terrorism, geopolitical conflict, other physical security threats, cyber-attacks, or other catastrophic events. If
such an event were to occur, users may be subject to service disruptions or outages and we may not be able to recover our technical infrastructure and user data in a
timely manner to restart or provide our services, which may adversely affect our financial results.

For example, the increase in the use of our products as a result of the COVID-19 pandemic increased demands on our technical infrastructure. Additional
product development  efforts during this time have put additional pressure on our technical  infrastructure.  We may not be able to accommodate  these demands,
including as a result of our reduced data center operations and personnel working remotely during the pandemic.

A substantial portion of our network infrastructure is provided by third parties. Any disruption or failure in the services we receive from these providers
could harm our ability to handle existing or increased traffic and could significantly harm our business. Any financial or other difficulties these providers face may
adversely affect our business, and we exercise little control over these providers, which increases our vulnerability to problems with the services they provide. The
effects  of  the  COVID-19  pandemic  have  increased  the  risk  of  supply  or  labor  shortages  or  other  disruptions  in  logistics  or  the  supply  chain  for  our  technical
infrastructure. As a result, we may not be able to procure sufficient equipment or services from third parties to satisfy our needs, or we may be required to procure
such services or equipment on unfavorable terms.

Any of these developments may result in interruptions in the availability or performance of our products, require unfavorable changes to existing products,

delay the introduction of future products, or otherwise adversely affect our business and financial results.

We could experience unforeseen difficulties in building and operating key portions of our technical infrastructure.

We  have  designed  and  built  our  own  data  centers  and  key  portions  of  our  technical  infrastructure  through  which  we  serve  our  products,  and  we plan  to
continue to significantly expand the size of our infrastructure primarily through data centers, subsea and terrestrial fiber optic cable systems, and other projects.
The  infrastructure  expansion  we  are  undertaking  is  complex  and  involves  projects  in  multiple  locations  around  the  world,  including  in  emerging  markets  that
expose us to increased risks relating to anti-corruption compliance and political challenges, among others. We have in the past suspended, and may in the future
suspend,  certain  of  these  projects  as  a  result  of  the  COVID-19  pandemic.  Additional  unanticipated  delays  or  disruptions  in  the  completion  of  these  projects,
including due to any shortage of labor necessary in building portions of such projects, or availability of components, challenges in obtaining required government
or regulatory approvals, or other geopolitical challenges or actions by governments, whether as a result of the pandemic, trade disputes, or otherwise, may lead to
increased project costs, operational inefficiencies, interruptions in the delivery or degradation of the quality or reliability of our products, or impairment of assets
on our balance sheet. In addition, there may be issues related to this infrastructure that are not identified during the testing phases of design and implementation,
which may only become evident after we have started to fully utilize the underlying equipment, that could further degrade the user experience or increase our costs.
Further, much of our technical infrastructure is located outside the United States, and it is possible that action by a foreign government, or our response to such
government action, could result in the impairment of a portion of our technical infrastructure, which may interrupt the delivery or degrade the quality or reliability
of our products and lead to a negative user experience or increase our costs. Any of these events could adversely affect our business, reputation, or financial results.

Real or perceived inaccuracies in our community and other metrics may harm our reputation and negatively affect our business.

The numbers for our key metrics, which include our Facebook metrics (DAUs, MAUs, and average revenue per user (ARPU)) and Family metrics (DAP,
MAP, and average revenue per person (ARPP)), are calculated using internal company data based on the activity of user accounts. While these numbers are based
on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring usage of our
products across large online and mobile populations around the world. The methodologies used to measure these metrics require

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significant judgment and are also susceptible to algorithm or other technical errors. In addition, we are continually seeking to improve our estimates of our user
base, and such estimates may change due to improvements or changes in our methodology. We regularly review our processes for calculating these metrics, and
from time to time we discover inaccuracies in our metrics or make adjustments to improve their accuracy, which can result in adjustments to our historical metrics.
Our  ability  to  recalculate  our  historical  metrics  may  be  impacted  by  data  limitations  or  other  factors  that  require  us  to  apply  different  methodologies  for  such
adjustments. We generally do not intend to update previously disclosed Family metrics for any such inaccuracies or adjustments that are within the error margins
disclosed below.

In addition, our Facebook metrics and Family metrics estimates will differ from estimates published by third parties due to differences in methodology.

We regularly evaluate our Facebook metrics to estimate the number of "duplicate" and "false" accounts among our MAUs. A duplicate account is one that a
user maintains in addition to his or her principal account. We divide "false" accounts into two categories: (1) user-misclassified accounts, where users have created
personal profiles for a business, organization, or non-human entity such as a pet (such entities are permitted on Facebook using a Page rather than a personal profile
under our terms of service); and (2) violating accounts, which represent user profiles that we believe are intended to be used for purposes that violate our terms of
service,  such  as  bots  and  spam.  The  estimates  of  duplicate  and  false  accounts  are  based  on  an  internal  review  of  a  limited  sample  of  accounts,  and  we  apply
significant judgment in making this determination. For example, to identify duplicate accounts we use data signals such as identical IP addresses and similar user
names, and to identify false accounts we look for names that appear to be fake or other behavior that appears inauthentic to the reviewers. Any loss of access to
data signals we use in this process, whether as a result of our own product decisions, actions by third-party browser or mobile platforms, regulatory or legislative
requirements, limitations while our personnel work remotely during the COVID-19 pandemic, or other factors, also may impact the stability or accuracy of our
estimates of duplicate and false accounts. Our estimates also may change as our methodologies evolve, including through the application of new data signals or
technologies or product changes that may allow us to identify previously undetected duplicate or false accounts and may improve our ability to evaluate a broader
population  of  our users.  Duplicate  and  false  accounts  are  very  difficult  to  measure  at  our scale,  and it  is possible  that  the  actual  number  of duplicate  and false
accounts may vary significantly from our estimates.

In  the  fourth  quarter  of  2020,  we  estimated  that  duplicate  accounts  may  have  represented  approximately  11%  of  our  worldwide  MAUs.  We  believe  the
percentage of duplicate accounts is meaningfully higher in developing markets such as the Philippines and Vietnam, as compared to more developed markets. In
the fourth quarter of 2020, we estimated that false accounts may have represented approximately 5% of our worldwide MAUs. Our estimation of false accounts can
vary  as  a  result  of  episodic  spikes  in  the  creation  of  such  accounts,  which  we  have  seen  originate  more  frequently  in  specific  countries  such  as  Indonesia  and
Vietnam. From time to time, we disable certain user accounts, make product changes, or take other actions to reduce the number of duplicate or false accounts
among our users, which may also reduce our DAU and MAU estimates in a particular period. We intend to disclose our estimates of the number of duplicate and
false accounts among our MAUs on an annual basis.

Many people in our community have user accounts on more than one of our products, and some people have multiple user accounts within an individual
product. Accordingly, for our Family metrics, we do not seek to count the total number of user accounts across our products because we believe that would not
reflect  the  actual  size  of  our  community.  Rather,  our  Family  metrics  represent  our  estimates  of  the  number  of  unique  people  using  at  least  one  of  Facebook,
Instagram, Messenger, and WhatsApp. We do not require people to use a common identifier  or link their accounts to use multiple products in our Family, and
therefore  must  seek  to  attribute  multiple  user  accounts  within  and  across  products  to  individual  people.  To  calculate  these  metrics,  we  rely  upon  complex
techniques, algorithms and machine learning models that seek to count the individual people behind user accounts, including by matching multiple user accounts
within an individual product and across multiple products when we believe they are attributable to a single person, and counting such group of accounts as one
person. These techniques and models require significant judgment, are subject to data and other limitations discussed below, and inherently are subject to statistical
variances and uncertainties. We estimate the potential error in our Family metrics primarily based on user survey data, which itself is subject to error as well. While
we  expect  the  error  margin  for  our  Family  metrics  to  vary  from  period  to  period,  we  estimate  that  such  margin  generally  will  be  approximately  4%  of  our
worldwide MAP. At our scale,  it  is very  difficult  to attribute  multiple  user accounts  within and across products  to individual  people,  and it is possible that  the
actual numbers of unique people using our products may vary significantly from our estimates, potentially beyond our estimated error margins. As a result, it is
also possible that our Family metrics may indicate changes or trends in user numbers that do not match actual changes or trends.

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To calculate our estimates of Family DAP and MAP, we currently use a series of machine learning models that are developed based on internal reviews of
limited samples of user accounts and calibrated against user survey data. We apply significant judgment in designing these models and calculating these estimates.
For example, to match user accounts within individual products and across multiple products, we use data signals such as similar device information, IP addresses,
and user names. We also calibrate our models against data from periodic user surveys of varying sizes and frequency across our products, which are inherently
subject  to  error.  The  timing  and  results  of  such  user  surveys  have  in  the  past  contributed,  and  may  in  the  future  contribute,  to  changes  in  our  reported  Family
metrics from period to period. In addition, our data limitations may affect our understanding of certain details of our business and increase the risk of error for our
Family metrics estimates. Our techniques and models rely on a variety of data signals from different products, and we rely on more limited data signals for some
products compared to others. For example, as a result of limited visibility into encrypted products, we have fewer data signals from WhatsApp user accounts and
primarily rely on phone numbers and device information to match WhatsApp user accounts with accounts on our other products. Similarly, although Messenger
Kids users are included in our Family metrics, we do not seek to match their accounts with accounts on our other applications for purposes of calculating DAP and
MAP. Any loss of access to data signals we use in our process for calculating Family metrics, whether as a result of our own product decisions, actions by third-
party browser or mobile platforms, regulatory or legislative requirements, limitations while our personnel work remotely during the COVID-19 pandemic, or other
factors, also may impact the stability or accuracy of our reported Family metrics. Our estimates of Family metrics also may change as our methodologies evolve,
including through the application of new data signals or technologies, product changes, or other improvements in our user surveys, algorithms, or machine learning
that may improve our ability to match accounts within and across our products or otherwise evaluate the broad population of our users. In addition, such evolution
may allow us to identify previously undetected violating accounts (as defined below).

We regularly evaluate our Family metrics to estimate the percentage of our MAP consisting solely of "violating" accounts. We define "violating" accounts
as accounts which we believe are intended to be used for purposes that violate our terms of service, including bots and spam. In the fourth quarter of 2020, we
estimated that approximately 3% of our worldwide MAP consisted solely of violating accounts. Such estimation is based on an internal review of a limited sample
of  accounts,  and  we  apply  significant  judgment  in  making  this  determination.  For  example,  we  look  for  account  information  and  behaviors  associated  with
Facebook and Instagram accounts that appear to be inauthentic to the reviewers, but we have limited visibility into WhatsApp user activity due to encryption. In
addition, if we believe an individual person has one or more violating accounts, we do not include such person in our violating accounts estimation as long as we
believe they have one account that does not constitute a violating account. From time to time, we disable certain user accounts, make product changes, or take other
actions  to  reduce  the number  of  violating  accounts  among  our users,  which  may  also  reduce  our  DAP and  MAP estimates  in  a  particular  period.  We  intend  to
disclose our estimates of the percentage of our MAP consisting solely of violating accounts on an annual basis. Violating accounts are very difficult to measure at
our scale, and it is possible that the actual number of violating accounts may vary significantly from our estimates.

Other  data  limitations  also  may  affect  our  understanding  of  certain  details  of  our  business.  For  example,  while  user-provided  data  indicates  a  decline  in
usage among younger users, this age data is unreliable because a disproportionate number of our younger users register with an inaccurate age. Accordingly, our
understanding of usage by age group may not be complete.

In  addition,  our  data  regarding  the  geographic  location  of  our  users  is  estimated  based  on  a  number  of  factors,  such  as  the  user's  IP  address  and  self-
disclosed location. These factors may not always accurately reflect the user's actual location. For example, a user may appear to be accessing Facebook from the
location of the proxy server that the user connects to rather than from the user's actual location. The methodologies used to measure our metrics are also susceptible
to algorithm or other technical errors, and our estimates for revenue by user location and revenue by user device are also affected by these factors.

In addition, from time to time we provide, or rely on, certain other metrics and estimates, including those relating to the reach and effectiveness of our ads.
Many of our metrics involve the use of estimations and judgments, and our metrics and estimates are subject to software bugs, inconsistencies in our systems, and
human error. Where marketers, developers, or investors do not perceive our metrics or estimates to be accurate, or where we discover material inaccuracies in our
metrics or estimates, we may be subject to liability, our reputation may be harmed, and marketers and developers may be less willing to allocate their budgets or
resources to Facebook or our other products, which could negatively affect our business and financial results.

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We cannot assure you that we will effectively manage our growth.

Our employee headcount and the scope and complexity of our business have increased significantly, with the number of employees increasing to 58,604 as
of  December  31,  2020  from  44,942  as  of  December  31,  2019,  and  we  expect  headcount  growth  to  continue  for  the  foreseeable  future.  In  addition,  we  plan  to
continue  to  hire  a  number  of  employees  and  contractors  to  continue  to  bolster  various  privacy,  safety,  security,  and  content  review  initiatives  as  well  as  other
functions to support our expected growth. The growth and expansion of our business and products create significant challenges for our management, operational,
and financial resources, including managing multiple relationships with users, marketers, developers, and other third parties. As our operations and the number of
our third-party relationships continue to grow, our information technology systems or our internal controls and procedures may not be adequate to support such
growth. In addition, some members of our management do not have significant experience managing a large global business operation, so our management may
not  be  able  to  manage  such  growth  effectively.  Additionally,  the  vast  majority  of  our  personnel  are  currently  working  remotely  as  a  result  of  the  COVID-19
pandemic, which limits their ability to perform certain job functions and may negatively impact productivity. In the long term, we may experience such challenges
to productivity and collaboration as some personnel transition to working remotely on a regular basis, and we may experience difficulties integrating recently hired
personnel  when  our  offices  re-open.  To  effectively  manage  our  growth,  we  must  continue  to  adapt  to  a  remote  work  environment;  improve  our  operational,
financial, and management processes and systems; and effectively expand, train, and manage our personnel. As our organization continues to grow, and we are
required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the benefits of our corporate culture,
including our ability to quickly develop and launch new and innovative products. This could negatively affect our business performance.

We have significant international operations and plan to continue expanding our operations abroad where we have more limited operating experience, and
this may subject us to increased business, economic, and legal risks that could affect our financial results.

We have significant international operations and plan to continue the international expansion of our business operations and the translation of our products.

We currently make Facebook available in more than 100 different languages, and we have offices or data centers in more than 30 different countries. We may enter
new international markets where we have limited or no experience in marketing, selling, and deploying our products. Our products are generally available globally,
but some or all of our products or functionality may not be available in certain markets due to legal and regulatory complexities. For example, Facebook and
certain of our other products are not generally available in China. We also outsource certain operational functions to third-party vendors globally. If we fail to
deploy, manage, or oversee our international operations successfully, our business may suffer. In addition, we are subject to a variety of risks inherent in doing
business internationally, including:

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political, social, or economic instability;

risks  related  to  legal,  regulatory,  and  other  government  scrutiny  applicable  to  U.S.  companies  with  sales  and  operations  in  foreign  jurisdictions,
including  with  respect  to  privacy,  tax,  law  enforcement,  content,  trade  compliance,  competition,  consumer  protection,  intellectual  property,  and
infrastructure matters;

potential  damage  to  our  brand  and  reputation  due  to  compliance  with  local  laws,  including  potential  censorship  or  requirements  to  provide  user
information to local authorities;

enhanced difficulty in reviewing content on our platform and enforcing our community standards across different languages and countries;

fluctuations in currency exchange rates and compliance with currency controls;

foreign exchange controls and tax and other regulations and orders that might prevent us from repatriating cash earned in countries outside the United
States or otherwise limit our ability to move cash freely, and impede our ability to invest such cash efficiently;

higher levels of credit risk and payment fraud;

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enhanced difficulties of integrating any foreign acquisitions;

burdens of complying with a variety of foreign laws, including laws related to taxation, content removal, data localization, payments, and regulatory
oversight;

reduced protection for intellectual property rights in some countries;

difficulties  in  staffing,  managing,  and  overseeing  global  operations  and  the  increased  travel,  infrastructure,  and  legal  compliance  costs  associated
with multiple international locations, including difficulties arising from personnel working remotely during the COVID-19 pandemic;

compliance with statutory equity requirements and management of tax consequences; and

geopolitical events affecting us, our marketers or our industry, including trade disputes and pandemics.

In addition, we must manage the potential conflicts between locally accepted business practices in any given jurisdiction and our obligations to comply with
laws and regulations, including anti-corruption laws or regulations applicable to us, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.
We also must manage our obligations to comply with laws and regulations related to export controls, sanctions, and embargoes, including regulations established
by the U.S. Office of Foreign Assets Control. Government agencies and authorities have a broad range of civil and criminal penalties they may seek to impose
against companies for violations of anti-corruption laws or regulations, export controls, and other laws, rules, sanctions, embargoes, and regulations.

If  we  are  unable  to  expand  internationally  and  manage  the  complexity  of  our  global  operations  successfully,  our  financial  results  could  be  adversely

affected.

We face design, manufacturing, and supply chain risks that, if not properly managed, could adversely impact our financial results.

We face a number of risks related to design, manufacturing, and supply chain management with respect to our consumer hardware products. For example,
the consumer hardware products we sell from time to time have had, and in the future may have, quality issues resulting from the design or manufacture of the
products, or from the software used in the products. Sometimes, these issues may be caused by components we purchase from other manufacturers or suppliers.
Our  brand  and  financial  results  could  be  adversely  affected  by  any  such  quality  issues,  other  failures  to  meet  our  customers'  expectations,  or  findings  of  our
consumer hardware products to be defective.

We rely on third parties to manufacture and manage the logistics of transporting and distributing our consumer hardware products, which subjects us to a
number of risks that have been exacerbated as a result of the COVID-19 pandemic. We may experience supply or labor shortages or other disruptions in logistics
or the supply chain that could result in shipping delays and negatively impact our operations, product development, and sales. We could be negatively affected if
we are not able to engage third parties with the necessary capabilities or capacity on reasonable terms, or if those we engage with fail to meet their obligations
(whether  due  to  financial  difficulties,  manufacturing  constraints,  or  other  reasons),  or  make  adverse  changes  in  the  pricing  or  other  material  terms  of  such
arrangements  with  them.  The  manufacturing,  distribution,  and  sale  of  our  consumer  hardware  products  also  may  be  negatively  impacted  by  macroeconomic
conditions, geopolitical challenges, trade disputes, or other actions by governments that subject us to supply shortages, increased costs, or supply chain disruptions.

We  also  require  the  suppliers  and  business  partners  of  our  consumer  hardware  products  to  comply  with  laws  and  certain  company  policies  regarding
sourcing practices and standards on labor, health and safety, the environment, and business ethics, but we do not control them or their practices and standards. If
any of them violates laws, fails to implement changes in accordance with newly enacted laws, or implements practices or standards regarded as unethical, corrupt,
or non-compliant, we could experience supply chain disruptions, government action or fines, canceled orders, or damage to our reputation.

We face inventory risk with respect to our consumer hardware products.

We are exposed to inventory risks with respect to our consumer hardware products as a result of rapid changes in

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product  cycles  and  pricing,  unsafe  or  defective  merchandise,  changes  in  consumer  demand  and  consumer  spending  patterns,  changes  in  consumer  tastes  with
respect  to  our  consumer  hardware  products,  and  other  factors.  The  demand  for  our  products  can  also  change  significantly  between  the  time  inventory  or
components are ordered and the date of sale. While we endeavor to accurately predict these trends and avoid overstocking or understocking consumer hardware
products we may sell, from time to time we have experienced difficulties in accurately predicting and meeting the consumer demand for our products. In addition,
when we begin selling or manufacturing a new consumer hardware product or enter new international markets, it may be difficult to establish vendor relationships,
determine appropriate product or component selection, and accurately forecast demand. The acquisition of certain types of inventory or components may require
significant lead-time and prepayment and they may not be returnable. Any one of the foregoing factors may adversely affect our operating results.

We are involved in numerous class action lawsuits and other litigation matters that are expensive and time consuming, and, if resolved adversely, could harm
our business, financial condition, or results of operations.

We  are  involved  in  numerous  lawsuits,  including  stockholder  derivative  lawsuits  and  putative  class  action  lawsuits,  many  of  which  claim  statutory
damages  and/or  seek significant  changes  to our business  operations,  and we anticipate  that we will continue  to be a target  for numerous  lawsuits  in the future.
Because of the scale of our user, advertiser, and developer base, the plaintiffs in class action cases filed against us typically claim enormous monetary damages
even if the alleged per-user or entity harm is small or non-existent. In addition, we have in the past, and may in the future, be subject to additional class action
lawsuits  based  on  claims  related  to  advertising,  antitrust,  privacy,  content,  employment,  or  product  performance  or  other  claims  related  to  the  use  of  consumer
hardware  and  software,  as  well  as  virtual  reality  technology  and  products,  which  are  new and  unproven.  For example,  we  are  currently  the  subject  of  multiple
putative class action suits in connection with our platform and user data practices and the misuse of certain data by a developer that shared such data with third
parties  in  violation  of  our  terms  and  policies;  the  disclosure  of  our  earnings  results  for  the  second  quarter  of  2018;  and  our  acquisitions  of  Instagram  and
WhatsApp, as well as other alleged anticompetitive conduct. We also agreed to settle certain lawsuits in connection with the "tag suggestions" facial recognition
feature  on  Facebook  and  a  third-party  cyber-attack  that  exploited  a  vulnerability  in  Facebook's  code  to  steal  user  access  tokens  and  access  certain  profile
information from user accounts on Facebook. The results of any such lawsuits and claims cannot be predicted with certainty, and any negative outcome from any
such lawsuits could result in payments of substantial monetary damages or fines, or undesirable changes to our products or business practices, and accordingly our
business, financial condition, or results of operations could be materially and adversely affected.

There can be no assurances that a favorable final outcome will be obtained in all our cases, and defending any lawsuit is costly and can impose a significant
burden on management and employees. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed upon
appeal or in payments of substantial monetary damages or fines, or we may decide to settle lawsuits on similarly unfavorable terms, which has occurred in the past
and which could adversely affect our business, financial conditions, or results of operations.

We may have exposure to greater than anticipated tax liabilities.

Our  tax  obligations,  including  income  and  non-income  taxes,  are  based  in  part  on  our  corporate  operating  structure  and  intercompany  arrangements,
including the manner in which we operate our business, develop, value, manage, protect, and use our intellectual property, and the valuations of our intercompany
transactions.  The  tax  laws  applicable  to  our  business,  including  the  laws  of  the  United  States  and  other  jurisdictions,  are  subject  to  interpretation  and  certain
jurisdictions are aggressively interpreting their laws in new ways in an effort to raise additional tax revenue from companies such as Facebook. We are subject to
regular  review  and  audit  by  U.S.  federal,  state,  and  foreign  tax  authorities.  Tax  authorities  may  disagree  with  certain  positions  we  have  taken,  including  our
methodologies for valuing developed technology or intercompany arrangements, and any adverse outcome of such a review or audit could increase our worldwide
effective tax rate, increase the amount of non-income taxes imposed on our business, and harm our financial position, results of operations, and cash flows. For
example, in 2016 and 2018, the IRS issued formal assessments relating to transfer pricing with our foreign subsidiaries in conjunction with the examination of the
2010 through 2013 tax years. Although we disagree with the IRS's position and are litigating this issue, the ultimate resolution is uncertain and, if resolved in a
manner unfavorable to us, may adversely affect our financial results.

The determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are many
transactions where the ultimate tax determination is uncertain. Our provision for income taxes is determined by the manner in which we operate our business, and
any changes to such operations or laws applicable to such operations may affect our effective tax rate. Although we believe that our provision for income taxes and
estimates of

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our non-income tax liabilities are reasonable, the ultimate settlement may differ from the amounts recorded in our financial statements and may materially affect
our financial results in the period or periods for which such determination is made.

Our future income tax rates could be volatile and difficult to predict due to changes in jurisdictional profit split, changes in the amount and recognition of

deferred tax assets and liabilities, or by changes in tax laws, regulations, or accounting principles.

Changes in tax laws or tax rulings could materially affect our financial position, results of operations, and cash flows.

The  tax  regimes  we  are  subject  to  or  operate  under,  including  income  and  non-income  taxes,  are  unsettled  and  may  be  subject  to  significant  change.
Changes  in  tax  laws  or  tax  rulings,  or  changes  in  interpretations  of  existing  laws,  could  materially  affect  our  financial  position,  results  of  operations,  and  cash
flows. For example, the 2017 Tax Cuts and Jobs Act (Tax Act) enacted in December 2017 had a significant impact on our tax obligations and effective tax rate for
the fourth quarter of 2017. The issuance of additional regulatory or accounting guidance related to the Tax Act, or other executive or Congressional actions in the
United States, could materially affect our tax obligations and effective tax rate in the period such guidance is issued or such actions take effect. In addition, many
countries  in  Europe,  as  well  as  a  number  of  other  countries  and  organizations,  have  recently  proposed  or  recommended  changes  to  existing  tax  laws  or  have
enacted new laws that could significantly increase our tax obligations in many countries where we do business or require us to change the manner in which we
operate our business.

The Organization for Economic Cooperation and Development has been working on a Base Erosion and Profit Shifting Project, and issued a report in 2015,
an interim report in 2018, and blueprints in 2020 that, if implemented, would change various aspects of the existing framework under which our tax obligations are
determined in many of the countries in which we do business. Similarly, the European Commission and several countries have issued proposals that would apply to
various aspects of the current tax framework under which we are taxed. These proposals include changes to the existing framework to calculate income tax, as well
as proposals to change or impose new types of non-income taxes, including taxes based on a percentage of revenue. For example, several countries have proposed
or  enacted  taxes  applicable  to  digital  services,  which  includes  business  activities  on  social  media  platforms  and  online  marketplaces,  and  which  apply  to  our
business.

The  European  Commission  has  conducted  investigations  in  multiple  countries  focusing  on  whether  local  country  tax  rulings  or  tax  legislation  provides
preferential  tax treatment  that  violates  European Union state  aid  rules and concluded  that certain  countries,  including  Ireland,  have provided  illegal  state aid in
certain cases. These investigations may result in changes to the tax treatment of our foreign operations.

Due to the large and expanding scale of our international business activities, many of these types of changes to the taxation of our activities described above
could  increase  our  worldwide  effective  tax  rate,  increase  the  amount  of  non-income  taxes  imposed  on  our  business,  and  harm  our  financial  position,  results  of
operations,  and  cash  flows.  Such  changes  may  also  apply  retroactively  to  our  historical  operations  and  result  in  taxes  greater  than  the  amounts  estimated  and
recorded in our financial statements.

Given our levels of share-based compensation, our tax rate may vary significantly depending on our stock price.

The tax effects of the accounting for share-based compensation may significantly impact our effective tax rate from period to period. In periods in which our
stock  price  is  higher  than  the  grant  price  of  the  share-based  compensation  vesting  in  that  period,  we  will  recognize  excess  tax  benefits  that  will  decrease  our
effective tax rate. For example, in 2020, excess tax benefits recognized from share-based compensation decreased our provision for income taxes by $656 million
and our effective tax rate by two percentage points as compared to the tax rate without such benefits. In future periods in which our stock price is lower than the
grant price of the share-based compensation vesting in that period, our effective tax rate may increase. The amount and value of share-based compensation issued
relative to our earnings in a particular period will also affect the magnitude of the impact of share-based compensation on our effective tax rate. These tax effects
are dependent on our stock price, which we do not control, and a decline in our stock price could significantly increase our effective tax rate and adversely affect
our financial results.

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If our goodwill or finite-lived intangible assets become impaired, we may be required to record a significant charge to earnings.

We review our finite-lived intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable,
such as a decline in stock price and market capitalization. We test goodwill for impairment at least annually. If such goodwill or finite-lived intangible assets are
deemed to be impaired, an impairment loss equal to the amount by which the carrying amount exceeds the fair value of the assets would be recognized. We may be
required to record a significant charge in our financial statements during the period in which any impairment of our goodwill or finite-lived intangible assets is
determined, which would negatively affect our results of operations.

The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business.

We currently depend on the continued services and performance of our key personnel, including Mark Zuckerberg and Sheryl K. Sandberg. Although we
have entered into employment agreements with Mr. Zuckerberg and Ms. Sandberg, the agreements have no specific duration and constitute at-will employment. In
addition,  many  of  our  key  technologies  and  systems  are  custom-made  for  our  business  by  our  personnel.  The  loss  of  key  personnel,  including  members  of
management  as  well  as  key  engineering,  product  development,  marketing,  and  sales  personnel,  could  disrupt  our  operations  and  have  an  adverse  effect  on  our
business.

As  we  continue  to  grow,  we  cannot  guarantee  we  will  continue  to  attract  and  retain  the  personnel  we  need  to  maintain  our  competitive  position.  In
particular,  we  intend  to  continue  to  hire  a  significant  number  of  technical  personnel  in  the  foreseeable  future,  and  we  expect  to  continue  to  face  significant
challenges in hiring such personnel, particularly in the San Francisco Bay Area, where our headquarters are located, whether as a result of competition with other
companies, challenges due to the high cost of living, facilities and infrastructure constraints, or other factors. As we continue to mature, the incentives to attract,
retain, and motivate employees provided by our equity awards or by future arrangements may not be as effective as in the past, and if we issue significant equity to
attract additional employees or to retain our existing employees, we would incur substantial additional share-based compensation expense and the ownership of our
existing stockholders would be further diluted. Our ability to attract, retain, and motivate employees may also be adversely affected by stock price volatility. As a
result  of  these  factors,  it  may  be  difficult  for  us  to  continue  to  retain  and  motivate  our  employees.  If  we  do  not  succeed  in  attracting,  hiring,  and  integrating
excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively.

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

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 and 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, which has limited voting power 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, in some cases, the 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 has designated. 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 governed by a voting agreement, in his own interests, which may not
always be in the interests of our stockholders generally.

We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value. Share repurchases
could also increase the volatility of the trading price of our stock and will diminish our cash reserves.

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Although  our  board  of  directors  has  authorized  a  share  repurchase  program  that  does  not  have  an  expiration  date,  the  program  does  not  obligate  us  to
repurchase any specific dollar amount or to acquire any specific number of shares of our Class A common stock. We cannot guarantee that the program will be
fully consummated or that it will enhance long-term stockholder value. The program could affect the trading price of our stock and increase volatility, and any
announcement of a termination of this program may result in a decrease in the trading price of our stock. In addition, this program will diminish our cash reserves.

Risks Related to Government Regulation and Enforcement

Actions by governments that restrict access to Facebook or our other products in their countries, or that otherwise impair our ability to sell advertising in their
countries, could substantially harm our business and financial results.

Governments from time to time seek to censor content available on Facebook or our other products in their country, restrict access to our products from their
country entirely, or impose other restrictions that may affect the accessibility of our products in their country for an extended period of time or indefinitely. For
example,  user  access  to  Facebook  and  certain  of  our  other  products  has  been  or  is  currently  restricted  in  whole  or  in  part  in  China,  Iran,  and  North  Korea.  In
addition, government authorities in other countries may seek to restrict user access to our products if they consider us to be in violation of their laws or a threat to
public safety or for other reasons, and certain of our products have been restricted by governments in other countries from time to time. For example, in June 2020,
Hong Kong adopted a National Security Law that provides authorities with the ability to obtain information, remove and block access to content, and suspend user
services, and if we are found to be in violation of this law then the use of our products may be restricted. In addition, if we are required to or elect to make changes
to our marketing and sales or other operations in Hong Kong as a result of the National Security Law, our revenue and business in the region will be adversely
affected.  It  is  also  possible  that  government  authorities  could  take  action  that  impairs  our  ability  to  sell  advertising,  including  in  countries  where  access  to  our
consumer-facing products may be blocked or restricted. For example, we generate meaningful revenue from a limited number of resellers representing advertisers
based in China, and it is possible that the Chinese government could take action that reduces or eliminates our China-based advertising revenue, whether as a result
of the trade dispute with the United States, in response to content issues or information requests in Hong Kong or elsewhere, or for other reasons, or take other
action against us, such as imposing taxes or other penalties, which could adversely affect our financial results. Similarly, if we are found to be out of compliance
with  certain  legal  requirements  for  social  media  companies  in  Turkey,  the  Turkish  government  could  take  action  to  reduce  or  eliminate  our  Turkey-based
advertising  revenue  or  otherwise  adversely  impact  access  to  our  products.  In  the  event  that  content  shown  on  Facebook  or  our  other  products  is  subject  to
censorship, access to our products is restricted, in whole or in part, in one or more countries, we are required to or elect to make changes to our operations, or other
restrictions  are  imposed  on  our  products,  or  our  competitors  are  able  to  successfully  penetrate  new  geographic  markets  or  capture  a  greater  share  of  existing
geographic  markets  that  we  cannot  access  or  where  we  face  other  restrictions,  our  ability  to  retain  or  increase  our  user  base,  user  engagement,  or  the  level  of
advertising  by  marketers  may  be  adversely  affected,  we  may  not  be  able  to  maintain  or  grow  our  revenue  as  anticipated,  and  our  financial  results  could  be
adversely affected.

Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data use and data protection, content, competition,
consumer protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims,
changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including privacy, data use,
data protection and personal information,  rights of publicity, content, intellectual  property, advertising, marketing, distribution,  data security, data retention and
deletion,  data  localization  and  storage,  data  disclosure,  artificial  intelligence,  electronic  contracts  and  other  communications,  competition,  protection  of  minors,
consumer protection, telecommunications, product liability, e-commerce, taxation, economic or other trade prohibitions or sanctions, anti-corruption and political
law compliance, securities law compliance, and online payment services. The introduction of new products, expansion of our activities in certain jurisdictions, or
other actions that we may take may subject us to additional laws, regulations, or other government scrutiny. In addition, foreign data protection, privacy, content,
competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States.

These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are
constantly evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often
uncertain, particularly in the new and

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rapidly  evolving  industry  in  which  we  operate,  and  may  be  interpreted  and  applied  inconsistently  from  country  to  country  and  inconsistently  with  our  current
policies and practices. For example, regulatory or legislative actions affecting the manner in which we display content to our users or obtain consent to various
practices  could  adversely  affect  user  growth  and  engagement.  Such  actions  could  affect  the  manner  in  which  we  provide  our  services  or  adversely  affect  our
financial results.

We are also subject to evolving laws and regulations that dictate whether, how, and under what circumstances we can transfer, process and/or receive certain
data that is critical to our operations, including data shared between countries or regions in which we operate and data shared among our products and services. For
example, in 2016, the European Union and United States agreed to a transfer framework for data transferred from the European Union to the United States, called
the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the European Union (CJEU). In addition, the other bases upon
which Facebook relies to transfer such data, such as Standard Contractual Clauses (SCCs), have been subjected to regulatory and judicial scrutiny. For example,
the CJEU considered the validity of SCCs as a basis to transfer user data from the European Union to the United States following a challenge brought by the Irish
Data Protection Commission (IDPC). Although the CJEU upheld the validity of SCCs in July 2020, our continued reliance on SCCs is contingent on SCCs being
held to satisfy certain new conditions that are yet to be clearly defined and will be the subject of future regulatory guidance (and the European Commission has
recently proposed new SCCs, which are currently subject to consultation). In addition, in August 2020, we received a preliminary draft decision from the IDPC that
preliminarily concluded that Facebook Ireland's reliance on SCCs in respect of European user data does not achieve compliance with the GDPR and preliminarily
proposed that such transfers of user data from the European Union to the United States should therefore be suspended. Facebook Ireland challenged procedural
aspects of this IDPC inquiry in a judicial review commenced in the Irish High Court in September 2020, and the court ordered the IDPC not to take further steps in
respect of the inquiry until the judicial review proceedings conclude (subject to the IDPC's right to apply to vary or lift this order), which we expect to occur in the
coming months. While we also rely upon alternative legal bases for data transfers, if a new transatlantic data transfer framework is not adopted and we are unable
to continue to rely on SCCs or validly rely upon other alternative means of data transfers from Europe to the United States, we may be unable to operate material
portions  of  our  business  in  Europe  as  a  result  of  the  CJEU's  invalidation  of  the  Privacy  Shield  and  any  final  decision  of  IDPC,  which  would  materially  and
adversely affect our business, financial condition, and results of operations. We have also been managing investigations and lawsuits in Europe, India, and other
jurisdictions regarding the August 2016 update to WhatsApp's terms of service and privacy policy and its sharing of certain data with other Facebook products and
services, including a lawsuit currently pending before the Supreme Court of India. If we are unable to transfer data between and among countries and regions in
which we operate, or if we are restricted from sharing data among our products and services, it could affect our ability to provide our services, the manner in which
we provide our services or our ability to target ads, which could adversely affect our financial results.

Proposed  or  new  legislation  and  regulations  could  also  significantly  affect  our  business.  For  example,  the  European  General  Data  Protection  Regulation
(GDPR)  took  effect  in  May  2018  and  applies  to  all  of  our  products  and  services  used  by  people  in  Europe.  The  GDPR  includes  operational  requirements  for
companies that receive or process personal data of residents of the European Union that are different from those previously in place in the European Union. As a
result, we implemented measures to change our service for minors under the age of 16 for certain countries in Europe that maintain the minimum age of 16 under
the  GDPR.  We  also  obtain  consent  and/or  offer  new  controls  to  existing  and  new  users  in  Europe  before  processing  data  for  certain  aspects  of  our  service.  In
addition,  the GDPR requires  submission  of  personal  data  breach  notifications  to  our designated  European  privacy  regulator,  the IDPC, and includes  significant
penalties for non-compliance with the notification obligation as well as other requirements of the regulation. Similarly, the Brazilian General Data Protection Law
recently  took  effect  and  imposes  data  privacy-related  requirements  on  products  and  services  offered  to  users  in  Brazil.  The  California  Consumer  Privacy  Act
(CCPA),  which  took  effect  in  January  2020,  also  establishes  certain  transparency  rules  and  creates  new  data  privacy  rights  for  users,  including  more  ability  to
control how their data is shared with third parties. These laws and regulations are evolving and subject to interpretation, and resulting limitations on our advertising
services,  or reductions  of advertising  by marketers,  have  to some extent  adversely  affected,  and will continue  to adversely  affect,  our advertising  business. For
example, regulators have recently issued new guidance concerning the ePrivacy Directive's requirements regarding the use of cookies and similar technologies. In
addition, effective  December 2020, the ePrivacy Directive includes additional limitations on the use of data across messaging products and includes significant
penalties  for  non-compliance.  Changes  to  our  products  or  business  practices  as  a  result  of  these  developments  may  adversely  affect  our  advertising  business.
Similarly, there are a number of legislative proposals in the European Union, the United States, at both the federal and state level, as well as other jurisdictions that
could impose new obligations or limitations in areas affecting our business. In addition, some countries are considering or have passed legislation implementing
data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our
services.

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These laws and regulations, as well as any associated claims, inquiries, or investigations or any other government actions, have in the past led to, and may in
the future lead to, unfavorable outcomes including increased compliance costs, delays or impediments in the development of new products, negative publicity and
reputational  harm,  increased  operating  costs,  diversion  of  management  time  and  attention,  and  remedies  that  harm  our  business,  including  fines  or  demands  or
orders that we modify or cease existing business practices.

We have been subject to regulatory and other government investigations, enforcement actions, and settlements, and we expect to continue to be subject to such
proceedings  and  other  inquiries  in  the  future,  which  could  cause  us  to  incur  substantial  costs  or  require  us  to  change  our  business  practices  in  a  manner
materially adverse to our business.

From  time  to  time,  we  receive  formal  and  informal  inquiries  from  government  authorities  and  regulators  regarding  our  compliance  with  laws  and
regulations, many of which are evolving and subject to interpretation. We are and expect to continue to be the subject of investigations, inquiries, data requests,
requests  for  information,  actions,  and  audits  in  the  United  States,  Europe,  and  around  the  world,  particularly  in  the  areas  of  privacy,  data  protection,  law
enforcement, consumer protection, and competition, as we continue to grow and expand our operations. In addition, we are currently, and may in the future be,
subject to regulatory orders or consent decrees. For example, data protection, competition, and consumer protection authorities in the European Union and other
jurisdictions  have  initiated  actions,  investigations,  or  administrative  orders  seeking  to  restrict  the  ways  in  which  we  collect  and  use  information,  or  impose
sanctions, and other authorities may do the same. In addition, beginning in March 2018, we became subject to FTC, state attorneys general, and other government
inquiries in the United States, Europe, and other jurisdictions in connection with our platform and user data practices as well as the misuse of certain data by a
developer that shared such data with third parties in violation of our terms and policies. In July 2019, we entered into a settlement and modified consent order to
resolve the FTC inquiry, which was approved by the federal court and took effect in April 2020. Among other matters, our settlement with the FTC required us to
pay a penalty of $5.0 billion and to significantly enhance our practices and processes for privacy compliance and oversight. Beginning in September 2018, we also
became subject to IDPC and other government inquiries in connection with a third-party cyber-attack that exploited a vulnerability in Facebook's code to steal user
access tokens and access certain profile information from user accounts on Facebook. From time to time we also notify the IDPC, our designated European privacy
regulator under the GDPR, of certain other personal data breaches and privacy issues, and are subject to inquiries and investigations regarding various aspects of
our regulatory compliance.

In addition, from time to time, we are subject to various litigation and formal and informal inquiries and investigations by competition authorities in the
United States, Europe, and other jurisdictions, which relate to many aspects of our business, including with respect to users and advertisers, as well as our industry.
Such inquiries, investigations, and lawsuits concern, among other things, our business practices in the areas of social networking or social media services, digital
advertising,  and/or  mobile  or  online  applications,  as  well  as  past  acquisitions.  For  example,  in  June  2019  we  were  informed  by  the  FTC  that  it  had  opened  an
antitrust investigation of our company. In addition, beginning in the third quarter of 2019, we became the subject of antitrust inquiries and investigations by the
U.S. Department of Justice, the U.S. House of Representatives, and state attorneys general. In December 2020, the FTC and the attorneys general from 46 states,
the territory of Guam, and the District of Columbia filed complaints against us in the U.S. District Court for the District of Columbia alleging that we violated
antitrust laws by acquiring Instagram in 2012 and WhatsApp in 2014 and by maintaining conditions on access to our platform, among other things. The lawsuits of
the FTC and attorneys general both seek a permanent injunction against our company's alleged violations of the antitrust laws, and other equitable relief, including
divestiture or reconstruction of Instagram and WhatsApp.

Orders issued by, or inquiries or enforcement actions initiated by, government or regulatory authorities could cause us to incur substantial costs, expose us
to  unanticipated  civil  and  criminal  liability  or  penalties  (including  substantial  monetary  remedies),  interrupt  or  require  us  to  change  our  business  practices  in  a
manner materially adverse to our business, result in negative publicity and reputational harm, divert resources and the time and attention of management from our
business,  or  subject  us  to  other  structural  or  behavioral  remedies  that  adversely  affect  our  business,  and  we  have  experienced  some  of  these  adverse  effects  to
varying degrees from time to time.

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Compliance  with  our  FTC  consent  order,  the  GDPR,  the  CCPA,  the  ePrivacy  Directive,  and  other  regulatory  and  legislative  privacy  requirements  require
significant operational resources and modifications to our business practices, and any compliance failures may have a material adverse effect on our business,
reputation, and financial results.

We are engaged in ongoing privacy compliance and oversight efforts, including in connection with our modified consent order with the FTC, requirements
of the GDPR, and other regulatory and legislative requirements around the world, such as the CCPA and the ePrivacy Directive. In particular, we are implementing
a comprehensive expansion of our privacy program in connection with the FTC consent order, including substantial management and board of directors oversight,
stringent operational requirements and reporting obligations, prohibitions against making misrepresentations relating to user data, a process to regularly certify our
compliance with the privacy program to the FTC, and regular assessments of our privacy program by an independent third-party assessor, which has been and will
continue  to  be  challenging  and  costly  to  implement.  These  compliance  and  oversight  efforts  are  increasing  demand  on  our  systems  and  resources,  and  require
significant  new and ongoing  investments,  including  investments  in compliance  processes,  personnel,  and technical  infrastructure.  We are  reallocating  resources
internally  to assist  with these  efforts,  and this has had, and will continue  to have, an adverse  impact  on our other  business initiatives.  In addition, these  efforts
require  substantial  modifications  to  our  business  practices  and  make  some  practices  such  as  product  and  ads  development  more  difficult,  time-consuming,  and
costly. As a result, we believe our ability to develop and launch new features, products, and services in a timely manner has been and will continue to be adversely
affected. We also expect that our privacy compliance and oversight efforts will require significant time and attention from our management and board of directors.
The requirements of the FTC consent order and other privacy-related laws and regulations are complex and apply broadly to our business, and from time to time
we notify relevant  authorities  of instances  where we are not in full compliance  with these requirements  or otherwise discover privacy issues, and we expect  to
continue to do so as any such issues arise in the future. In addition, regulatory and legislative privacy requirements are constantly evolving and can be subject to
significant  change  and  uncertain  interpretation.  If  we  are  unable  to  successfully  implement  and  comply  with  the  mandates  of  the  FTC  consent  order,  GDPR,
CCPA,  ePrivacy  Directive,  or  other  regulatory  or  legislative  requirements,  or  if  we  are  found  to  be  in  violation  of  the  consent  order  or  other  applicable
requirements,  we  may  be  subject  to  regulatory  or  governmental  investigations  or  lawsuits,  which  may  result  in  significant  monetary  fines,  judgments,  or  other
penalties,  and  we  may  also  be  required  to  make  additional  changes  to  our  business  practices.  Any  of  these  events  could  have  a  material  adverse  effect  on  our
business, reputation, and financial results.

We may incur liability as a result of information retrieved from or transmitted over the Internet or published using our products or as a result of claims related
to our products, and legislation regulating content on our platform may require us to change our products or business practices and may adversely affect our
business and financial results.

We  have  faced,  currently  face,  and  will  continue  to  face  claims  relating  to  information  or  content  that  is  published  or  made  available  on  our  products,
including our policies and enforcement actions with respect to such information or content. In particular, the nature of our business exposes us to claims related to
defamation,  dissemination  of  misinformation  or  news  hoaxes,  discrimination,  harassment,  intellectual  property  rights,  rights  of  publicity  and  privacy,  personal
injury torts, laws regulating hate speech or other types of content, and breach of contract, among others. This risk is enhanced in certain jurisdictions outside the
United States where our protection from liability for third-party actions may be unclear or where we may be less protected under local laws than we are in the
United States. For example, in April 2019, the European Union passed a directive expanding online platform liability for copyright infringement and regulating
certain  uses  of  news  content  online,  which  member  states  are  required  to  implement  by  June  2021.  In  addition,  the  European  Union  revised  the  European
Audiovisual Media Service Directive to apply to online video-sharing platforms, which member states are expected to implement by 2021. In the United States,
there have been, and continue to be, various Congressional and executive efforts to remove or restrict the scope of the protections available to online platforms
under Section 230 of the Communications Decency Act, as well as to impose new obligations on online platforms with respect to commerce listings, counterfeit
goods and copyright-infringing material, and our current protections from liability for third-party content in the United States could decrease or change. We could
incur  significant  costs  investigating  and  defending  such  claims  and,  if  we  are  found  liable,  significant  damages.  We  could  also  face  fines,  orders  restricting  or
blocking our services in particular geographies, or other government-imposed remedies as a result of content hosted on our services. For example, legislation in
Germany has in the past, and may in the future, result in the imposition of fines for failure to comply with certain content removal, law enforcement cooperation,
and disclosure obligations. Numerous other countries in Europe, Asia-Pacific, and Latin America are considering or have implemented similar legislation imposing
penalties, including fines, service throttling, or advertising bans, for failure to remove certain types of content or follow certain processes. For example, we have
been  subject  to  fines  and  may  in  the  future  be  subject  to  other  penalties  in  connection  with  social  media  legislation  in  Turkey.  In  addition,  Australia  recently
announced proposed legislation that would, among other matters, require us to pay publishers for certain

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news content that is shared on Facebook and Instagram. Content-related legislation also has required us in the past, and may require us in the future, to change our
products  or  business  practices,  increase  our  compliance  costs,  or  otherwise  impact  our  operations  or  our  ability  to  provide  services  in  certain  geographies.  For
example, the European Copyright Directive requires certain online services to obtain authorizations for copyrighted content or to implement measures to prevent
the  availability  of  that  content,  which  may  require  us  to  make  substantial  investments  in  compliance  processes.  In  addition,  changes  to  Section  230  of  the
Communications Decency Act may increase our costs or require significant changes to our products, business practices, or operations, which could adversely affect
user growth and engagement. Any of the foregoing events could adversely affect our business and financial results.

Payment transactions may subject us to additional regulatory requirements and other risks that could be costly and difficult to comply with or that could harm
our business.

Our  users  can  purchase  virtual  and  digital  goods  from  developers  that  offer  applications  using  our  Payments  infrastructure  on  the  Facebook  website.  In
addition, certain  of our users can use our Payments infrastructure,  including  on Messenger  and WhatsApp, for other activities,  such as sending money to other
users and making donations to certain charitable organizations. We are subject to a variety of laws and regulations in the United States, Europe, and elsewhere,
including those governing anti-money laundering and counter-terrorist financing, money transmission, gift cards and other prepaid access instruments, electronic
funds transfer, charitable fundraising, and import and export restrictions. Depending on how our Payments product evolves, we may also be subject to other laws
and regulations including those governing gambling, banking, and lending. In some jurisdictions, the application or interpretation of these laws and regulations is
not  clear.  To  increase  flexibility  in  how  our  use  of  Payments  may  evolve  and  to  mitigate  regulatory  uncertainty,  we  have  received  certain  money  transmitter
licenses in the United States and an Electronic Money (E-money) license that allows us to conduct certain regulated payment activities in the participating member
countries of the European Economic Area, which will generally require us to demonstrate compliance with many domestic and foreign laws in these areas. Our
efforts to comply with these laws and regulations could be costly and result in diversion of management time and effort and may still not guarantee compliance. In
the event that we are found to be in violation of any such legal or regulatory requirements, we may be subject to monetary fines or other penalties such as a cease
and desist order, or we may be required to make product changes, any of which could have an adverse effect on our business and financial results.

In addition, we are subject to a variety of additional risks as a result of Payments transactions, including: increased costs and diversion of management time
and effort and other resources to deal with bad transactions or customer disputes; potential fraudulent or otherwise illegal activity by users, developers, employees,
or third parties; restrictions on the investment of consumer funds used to transact Payments; and additional disclosure and reporting requirements. We have also
launched certain payments functionality on WhatsApp and have announced plans to develop digital payments products and services, which may subject us to many
of the foregoing risks and additional licensing requirements.

Our participation in the Diem Association subjects us to significant regulatory scrutiny and other risks that could adversely affect our business, reputation, or
financial results.

In  June  2019,  we  announced  our  participation  in  the  Diem  Association,  which  will  oversee  a  proposed  digital  payments  system  powered  by  blockchain
technology, and our plans for Novi, a digital wallet for Diem which we expect to launch as a standalone application and subsequently in Messenger and WhatsApp.

Diem is based on relatively new and unproven technology, and the laws and regulations surrounding blockchain-based payments are uncertain and evolving.
Diem  has  drawn  significant  scrutiny  from  governments  and  regulators  in  multiple  jurisdictions  and  we  expect  that  scrutiny  to  continue.  As  a  sponsor  of  the
initiative and a proposed digital wallet service provider, we are participating in responses to inquiries from governments and regulators, and adverse government or
regulatory actions or negative publicity resulting from such participation may adversely affect our reputation and harm our business.

As  this  initiative  evolves,  both  Diem  and  Novi  may  be  subject  to  a  variety  of  laws  and  regulations  in  the  United  States  and  international  jurisdictions,
including  those  governing  payments,  financial  services,  anti-money  laundering,  counter-terrorism  financing,  economic  sanctions,  data  protection,  tax,  and
competition.  In  many  jurisdictions,  the  application  or  interpretation  of  these  laws  and  regulations  is  not  clear,  particularly  with  respect  to  evolving  laws  and
regulations that are applied to blockchain and digital payments. To mitigate regulatory uncertainty, Diem has applied for a payment system operator license with
the Swiss Financial Market Supervisory Authority (FINMA), and Novi has applied for money

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transmitter licenses in the United States and certain other countries, and other financial services licenses in certain other countries, that would allow us to conduct
digital wallet activities in these countries using the Diem network. These licenses, laws, and regulations, as well as any associated inquiries or investigations, may
delay or impede the launch of the Diem digital payments system as well as the development of our products and services, increase our operating costs, require
significant management time and attention, or otherwise harm our business.

In addition, market acceptance of such a digital payments system is subject to significant uncertainty. As such, there can be no assurance that Diem or our
associated products and services will be made available in a timely manner, or at all. We do not have significant prior experience with blockchain-based payments
technology,  which  may  adversely  affect  our  ability  to  successfully  develop  and  market  these  products  and  services.  We  will  also  incur  increased  costs  in
connection with our participation in the Diem Association and the development and marketing of associated products and services, and our investments may not be
successful. Any of these events could adversely affect our business, reputation, or financial results.

Risks Related to Data, Security, and Intellectual Property

Security breaches, improper access to or disclosure of our data or user data, other hacking and phishing attacks on our systems, or other cyber incidents could
harm our reputation and adversely affect our business.

Our industry is prone to cyber-attacks by third parties seeking unauthorized access to our data or users' data or to disrupt our ability to provide service. Our
products and services involve the collection, storage, processing, and transmission of a large amount of data. Any failure to prevent or mitigate security breaches
and improper access to or disclosure of our data or user data, including personal information, content, or payment information from users, or information from
marketers, could result in the loss, modification, disclosure, destruction, or other misuse of such data, which could harm our business and reputation and diminish
our competitive position. In addition, computer malware, viruses, social engineering (predominantly spear phishing attacks), scraping, and general hacking have
become more prevalent in our industry, have occurred on our systems in the past, and will occur on our systems in the future. We also regularly encounter attempts
to create false or undesirable user accounts, purchase ads, or take other actions on our platform for purposes such as spamming, spreading misinformation, or other
objectionable ends. As a result of our prominence, the size of our user base, the types and volume of personal data and content on our systems, and the evolving
nature of our products and services (including our efforts involving new and emerging technologies), we believe that we are a particularly attractive target for such
breaches and attacks, including from nation states and highly sophisticated, state-sponsored, or otherwise well-funded actors. Our efforts to address undesirable
activity on our platform also increase the risk of retaliatory attacks. Such breaches and attacks may cause interruptions to the services we provide, degrade the user
experience,  cause  users  or  marketers  to  lose  confidence  and  trust  in  our  products,  impair  our  internal  systems,  or  result  in  financial  harm  to  us.  Our  efforts  to
protect our company data or the information we receive, and to disable undesirable activities on our platform, may also be unsuccessful due to software bugs or
other  technical  malfunctions;  employee,  contractor,  or  vendor  error  or  malfeasance,  including  defects  or  vulnerabilities  in  our  vendors'  information  technology
systems or offerings; government surveillance; breaches of physical security of our facilities or technical infrastructure; or other threats that evolve. In addition,
third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access to our data or our users' data. Cyber-attacks
continue  to  evolve  in  sophistication  and  volume,  and  inherently  may  be  difficult  to  detect  for  long  periods  of  time.  Although  we  have  developed  systems  and
processes that are designed to protect our data and user data, to prevent data loss, to disable undesirable accounts and activities on our platform, and to prevent or
detect  security  breaches,  we  cannot  assure  you  that  such  measures  will  provide  absolute  security,  that  we  will  be  able  to  react  in  a  timely  manner,  or  that  our
remediation efforts will be successful.

In addition, some of our developers or other partners, such as those that help us measure the effectiveness of ads, may receive or store information provided
by us or by our users through mobile or web applications integrated with Facebook. We provide limited information to such third parties based on the scope of
services provided to us. However, if these third parties or developers fail to adopt or adhere to adequate data security practices, or in the event of a breach of their
networks, our data or our users' data may be improperly accessed, used, or disclosed.

We experience such cyber-attacks and other security incidents of varying degrees from time to time, and we incur significant costs in protecting against or
remediating  such  incidents.  In  addition,  we  are  subject  to  a  variety  of  laws  and  regulations  in  the  United  States  and  abroad  relating  to  cybersecurity  and  data
protection,  as  well  as  obligations  under  our  modified  consent  order  with  the  FTC.  As  a  result,  affected  users  or  government  authorities  could  initiate  legal  or
regulatory actions against us in connection with any actual or perceived security breaches or improper access to or disclosure of data,

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which has occurred in the past and which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our
business practices. Such incidents or our efforts to remediate such incidents may also result in a decline in our active user base or engagement levels. Any of these
events could have a material and adverse effect on our business, reputation, or financial results.

For example, in September 2018, we announced our discovery of a third-party cyber-attack that exploited a vulnerability in Facebook's code to steal user
access tokens, which were then used to access certain profile information from approximately 29 million user accounts on Facebook. The events surrounding this
cyber-attack became the subject of Irish Data Protection Commission and other government inquiries. Any such inquiries could subject us to substantial fines and
costs, require us to change our business practices, divert resources and the attention of management from our business, or adversely affect our business.

In addition, the changes in our work environment as a result of the COVID-19 pandemic could impact the security of our systems, as well as our ability to
protect  against  attacks  and  detect  and  respond  to  them  quickly.  The  rapid  adoption  of  some  third-party  services  designed  to  enable  the  transition  to  a  remote
workforce also may introduce security risk that is not fully mitigated prior to the use of these services. We may also be subject to increased cyber-attacks, such as
phishing attacks by threat actors using the attention placed on the pandemic as a method for targeting our personnel.

We anticipate that our ongoing efforts related to privacy, safety, security, and content review will identify additional instances of misuse of user data or other
undesirable activity by third parties on our platform.

In addition to our efforts to mitigate cybersecurity risks, we are making significant investments in privacy, safety, security, and content review efforts to
combat  misuse  of  our  services  and  user  data  by  third  parties,  including  investigations  and  audits  of  platform  applications.  As  a  result  of  these  efforts  we  have
discovered and announced, and anticipate that we will continue to discover and announce, additional incidents of misuse of user data or other undesirable activity
by third parties. We may not discover all such incidents or activity, whether as a result of our data or technical limitations, including our lack of visibility over our
encrypted services, the scale of activity on our platform, challenges related to our personnel working remotely during the COVID-19 pandemic, the allocation of
resources to other projects, or other factors, and we may be notified of such incidents or activity by the independent privacy assessor required under our modified
consent order with the FTC, the media, or other third parties. Such incidents and activities have in the past, and may in the future, include the use of user data or
our  systems  in  a  manner  inconsistent  with  our  terms,  contracts  or  policies,  the  existence  of  false  or  undesirable  user  accounts,  election  interference,  improper
advertising practices, activities that threaten people's safety on- or offline, or instances of spamming, scraping, data harvesting, unsecured datasets, or spreading
misinformation. We may also be unsuccessful in our efforts to enforce our policies or otherwise remediate any such incidents. Any of the foregoing developments
may negatively affect user trust and engagement, harm our reputation and brands, require us to change our business practices in a manner adverse to our business,
and adversely affect our business and financial results. Any such developments may also subject us to additional litigation and regulatory inquiries, which could
subject us to monetary penalties and damages, divert management's time and attention, and lead to enhanced regulatory oversight.

Our products and internal systems rely on software and hardware that is highly technical, and any errors, bugs, or vulnerabilities in these systems, or failures
to address or mitigate technical limitations in our systems, could adversely affect our business.

Our  products  and  internal  systems  rely  on  software  and  hardware,  including  software  and  hardware  developed  or  maintained  internally  and/or  by  third
parties, that is highly technical and complex. In addition, our products and internal systems depend on the ability of such software and hardware to store, retrieve,
process,  and  manage  immense  amounts  of  data.  The  software  and  hardware  on  which  we  rely  has  contained,  and  will  in  the  future  contain,  errors,  bugs,  or
vulnerabilities,  and  our  systems  are  subject  to  certain  technical  limitations  that  may  compromise  our  ability  to  meet  our  objectives.  Some  errors,  bugs,  or
vulnerabilities  inherently  may  be  difficult  to  detect  and  may  only  be  discovered  after  the  code  has  been  released  for  external  or  internal  use.  For  example,  in
September 2018, we announced our discovery of a third-party cyber-attack that exploited a vulnerability in Facebook's code to steal user access tokens and access
certain profile information from user accounts on Facebook. Errors, bugs, vulnerabilities, design defects, or technical limitations within the software and hardware
on which we rely have in the past led to, and may in the future lead to, outcomes including a negative experience for users and marketers who use our products,
compromised  ability  of  our  products  to  perform  in  a  manner  consistent  with  our  terms,  contracts,  or  policies,  delayed  product  introductions  or  enhancements,
targeting, measurement, or billing errors, compromised ability to protect the data of our users and/or our intellectual property or other data, or reductions in our
ability to provide some or all of our services. For example, we make commitments to our users as to how their data will

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be used within and across our products, and our systems are subject to errors, bugs and technical limitations that may prevent us from fulfilling these commitments
reliably.  In addition,  any errors,  bugs, vulnerabilities,  or defects  in our systems  or the  software  and hardware  on which we rely,  failures  to properly  address  or
mitigate the technical limitations in our systems, or associated degradations or interruptions of service or failures to fulfill our commitments to our users, have in
the past led to, and may in the future lead to, outcomes including damage to our reputation, loss of users, loss of marketers, loss of revenue, regulatory inquiries,
litigation, or liability for fines, damages, or other remedies, any of which could adversely affect our business and financial results.

If we are unable to protect our intellectual property, the value of our brands and other intangible assets may be diminished, and our business may be adversely
affected.

We rely and expect to continue to rely on a combination of confidentiality, assignment, and license agreements with our employees, consultants, and third
parties with whom we have relationships, as well as trademark, copyright, patent, trade secret, and domain name protection laws, to protect our proprietary rights.
In the United States and internationally, we have filed various applications for protection of certain aspects of our intellectual property, and we currently hold a
significant number of registered trademarks and issued patents in multiple jurisdictions and have acquired patents and patent applications from third parties. Third
parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, and pending and future trademark
and patent applications may not be approved. In addition, effective intellectual property protection may not be available in every country in which we operate or
intend  to  operate  our  business.  In  any  or  all  of  these  cases,  we  may  be  required  to  expend  significant  time  and  expense  in  order  to  prevent  infringement  or  to
enforce our rights. Although we have generally taken measures to protect our proprietary rights, there can be no assurance that others will not offer products or
concepts that are substantially similar to ours and compete with our business. In addition, we regularly contribute software source code under open source licenses
and have made other technology we developed available under other open licenses, and we include open source software in our products. As a result of our open
source contributions and the use of open source in our products, we may license or be required to license or disclose code and/or innovations that turn out to be
material to our business and may also be exposed to increased litigation risk. If the protection of our proprietary rights is inadequate to prevent unauthorized use or
appropriation by third parties, the value of our brands and other intangible assets may be diminished and competitors may be able to more effectively mimic our
products, services, and methods of operations. Any of these events could have an adverse effect on our business and financial results.

We are currently, and expect to be in the future, party to patent lawsuits and other intellectual property rights claims that are expensive and time consuming
and, if resolved adversely, could have a significant impact on our business, financial condition, or results of operations.

Companies in the Internet, technology, and media industries own large numbers of patents, copyrights, trademarks, and trade secrets, and frequently enter
into  litigation  based  on  allegations  of  infringement,  misappropriation,  or  other  violations  of  intellectual  property  or  other  rights.  In  addition,  various  "non-
practicing entities" that own patents and other intellectual property rights often attempt to aggressively assert their rights in order to extract value from technology
companies. Furthermore, from time to time we may introduce or acquire new products, including in areas where we historically have not competed, which could
increase our exposure to patent and other intellectual property claims from competitors and non-practicing entities.

From time to time, we receive notice from patent holders and other parties alleging that certain of our products and services, or user content, infringe their
intellectual property rights. We presently are involved in a number of intellectual property lawsuits, and as we face increasing competition and gain an increasingly
high profile, we expect the number of patent and other intellectual property claims against us to grow. Defending patent and other intellectual property litigation is
costly and can impose a significant burden on management and employees, and there can be no assurances that favorable final outcomes will be obtained in all
cases. In addition, plaintiffs may seek, and we may become subject to, preliminary or provisional rulings in the course of any such litigation, including potential
preliminary injunctions requiring us to cease some or all of our operations. We may decide to settle such lawsuits and disputes on terms that are unfavorable to us.
Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. The
terms of such a settlement or judgment may require us to cease some or all of our operations or pay substantial amounts to the other party. In addition, we may
have to seek a license to continue practices found to be in violation of a third party's rights, which may not be available on reasonable terms, or at all, and may
significantly increase our operating costs and expenses. As a result, we may also be required to develop alternative non-infringing technology or

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practices or discontinue the practices. The development of alternative non-infringing technology or practices could require significant effort and expense, could
result  in  less  effective  technology  or  practices  or  otherwise  negatively  affect  the  user  experience,  or  may  not  be  feasible.  We  have  experienced  unfavorable
outcomes in such disputes and litigation in the past, and our business, financial condition, and results of operations could be adversely affected as a result of an
unfavorable resolution of the disputes and litigation referred to above.

The trading price of our Class A common stock has been and will likely continue to be volatile.

Risks Related to Ownership of Our Class A Common Stock

The trading price of our Class A common stock has been, and is likely to continue to be, volatile. Since shares of our Class A common stock were sold in
our initial public offering in May 2012 at a price of $38.00 per share, our stock price has ranged from $17.55 to $304.67 through December 31, 2020. In addition to
the factors discussed in this Annual Report on Form 10-K, the trading price of our Class A common stock may fluctuate significantly in response to numerous
factors, many of which are beyond our control, including:

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actual or anticipated fluctuations in our revenue and other operating results;

the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;

actions  of  securities  analysts  who  initiate  or  maintain  coverage  of  us,  changes  in  financial  estimates  by  any  securities  analysts  who  follow  our
company, or our failure to meet these estimates or the expectations of investors;

additional shares of our stock being sold into the market by us, our existing stockholders, or in connection with acquisitions, or the anticipation of
such sales;

investor sentiment with respect to our competitors, our business partners, and our industry in general;

announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures,
or capital commitments;

announcements by us or estimates by third parties of actual or anticipated changes in the size of our user base, the level of user engagement, or the
effectiveness of our ad products;

changes in operating performance and stock market valuations of technology companies in our industry, including our developers and competitors;

price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

the inclusion, exclusion, or deletion of our stock from any trading indices, such as the S&P 500 Index;

media coverage of our business and financial performance;

lawsuits threatened or filed against us, or developments in pending lawsuits;

adverse  government  actions  or  legislative  or  regulatory  developments  relating  to  advertising,  competition,  content,  privacy,  or  other  matters,
including interim or final rulings by tax, judicial, or regulatory bodies;

trading activity in our share repurchase program; and

other events or factors, including those resulting from war, incidents of terrorism, pandemics, and other disruptive external events, or responses to
these events.

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In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity
securities of many technology companies. We are currently subject to securities litigation in connection with our platform and user data practices and the misuse of
certain data by a developer that shared such data with third parties in violation of our terms and policies, as well as the disclosure of our earnings results for the
second  quarter  of  2018.  We  may  experience  more  such  litigation  following  future  periods  of  volatility.  Any  securities  litigation  could  subject  us  to  substantial
costs, divert resources and the attention of management from our business, and adversely affect our business.

We do not intend to pay cash dividends for the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion
of our business and fund our share repurchase program, and we do not expect to declare or pay any cash dividends in the foreseeable future. As a result, you may
only receive a return on your investment in our Class A common stock if the trading price of your shares increases.

The dual class structure of our common stock and a voting agreement between certain stockholders have the effect of concentrating voting control with our
CEO and certain other holders of our Class B common stock; this will limit or preclude your ability to influence corporate matters.

Our  Class  B  common  stock  has  ten  votes  per  share  and  our  Class  A  common  stock  has  one  vote  per  share.  Stockholders  who  hold  shares  of  Class  B
common stock, including certain of our executive officers, employees, and directors and their affiliates, together hold a substantial majority of the voting power of
our outstanding capital stock. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock
collectively control a majority of the combined voting power of our common stock and therefore are able to control all matters submitted to our stockholders for
approval  so  long  as  the  shares  of  Class  B  common  stock  represent  at  least  9.1%  of  all  outstanding  shares  of  our  Class  A  and  Class  B  common  stock.  This
concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future.

Transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such
as certain transfers effected for estate planning or charitable purposes. The conversion of Class B common stock to Class A common stock will have the effect,
over  time,  of  increasing  the  relative  voting  power  of  those  holders  of  Class  B  common  stock  who  retain  their  shares  in  the  long  term.  If,  for  example,
Mr. Zuckerberg retains a significant portion of his holdings of Class B common stock for an extended period of time, he could, in the future, continue to control a
majority of the combined voting power of our outstanding capital stock.

Our status as a "controlled company" could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

Because we qualify as a "controlled company" under the corporate governance rules for Nasdaq-listed companies, we are not required to have a majority of
our board of directors be independent, nor are we required to have a compensation committee or an independent nominating function. In the future we could elect
not to have a majority of our board of directors be independent or not to have a compensation committee or an independent nominating function. Accordingly,
should the interests of our controlling stockholder differ from those of other stockholders, the other stockholders may not have the same protections afforded to
stockholders of companies that are subject to all of the corporate governance rules for Nasdaq-listed companies. Our status as a controlled company could make
our Class A common stock less attractive to some investors or otherwise harm our stock price.

Delaware  law  and  provisions  in  our  restated  certificate  of  incorporation  and  bylaws  could  make  a  merger,  tender  offer,  or  proxy  contest  difficult,  thereby
depressing the trading price of our Class A common stock.

Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change
in  control  by  prohibiting  us  from  engaging  in  a  business  combination  with  an  interested  stockholder  for  a  period  of  three  years  after  the  person  becomes  an
interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our current restated certificate of incorporation and
bylaws contain provisions that may make the acquisition of our company more difficult, including the following:

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until the first date on which the outstanding shares of our Class B common stock represent less than 35% of the

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combined voting power of our common stock, any transaction that would result in a change in control of our company requires the approval of a
majority of our outstanding Class B common stock voting as a separate class;

we currently have a dual class common stock structure, which provides Mr. Zuckerberg with the ability to control the outcome of matters requiring
stockholder approval, even if he owns significantly less than a majority of the shares of our outstanding Class A and Class B common stock;

when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of common stock, certain
amendments  to  our  restated  certificate  of  incorporation  or  bylaws  will  require  the  approval  of  two-thirds  of  the  combined  vote  of  our  then-
outstanding shares of Class A and Class B common stock;

when  the  outstanding  shares  of  our  Class  B  common  stock  represent  less  than  a  majority  of  the  combined  voting  power  of  our  common  stock,
vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders;

when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, our
board of directors will be classified into three classes of directors with staggered three-year terms and directors will only be able to be removed from
office for cause;

when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, our
stockholders will only be able to take action at a meeting of stockholders and not by written consent;

only  our  chairman,  our  chief  executive  officer,  our  president,  or  a  majority  of  our  board  of  directors  are  authorized  to  call  a  special  meeting  of
stockholders;

advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of
stockholders;

our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be
issued, without stockholder approval; and

certain litigation against us can only be brought in Delaware.

•

•

•

•

•

•

•

•

•

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties 

Our corporate headquarters are located in Menlo Park, California. As of December 31, 2020, we owned and leased approximately 10 million square feet of
office  and  building  space  for  our  corporate  headquarters  and  in  the  surrounding  areas,  and  approximately  90  acres  of  land  to  be  developed  to  accommodate
anticipated future growth.

In addition, we have offices in more than 80 cities across North America, Latin America, Europe, the Middle East, Africa, and Asia Pacific. We also own 17

data centers globally.

We believe that our facilities are adequate for our current needs.

Item 3. Legal Proceedings

Beginning on March 20, 2018, multiple putative class actions and derivative actions were filed in state and federal courts in the United States and elsewhere
against us and certain of our directors and officers alleging violations of securities laws, breach of fiduciary duties, and other causes of action in connection with
our  platform  and  user  data  practices  as  well  as  the  misuse  of  certain  data  by  a  developer  that  shared  such  data  with  third  parties  in  violation  of  our  terms  and
policies, and seeking unspecified damages and injunctive relief. Beginning on July 27, 2018, two putative class actions were filed in federal court in the United
States  against  us and certain  of our directors  and officers  alleging  violations  of securities  laws in connection  with the  disclosure  of our earnings  results  for the
second  quarter  of  2018  and  seeking  unspecified  damages.  These  two  actions  subsequently  were  transferred  and  consolidated  in  the  U.S.  District  Court  for  the
Northern District of California with the putative securities class action described above relating to our platform and user data practices. On September 25, 2019, the
district  court  granted  our  motion  to  dismiss  the  consolidated  putative  securities  class  action,  with  leave  to  amend.  On  November  15,  2019,  a  second  amended
complaint was filed in the consolidated putative securities class action. On August 7, 2020, the district court granted our motion to dismiss the second amended
complaint, with leave to amend. On October 16, 2020, a third amended complaint was filed in the consolidated putative securities class action. We believe these
lawsuits are without merit, and we are vigorously defending them. In addition, our platform and user data practices, as well as the events surrounding the misuse of
certain data by a developer, became the subject of U.S. Federal Trade Commission (FTC), state attorneys general, and other government inquiries in the United
States, Europe, and other jurisdictions. In July 2019, we entered into a settlement and modified consent order to resolve the FTC inquiry, which was approved by
the federal court and took effect in April 2020. Among other matters, our settlement with the FTC required us to pay a penalty of $5.0 billion and to significantly
enhance our practices and processes for privacy compliance and oversight. Any other government inquiries regarding these matters could subject us to additional
substantial fines and costs, require us to change our business practices, divert resources and the attention of management from our business, or adversely affect our
business.

On April 1, 2015, a putative class action was filed against us in the U.S. District Court for the Northern District of California by Facebook users alleging
that the "tag suggestions" facial recognition feature violates the Illinois Biometric Information Privacy Act, and seeking statutory damages and injunctive relief. On
April 16, 2018, the district court certified a class of Illinois residents, and on May 14, 2018, the district court denied both parties' motions for summary judgment.
On May 29, 2018, the U.S. Court of Appeals for the Ninth Circuit granted our petition for review of the class certification order and stayed the proceeding. On
August 8, 2019, the Ninth Circuit affirmed the class certification order. On December 2, 2019, we filed a petition with the U.S. Supreme Court seeking review of
the decision of the Ninth Circuit, which was denied. On January 15, 2020, the parties agreed to a settlement in principle to resolve the lawsuit, which provided for a
payment of $550 million by us and was subject to court approval. On or about May 8, 2020, the parties executed a formal settlement agreement, and plaintiffs filed
a motion for preliminary approval of the settlement by the district court. On June 4, 2020, the district court denied the plaintiffs' motion without prejudice. On July
22, 2020, the parties executed an amended settlement agreement, which, among other terms, provides for a payment of $650 million by us. On August 19, 2020,
the court granted preliminary approval of the settlement. The settlement is subject to final court approval.

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Beginning  on  September  28,  2018,  multiple  putative  class  actions  were  filed  in  state  and  federal  courts  in  the  United  States  and  elsewhere  against  us
alleging violations of consumer protection laws and other causes of action in connection with a third-party cyber-attack that exploited a vulnerability in Facebook's
code to steal user access tokens and access certain profile information from user accounts on Facebook, and seeking unspecified damages and injunctive relief. The
actions filed in the United States were consolidated in the U.S. District Court for the Northern District of California. On November 26, 2019, the district court
certified a class for injunctive relief purposes, but denied certification of a class for purposes of pursuing damages. On January 16, 2020, the parties agreed to a
settlement in principle to resolve the lawsuit. On November 15, 2020, the court granted preliminary approval of the settlement. The settlement is subject to final
court approval. We believe the remaining lawsuits are without merit, and we are vigorously defending them. In addition, the events surrounding this cyber-attack
became the subject of Irish Data Protection Commission (IDPC) and other government inquiries. Any such inquiries could subject us to substantial fines and costs,
require us to change our business practices, divert resources and the attention of management from our business, or adversely affect our business.

From  time  to  time  we  also  notify  the  IDPC,  our  designated  European  privacy  regulator  under  the  General  Data  Protection  Regulation,  of  certain  other
personal data breaches and privacy issues, and are subject to inquiries and investigations regarding various aspects of our regulatory compliance. For example, in
August  2020,  we  received  a  preliminary  draft  decision  from  the  IDPC  that  preliminarily  concluded  that  Facebook  Ireland's  reliance  on  Standard  Contractual
Clauses  in  respect  of  European  user  data  does  not  achieve  compliance  with  the  GDPR  and  preliminarily  proposed  that  such  transfers  of  user  data  from  the
European  Union  to  the  United  States  should  therefore  be  suspended.  Facebook  Ireland  challenged  procedural  aspects  of  this  IDPC  inquiry  in  a  judicial  review
commenced in the Irish High Court in September 2020, and the court ordered the IDPC not to take further steps in respect of the inquiry until the judicial review
proceedings conclude (subject to the IDPC's right to apply to vary or lift this order), which we expect to occur in early 2021. For additional information, see Part I,
Item  1A,  "Risk  Factors—Our  business  is  subject  to  complex  and  evolving  U.S.  and  foreign  laws  and  regulations  regarding  privacy,  data  protection,  content,
competition,  consumer protection,  and other  matters"  in this Annual Report on Form 10-K. Any such inquiries  or investigations  could subject  us to substantial
fines and costs, require us to change our business practices, divert resources and the attention of management from our business, or adversely affect our business.

In  addition,  from  time  to  time  we  are  subject  to  various  litigation  and  government  inquiries  and  investigations,  formal  or  informal,  by  competition
authorities in the United States, Europe, and other jurisdictions. Such investigations, inquiries, and lawsuits concern, among other things, our business practices in
the areas of social networking or social media services, digital advertising, and/or mobile or online applications, as well as past acquisitions. For example, in June
2019 we were informed by the FTC that it had opened an antitrust investigation of our company. On December 9, 2020, the FTC filed a complaint against us in the
U.S. District Court for the District of Columbia alleging that we engaged in anticompetitive conduct and unfair methods of competition in violation of Section 5 of
the Federal Trade Commission Act and Section 2 of the Sherman Act by acquiring Instagram in 2012 and WhatsApp in 2014 and by maintaining conditions on
access to our platform. In addition, beginning in the third quarter of 2019, we became the subject of antitrust investigations by the U.S. Department of Justice and
state attorneys general. On December 9, 2020, the attorneys general from 46 states, the territory of Guam, and the District of Columbia filed a complaint against us
in  the  U.S.  District  Court  for  the  District  of  Columbia  alleging  that  we  engaged  in  anticompetitive  conduct  in  violation  of  Section  2  of  the  Sherman  Act  by
acquiring Instagram in 2012 and WhatsApp in 2014 and by maintaining conditions on access to our platform. The complaint also alleges that we violated Section 7
of the Clayton Act by acquiring Instagram and WhatsApp. The lawsuits of the FTC and attorneys general both seek a permanent injunction against our company's
alleged  violations  of  the  antitrust  laws,  and  other  equitable  relief,  including  divestiture  or  reconstruction  of  Instagram  and  WhatsApp.  Multiple  putative  class
actions have also been filed in state and federal courts in the United States against us alleging violations of antitrust laws and other causes of action in connection
with these acquisitions and other alleged anticompetitive conduct, and seeking unspecified damages and injunctive relief. We believe these lawsuits are without
merit, and we are vigorously defending them. The result of such litigation, investigations or inquiries could subject us to substantial monetary remedies and costs,
interrupt or require us to change our business practices, divert resources and the attention of management from our business, or subject us to other structural or
behavioral remedies that adversely affect our business.

In  addition,  from  time  to  time,  we  are  subject  to  litigation  and  other  proceedings  involving  law  enforcement  and  other  regulatory  agencies,  including  in
particular  in  Brazil  and  Europe,  in  order  to  ascertain  the  precise  scope  of  our  legal  obligations  to  comply  with  the  requests  of  those  agencies,  including  our
obligation to disclose user information in particular circumstances. A number of such instances have resulted in the assessment of fines and penalties against us.
We believe we

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have multiple legal grounds to satisfy these requests or prevail against associated fines and penalties, and we intend to vigorously defend such fines and penalties.

We are also party to various other legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course

of business, and we may in the future be subject to additional legal proceedings and disputes.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol "FB" since May 18, 2012. Prior to that time, there was no

public market for our stock.

Our Class B common stock is not listed on any stock exchange nor traded on any public market.

Holders of Record

As of December 31, 2020, there were 3,471 stockholders of record of our Class A common stock, and the closing price of our Class A common stock was
$273.16 per share as reported on the Nasdaq Global Select Market. Because many of our shares of Class A common stock are held by brokers and other institutions
on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. As of December 31, 2020, there were
32 stockholders of record of our Class B common stock.

Dividend Policy

We have never declared or paid any cash dividend on our common stock. We intend to retain any future earnings to finance the operation and expansion of

our business and fund our share repurchase program, and we do not expect to pay cash dividends in the foreseeable future.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes the share repurchase activity for the three months ended December 31, 2020:

October 1 - 31, 2020
November 1 - 30, 2020
December 1 - 31, 2020

Total Number of Shares
Purchased 
(in thousands)

(1)

Average Price Paid Per
Share 

(2)

Total Number of Shares
Purchased as Part of Publicly
Announced Programs 
(in thousands)

(1)

Approximate Dollar Value of
Shares that May Yet Be
Purchased Under the Plans or
Programs 
(in millions)

(1)

$
$
$

2,310 
2,100 
2,670 
7,080 

270.12 
276.32 
276.38 

$
$
$

2,310 
2,100 
2,670 
7,080 

9,921 
9,341 
8,603 

_________________________
(1) Our board of directors has authorized a share repurchase program of our Class A common stock, which commenced in January 2017 and does not have an expiration date.
In January 2021, an additional $25 billion of repurchases was authorized under this program. The timing and actual number of shares repurchased depend on a variety of
factors,  including  price,  general  business  and  market  conditions,  and  other  investment  opportunities,  and  shares  may  be  repurchased  through  open  market  purchases  or
privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act.

(2) Average price paid per share includes costs associated with the repurchases.

Recent Sale of Unregistered Securities and Use of Proceeds

Recent Sale of Unregistered Securities

None.

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Stock Performance Graph

This  performance  graph  shall  not  be  deemed  "soliciting  material"  or  to  be  "filed"  with  the  SEC  for  purposes  of  Section  18  of  the  Exchange  Act,  or  otherwise
subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Facebook, Inc. under the Securities Act of
1933, as amended, or the Exchange Act.

The following graph shows a comparison of the cumulative total return for our Class A common stock, the Dow Jones Internet Composite Index (DJINET),
the Standard & Poor's 500 Stock Index (S&P 500) and the Nasdaq Composite Index (Nasdaq Composite) for the five years ended December 31, 2020. The graph
assumes that $100 was invested at the market close on the last trading day for the fiscal year ended December 31, 2015 in the Class A common stock of Facebook,
Inc., the DJINET, the S&P 500 and the Nasdaq Composite  and data  for the DJINET, the S&P 500 and the Nasdaq Composite  assumes  reinvestments  of gross
dividends. The stock price performance of the following graph is not necessarily indicative of future stock price performance.

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Item 6. Selected Financial Data

You should read the following selected consolidated financial data in conjunction with Part II, Item 7, "Management's Discussion and Analysis of Financial
Condition  and  Results  of  Operations,"  and  our  consolidated  financial  statements  and  the  related  notes  included  in  Part  II,  Item  8,  "Financial  Statements  and
Supplementary Data" of this Annual Report on Form 10‑K.

The consolidated statements of income data for each of the years ended December 31, 2020, 2019, and 2018 and the consolidated balance sheets data as of
December 31, 2020 and 2019 are derived from our audited consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary
Data" of this Annual Report on Form 10‑K. The consolidated statements of income data for the years ended December 31, 2017 and 2016 and the consolidated
balance sheets data as of December 31, 2018, 2017, and 2016 are derived from our audited consolidated financial statements, except as otherwise noted, that are
not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of our results in any future period.

(1)

Consolidated Statements of Income Data:
Revenue
Total costs and expenses
Income from operations
Income before provision for income taxes
Net income
Net income attributable to Class A and Class B common
stockholders
Earnings per share attributable to Class A and Class B
common stockholders:

Basic
Diluted

$
$
$
$
$

$

$
$

2020

2019

Year Ended December 31,
2018
(in millions, except per share data)

2017

2016

85,965  $
53,294  $
32,671  $
33,180  $
29,146  $

70,697  $
46,711  $
23,986  $
24,812  $
18,485  $

55,838  $
30,925  $
24,913  $
25,361  $
22,112  $

40,653  $
20,450  $
20,203  $
20,594  $
15,934  $

27,638 
15,211 
12,427 
12,518 
10,217 

29,146  $

18,485  $

22,111  $

15,920  $

10,188 

10.22  $
10.09  $

6.48  $
6.43  $

7.65  $
7.57  $

5.49  $
5.39  $

3.56 
3.49 

_________________________
(1) Total costs and expenses include $6.54 billion, $4.84 billion, $4.15 billion, $3.72 billion, and $3.22 billion of share-based compensation for the years ended December 31,

2020, 2019, 2018, 2017, and 2016, respectively.

Consolidated Balance Sheets Data:
Cash, cash equivalents, and marketable securities
Working capital
Property and equipment, net
Total assets
Operating lease liabilities
Total liabilities
Additional paid-in capital
Total stockholders' equity

(1)

2020

2019

As of December 31,
2018
(in millions)

2017

2016

$
$
$
$
$
$
$
$

61,954  $
60,689  $
45,633  $
159,316  $
10,654  $
31,026  $
50,018  $
128,290  $

54,855  $
51,172  $
35,323  $
133,376  $
10,324  $
32,322  $
45,851  $
101,054  $

41,114  $
43,463  $
24,683  $
97,334  $
—  $
13,207  $
42,906  $
84,127  $

41,711  $
44,803  $
13,721  $
84,524  $
—  $
10,177  $
40,584  $
74,347  $

29,449 
31,526 
8,591 
64,961 
— 
5,767 
38,227 
59,194 

_________________________
(1) On  January  1,  2019,  we  adopted  Accounting  Standards  Update  No.  2016-02,  Leases  (Topic  842).  Prior  period  amounts  have  not  been  adjusted  under  the  modified

retrospective method.

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Free Cash Flow

In  addition  to  other  financial  measures  presented  in  accordance  with  U.S.  generally  accepted  accounting  principles  (GAAP),  we  monitor  free  cash  flow
(FCF) as a non-GAAP measure to manage our business, make planning decisions, evaluate our performance, and allocate resources. We define FCF as net cash
provided by operating activities reduced by net purchases of property and equipment and principal payments on finance leases.

We believe that FCF is one of the key financial indicators of our business performance over the long term and provides useful information regarding how

cash provided by operating activities compares to the property and equipment investments required to maintain and grow our business.

We  have  chosen  our  definition  for  FCF  because  we  believe  that  this  methodology  can  provide  useful  supplemental  information  to  help  investors  better

understand underlying trends in our business. We use FCF in discussions with our senior management and board of directors.

FCF has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of other GAAP financial measures, such as
net cash provided by operating activities. FCF is not intended to represent our residual cash flow available for discretionary expenses. Some of the limitations of
FCF are:

•
•

FCF does not reflect our future contractual commitments; and
other companies in our industry present similarly titled measures differently than we do, limiting their usefulness as comparative measures.

Management  compensates  for  the  inherent  limitations  associated  with  using  the  FCF measure  through  disclosure  of  such  limitations,  presentation  of  our
financial  statements  in  accordance  with  GAAP,  and  reconciliation  of  FCF  to  the  most  directly  comparable  GAAP  measure,  net  cash  provided  by  operating
activities, as presented below.

The following is a reconciliation of FCF to the most comparable GAAP measure, net cash provided by operating activities:

Net cash provided by operating activities

Less: Purchases of property and equipment
Less: Principal payments on finance leases

Free cash flow

2020

2019

Year Ended December 31,
2018
(in millions)

2017

2016

$

$

38,747  $
(15,115)
(604)
23,028  $

36,314  $
(15,102)
(552)
20,660  $

29,274  $
(13,915)
— 
15,359  $

24,216  $
(6,733)
— 
17,483  $

16,108 
(4,491)
— 
11,617 

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with our consolidated financial statements and the
related  notes  included  in  Part  II,  Item  8,  "Financial  Statements  and  Supplementary  Data"  of  this  Annual  Report  on  Form  10-K.  In  addition  to  our  historical
consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed
below and elsewhere in this Annual Report on Form 10-K, particularly in Part I, Item 1A, "Risk Factors." For a discussion of limitations in the measurement of
certain of our community metrics, see the section entitled "Limitations of Key Metrics and Other Data" in this Annual Report on Form 10-K.

Certain  revenue  information  in  the  section  entitled  "—Revenue—Foreign  Exchange  Impact  on  Revenue"  is  presented  on  a  constant  currency  basis.  This
information is a non-GAAP financial measure. To calculate revenue on a constant currency basis, we translated revenue for the full year 2020 using 2019 monthly
exchange rates for our settlement or billing currencies other than the U.S. dollar. This non-GAAP financial measure is not intended to be considered in isolation
or as a substitute  for, or superior to, financial  information prepared and presented  in accordance  with GAAP. This measure may be different  from non‑GAAP
financial measures used by other companies, limiting its usefulness for comparison purposes. Moreover, presentation of revenue on a constant currency basis is
provided for year-over-year comparison purposes, and investors should be cautioned that the effect of changing foreign currency exchange rates has an actual
effect  on  our  operating  results.  We  believe  this  non-GAAP  financial  measure  provides  investors  with  useful  supplemental  information  about  the  financial
performance of our business, enables comparison of financial results between periods where certain items may vary independent of business performance, and
allows for greater transparency with respect to key metrics used by management in operating our business.

Executive Overview of Full Year 2020 Results

Our key community metrics and financial results for 2020 are as follows:

Community growth:

•
•
•
•

Facebook daily active users (DAUs) were 1.84 billion on average for December 2020, an increase of 11% year-over-year.
Facebook monthly active users (MAUs) were 2.80 billion as of December 31, 2020, an increase of 12% year-over-year.
Family daily active people (DAP) was 2.60 billion on average for December 2020, an increase of 15% year-over-year.
Family monthly active people (MAP) was 3.30 billion as of December 31, 2020, an increase of 14% year-over-year.

Financial results:

•
•
•
•
•
•
•
•

Revenue was $85.97 billion, up 22% year-over-year, and advertising revenue was $84.17 billion, up 21% year-over-year.
Total costs and expenses were $53.29 billion.
Income from operations was $32.67 billion and operating margin was 38%.
Net income was $29.15 billion with diluted earnings per share of $10.09.
Capital expenditures, including principal payments on finance leases, were $15.72 billion.
Effective tax rate was 12.2%.
Cash and cash equivalents and marketable securities were $61.95 billion as of December 31, 2020.
Headcount was 58,604 as of December 31, 2020, an increase of 30% year-over-year.

Our mission is to give people the power to build community and bring the world closer together.

In  response  to  the  COVID-19  pandemic,  we  have  focused  on  helping  people  stay  connected,  assisting  the  public  health  response,  and  working  on  the
economic recovery. We have also continued to invest based on the following company priorities: (i) continue making progress on the major social issues facing the
internet and our company, including privacy, safety, and security; (ii) build new experiences that meaningfully improve people's lives today and set the stage for
even bigger improvements in the future; (iii) keep building our business by supporting the millions of businesses that rely on our

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services to grow and create jobs; and (iv) communicate more transparently about what we're doing and the role our services play in the world.

In 2020, we also continued to focus on our main revenue growth priorities: (i) helping marketers use our products to connect with consumers where they are

and (ii) making our ads more relevant and effective.

Our business has been impacted by the COVID-19 pandemic, which has resulted in authorities implementing numerous preventative measures to contain or
mitigate the outbreak of the virus, such as travel bans and restrictions, limitations on business activity, quarantines, and shelter-in-place orders. These measures
have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide, which have significantly impacted
our business and results of operations. Beginning in the first quarter of 2020, we experienced significant increases in the size and engagement of our active user
base  across  a  number  of  regions  as  a  result  of  the  COVID-19  pandemic.  More  recently,  we  have  seen  user  growth  and  engagement  returning  to  pre-pandemic
trends, particularly in the United States & Canada region. We are unable to predict the impact of the pandemic on user growth and engagement with any certainty,
and we expect these trends to continue to be subject to volatility.

The  COVID-19  pandemic  has  also  previously  caused  a  reduction  in  the  demand  for  advertising,  as  well  as  a  related  decline  in  the  pricing  of  our  ads,
particularly  in  the  second  quarter  of  2020.  More  recently,  we  believe  the  pandemic  has  contributed  to  an  acceleration  in  the  shift  of  commerce  from  offline  to
online, as well as increasing consumer demand for purchasing products as opposed to services, and we experienced increasing demand for advertising as a result of
these trends. However, it is possible that this increased demand may not continue in future periods and may even recede as the effects of the pandemic subside,
which  could  adversely  affect  our  advertising  revenue  growth.  The  impact  of  the  pandemic  on user  growth  and  engagement,  the  demand  for  and  pricing  of  our
advertising  services,  as  well  as  on  our  overall  results  of  operations,  remains  highly  uncertain  for  the  foreseeable  future.  In  addition,  we  expect  that  future
advertising revenue growth will continue to be adversely affected by limitations on our ad targeting and measurement tools arising from changes to the regulatory
environment and third-party mobile operating systems and browsers.

We intend to continue to invest in our business based on our company priorities, and we anticipate that additional investments in our data center capacity,
servers, network infrastructure, and office facilities, as well as scaling our headcount to support our growth, will continue to drive expense growth in 2021. We
expect 2021 capital expenditures to be in the range of $21-23 billion and total expenses to be in the range of $68-73 billion.

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Trends in Our Facebook User Metrics

The numbers for our key Facebook metrics, our DAUs, MAUs, and average revenue per user (ARPU), do not include users on Instagram, WhatsApp, or our

other products, unless they would otherwise qualify as DAUs or MAUs, respectively, based on their other activities on Facebook.

Trends  in  the  number  of  users  affect  our  revenue  and  financial  results  by  influencing  the  number  of  ads  we  are  able  to  show,  the  value  of  our  ads  to
marketers,  the  volume  of  Payments  transactions,  as  well  as  our  expenses  and  capital  expenditures.  Substantially  all  of  our  daily  and  monthly  active  users  (as
defined below) access Facebook on mobile devices.

•

Daily Active Users (DAUs). We define a daily active user as a registered  and logged-in Facebook user who visited Facebook through our website or a
mobile device, or used our Messenger application (and is also a registered Facebook user), on a given day. We view DAUs, and DAUs as a percentage of
MAUs, as measures of user engagement on Facebook.

DAU/MAU: 66% 66% 66% 66% 66% 66% 66% 66% 66% 67% 66% 66% 66%

DAU/MAU: 77% 77% 77% 76% 77% 77% 77% 77% 77% 77% 77% 77% 76% DAU/MAU: 75% 75% 74% 74% 74% 74% 74% 74% 75% 75% 74% 74% 74%

DAU/MAU: 60% 61% 61% 61% 61% 61% 61% 62% 62% 62% 61% 62% 62% DAU/MAU: 64% 64% 64% 64% 64% 64% 64% 65% 65% 65% 65% 65% 65%

Note: For purposes of reporting DAUs, MAUs, and ARPU by geographic region, Europe includes all users in Russia and Turkey and Rest of World includes all users in Africa, Latin
America, and the Middle East.

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Worldwide DAUs increased 11% to 1.84 billion on average during December 2020 from 1.66 billion during December 2019. Users in India, the Philippines,

and Indonesia represented key sources of growth in DAUs during December 2020, relative to the same period in 2019.

• Monthly Active Users (MAUs). We define a monthly active user as a registered and logged-in Facebook user who visited Facebook through our website
or a mobile device, or used our Messenger application (and is also a registered Facebook user), in the last 30 days as of the date of measurement. MAUs
are a measure of the size of our global active user community on Facebook.

As  of  December  31,  2020,  we  had  2.80  billion  MAUs,  an  increase  of  12%  from  December  31,  2019.  Users  in  India,  Indonesia,  and  the  Philippines

represented key sources of growth in 2020, relative to the same period in 2019.

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Trends in Our Monetization by Facebook User Geography

We calculate our revenue by Facebook user geography based on our estimate of the geography in which ad impressions are delivered, virtual and digital
goods are purchased, or consumer hardware devices are shipped. We define ARPU as our total revenue in a given geography during a given quarter, divided by the
average of the number of MAUs in the geography at the beginning and end of the quarter. While ARPU includes all sources of revenue, the number of MAUs used
in this calculation only includes users of Facebook and Messenger as described in the definition of MAU above. The share of revenue from users who are not also
Facebook  or  Messenger  MAUs  was  not  material.  The  geography  of  our  users  affects  our  revenue  and  financial  results  because  we  currently  monetize  users  in
different geographies at different average rates. Our revenue and ARPU in regions such as United States & Canada and Europe are relatively higher primarily due
to the size and maturity of those online and mobile advertising markets. For example, ARPU in 2020 in the United States & Canada region was more than 11 times
higher than in the Asia-Pacific region.

ARPU: $7.37

$6.42

$7.05

$7.26

$8.52

$6.95

$7.05

$7.89

$10.14

ARPU: $34.86

$30.12

$33.27

$34.55

$41.41

$34.18

$36.49

$39.63

$53.56

ARPU: $10.98

$9.55

$10.70

$10.68

$13.21

$10.64

$11.03

$12.41

$16.87

ARPU: $2.96

$2.78

$3.04

$3.24

$3.57

$3.06

$2.99

$3.67

$4.05

ARPU: $2.11

$1.89

$2.13

$2.24

$2.48

$1.99

$1.78

$2.22

$2.77

Note: Our revenue by Facebook user geography in the charts above is geographically apportioned based on our estimation of the geographic location of our Facebook users when
they perform a revenue-generating activity. This allocation differs from our revenue disaggregated by geography disclosure in our consolidated financial statements where revenue is
geographically apportioned based on the billing address of the customer.

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Our annual worldwide ARPU in 2020, which represents the sum of quarterly ARPU during such period, was $32.03, an increase of 10% from 2019. Over
this period, ARPU increased by 18% in the United States & Canada, 15% in Europe, and 9% in Asia‑Pacific, and ARPU was flat in Rest of World. In addition,
user growth was more rapid in geographies with relatively lower ARPU, such as Asia‑Pacific and Rest of World. We expect that user growth in the future will be
primarily concentrated in those regions where ARPU is relatively lower, such that worldwide ARPU may continue to increase at a slower rate relative to ARPU in
any geographic region, or potentially decrease even if ARPU increases in each geographic region.

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Trends in Our Family Metrics

The numbers for our key Family metrics, our DAP, MAP, and average revenue per person (ARPP), do not include users on our other products unless they

would otherwise qualify as MAP or DAP, respectively, based on their other activities on our Family products.

Trends in the number of people in our community affect our revenue and financial results by influencing the number of ads we are able to show, the value of
our  ads  to  marketers,  the  volume  of  Payments  transactions,  as  well  as  our  expenses  and  capital  expenditures.  Substantially  all  of  our  daily  and  monthly  active
people (as defined below) access our Family products on mobile devices.

•

Daily Active People (DAP). We define a daily active person as a registered and logged-in user of Facebook, Instagram, Messenger, and/or WhatsApp
(collectively, our "Family" of products) who visited at least one of these Family products through a mobile device application or using a web or mobile
browser on a given day. We do not require people to use a common identifier or link their accounts to use multiple products in our Family, and therefore
must seek to attribute multiple user accounts within and across products to individual people. Our calculations of DAP rely upon complex techniques,
algorithms, and machine learning models that seek to estimate the underlying number of unique people using one or more of these products, including by
matching user accounts within an individual product and across multiple products when we believe they are attributable to a single person, and counting
such group of accounts as one person. As these techniques and models require significant judgment, are developed based on internal reviews of limited
samples of user accounts, and are calibrated against user survey data, there is necessarily some margin of error in our estimates. We view DAP, and DAP
as a percentage of MAP, as measures of engagement across our products. For additional information, see the section entitled "Limitations of Key Metrics
and Other Data" in this Annual Report on Form 10-K.

DAP/MAP: 77% 78% 78%

78%

78%

79%

79%

79%

79%

Note: We report the numbers of DAP and MAP as specific amounts, but these numbers are estimates of the numbers of unique people using our products and are subject to statistical
variances and errors. While we expect the error margin for these estimates to vary from period to period, we estimate that such margin generally will be approximately 4% of our
worldwide MAP. At our scale, it is very difficult to attribute multiple user accounts within and across products to individual people, and it is possible that the actual numbers of
unique  people  using  our  products  may  vary  significantly  from  our  estimates,  potentially  beyond  our  estimated  error  margins.  For  additional  information,  see  the  section  entitled
"Limitations of Key Metrics and Other Data" in this Annual Report on Form 10-K. In the second quarter of 2020, we updated our Family metrics calculations to reflect recent data
from a periodic WhatsApp user survey and to incorporate certain methodology improvements, and we estimate such updates contributed an aggregate of approximately 40 million
DAP to our reported worldwide DAP in June 2020.

Worldwide DAP increased 15% to 2.60 billion on average during December 2020 from 2.26 billion during December 2019.

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• Monthly Active People (MAP). We define a monthly active person as a registered and logged-in user of one or more Family products who visited at least
one of these Family products through a mobile device application or using a web or mobile browser in the last 30 days as of the date of measurement. We
do  not  require  people  to  use  a  common  identifier  or  link  their  accounts  to  use  multiple  products  in  our  Family,  and  therefore  must  seek  to  attribute
multiple user accounts within and across products to individual people. Our calculations of MAP rely upon complex techniques, algorithms, and machine
learning models that seek to estimate the underlying number of unique people using one or more of these products, including by matching user accounts
within an individual product and across multiple products when we believe they are attributable to a single person, and counting such group of accounts as
one person. As these techniques and models require significant judgment, are developed based on internal reviews of limited samples of user accounts,
and are  calibrated  against  user survey data, there  is necessarily  some margin  of error in our estimates.  We view MAP as a measure  of the size  of our
global active community of people using our products. For additional information, see the section entitled "Limitations of Key Metrics and Other Data" in
this Annual Report on Form 10-K.

Note: We report the numbers of DAP and MAP as specific amounts, but these numbers are estimates of the numbers of unique people using our products and are subject to statistical
variances and errors. While we expect the error margin for these estimates to vary from period to period, we estimate that such margin generally will be approximately 4% of our
worldwide MAP. At our scale, it is very difficult to attribute multiple user accounts within and across products to individual people, and it is possible that the actual numbers of
unique  people  using  our  products  may  vary  significantly  from  our  estimates,  potentially  beyond  our  estimated  error  margins.  For  additional  information,  see  the  section  entitled
"Limitations of Key Metrics and Other Data" in this Annual Report on Form 10-K. In the second quarter of 2020, we updated our Family metrics calculations to reflect recent data
from a periodic WhatsApp user survey and to incorporate certain methodology improvements, and we estimate such updates contributed an aggregate of approximately 50 million
MAP to our reported worldwide MAP in June 2020.

As of December 31, 2020, we had 3.30 billion MAP, an increase of 14% from 2.89 billion as of December 31, 2019.

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•

Average Revenue Per Person (ARPP). We define ARPP as our total revenue during a given quarter, divided by the average of the number of MAP at the
beginning and end of the quarter. While ARPP includes all sources of revenue, the number of MAP used in this calculation only includes users of our
Family products as described in the definition of MAP above. The share of revenue from users who are not also MAP was not material.

ARPP:

$6.52

$5.66

$6.20

$6.33

$7.38

$6.03

$6.10

$6.76

$8.62

Our annual worldwide ARPP in 2020, which represents the sum of quarterly ARPP during such period, was $27.51, an increase of 8% from 2019.

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis,
we  evaluate  our  estimates  and  assumptions  based  on  historical  experience  and  on  various  other  assumptions  that  we  believe  are  reasonable  under  the
circumstances. Our actual results could differ from these estimates under different assumptions or conditions.

An  accounting  policy  is  deemed  to  be  critical  if  the  nature  of  the  estimates  or  assumptions  is  material  due  to  the  levels  of  subjectivity  and  judgment
necessary  to  account  for  highly  uncertain  matters  or  the  susceptibility  of  such  matters  to  change,  and  the  impact  of  the  estimates  and  assumptions  on  our
consolidated  financial  statements  is  material.  We  believe  that  the  assumptions  and  estimates  associated  with  gross  vs.  net  in  revenue  recognition,  valuation  of
equity investments, income taxes, loss contingencies, valuation of long-lived assets including goodwill and intangible assets and their associated estimated useful
lives have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
For  further  information  on  all  of  our  significant  accounting  policies,  see  Note  1—Summary  of  Significant  Accounting  Policies  in  the  accompanying  notes  to
consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

In  response  to  the economic  slowdown caused  by  the  COVID-19 pandemic,  we believe  that  the  assumptions  and estimates  associated  with  collectibility
assessment of revenue and credit losses of accounts receivable could have a material impact to our consolidated financial statements in future periods, depending
on the duration or degree of the impact of the COVID-19 pandemic on the global economy. 

Collectibility Assessment of Revenue

Under Topic 606, we recognize revenue using a five-step model. In step one, for a revenue contract to exist, it must be probable that substantially all of the
consideration to which we are entitled to will be collected. In performing such collectibility  assessment, we consider various facts and circumstances including
future expectations about our customer's ability and intention to pay. Collectibility assessment uses a probable threshold which requires estimation based on several
objective  and  subjective  factors,  such  as  probability  of  default,  customer’s  intention  to  pay,  payment  history,  financial  strength,  geography,  and  industry  sub-
vertical risks. The collectibility assessment has become uncertain during the current economic environment caused by the COVID-19 pandemic, and our actual
experience in the future may differ from our past experiences or current assessment.

Credit Losses of Accounts Receivable

On  January  1,  2020,  we  adopted  Accounting  Standards  Update  No.  2016-13,  Financial  Instruments-Credit  Losses  (Topic  326):  Measurement  of  Credit
Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost that an entity
does not expect to collect over the asset's contractual life, considering past events, current conditions, and reasonable and supportable forecasts of future economic
conditions.

For accounts receivable measured at amortized cost, we use aging analysis, probability of default methods and incorporate macroeconomic variables that are
most relevant  to evaluating  and estimating  the expected  credit  losses. These macroeconomic  variables  may vary by geography, customer-type,  or industry sub-
vertical.  The  contractual  life  of  our  trade  accounts  receivable  is  generally  short-term;  however,  we  may  experience  increasing  credit  loss  risks  from  accounts
receivable  in  future  periods  depending  on  the  duration  or  degree  of  economic  slowdown  caused  by  the  COVID-19  pandemic,  and  our  actual  experience  in  the
future may differ from our past experiences or current assessment.

Gross vs. Net in Revenue Recognition

For revenue generated from arrangements that involve third-party publishers, there is significant judgment in evaluating whether we are the principal, and
report  revenue  on  a  gross  basis,  or  the  agent,  and  report  revenue  on  a  net  basis.  In  this  assessment,  we  consider  if  we  obtain  control  of  the  specified  goods  or
services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk, and discretion
in

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establishing price. The assessment of whether we are considered the principal or the agent in a transaction could impact our revenue and cost of revenue recognized
on the consolidated statements of income.

Valuation of Equity Investments

For our equity securities without readily determinable fair values accounted for using the measurement alternative, determining whether an equity security
issued by the same issuer is similar to the equity security we hold may require judgment in (a) assessment of differences in rights and obligations associated with
the instruments such as voting rights, distribution rights and preferences, and conversion features, and (b) adjustments to the observable price for differences such
as, but not limited to, rights and obligations, control premium, liquidity, or principal or most advantageous markets. In addition, the identification of observable
transactions  will  depend  on  the  timely  reporting  of  these  transactions  from  our  investee  companies,  which  may  occur  in  a  period  subsequent  to  when  the
transactions take place. Therefore, our fair value adjustment for these observable transactions may occur in a period subsequent to when the transaction actually
occurred. For equity investments, we perform a qualitative assessment at each reporting date to determine whether there are triggering events for impairment. The
qualitative  assessment  considers  factors  such  as,  but  not  limited  to,  the  investee's  financial  condition  and  business  outlook;  industry  and  sector  performance;
regulatory,  economic  or  technological  environment;  operational  and  financing  cash  flows;  and  other  relevant  events  and  factors  affecting  the  investee.  When
indicators  of  impairment  exist,  we  estimate  the  fair  value  of  our  equity  investments  using  the  market  approach  and/or  the  income  approach  and  recognize
impairment loss in the consolidated statements of income if the estimated fair value is less than the carrying value. Estimating fair value requires judgment and use
of estimates such as discount rates, forecast cash flows, holding period, and market data of comparable companies, among others.

Income Taxes

We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our provision for

income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination
by  the  taxing  authorities  based  on  the  technical  merits  of  the  position.  These  uncertain  tax  positions  include  our  estimates  for  transfer  pricing  that  have  been
developed  based upon analyses  of  appropriate  arms-length  prices.  Similarly,  our  estimates  related  to  uncertain  tax  positions  concerning  research  tax credits  are
based on an assessment of whether our available documentation corroborating the nature of our activities supporting the tax credits will be sufficient. Although we
believe  that  we  have  adequately  reserved  for  our  uncertain  tax  positions  (including  net  interest  and  penalties),  we  can  provide  no  assurance  that  the  final  tax
outcome of these matters will not be materially different. We make adjustments to these reserves in accordance with the income tax accounting guidance when
facts and circumstances  change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is
different from the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made, and could have
a material impact on our financial condition and operating results.

Loss Contingencies

We are involved in legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business.
Certain  of  these  matters  include  speculative  claims  for  substantial  or  indeterminate  amounts  of  damages.  Additionally,  we  are  required  to  comply  with  various
legal  and  regulatory  obligations  around  the  world.  The  requirements  for  complying  with  these  obligations  may  be  uncertain  and  subject  to  interpretation  and
enforcement by regulatory and other authorities, and any failure to comply with such obligations could eventually lead to asserted legal or regulatory action. With
respect to these matters, asserted and unasserted, we evaluate the associated developments on a regular basis and accrue a liability when we believe that it is both
probable that a loss has been incurred and the amount can be reasonably estimated. If we determine there is a reasonable possibility that we may incur a loss and
the loss or range of loss can be estimated, we disclose the possible loss in the accompanying notes to the consolidated financial statements to the extent material.

We review the developments in our contingencies that could affect the amount of the provisions that have been previously recorded, and the matters and
related  reasonably  possible  losses  disclosed.  We  make  adjustments  to  our  provisions  and  changes  to  our  disclosures  accordingly  to  reflect  the  impact  of
negotiations, settlements, rulings, advice of legal counsel,

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and  updated  information.  Significant  judgment  is  required  to  determine  the  probability  of  loss  and  the  estimated  amount  of  loss,  including  when  and  if  the
probability and estimate has changed for asserted and unasserted matters.

The ultimate  outcome of these matters,  such as whether the likelihood  of loss is remote,  reasonably  possible, or probable  or if and when the reasonably
possible  range  of  loss  is  estimable,  is  inherently  uncertain.  Therefore,  if  one  or  more  of  these  matters  were  resolved  against  us  for  amounts  in  excess  of
management's estimates of losses, our results of operations and financial condition, including in a particular reporting period in which any such outcome becomes
probable and estimable, could be materially adversely affected. See Note 12—Commitments and Contingencies and Note 15—Income Taxes of the accompanying
notes to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" and Part I, Item 3, "Legal Proceedings"
of this Annual Report on Form 10-K for additional information regarding these contingencies.

Valuation of Long-lived Assets including Goodwill, Intangible Assets and Estimated Useful Lives

We  allocate  the  fair  value  of  purchase  consideration  to  the  tangible  assets  acquired,  liabilities  assumed,  and  intangible  assets  acquired  based  on  their
estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.
Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing
certain  intangible  assets  include,  but  are  not  limited  to,  estimated  replacement  costs  and  future  expected  cash  flows  from  acquired  users,  acquired  technology,
acquired  patents,  and  trade  names  from  a  market  participant  perspective,  useful  lives,  and  discount  rates.  Management's  estimates  of  fair  value  are  based  upon
assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of
purchase consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over the useful
life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the
acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the
measurement period, any subsequent adjustments are recorded to earnings.

We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair

value of our single reporting unit below its carrying value. As of December 31, 2020, no impairment of goodwill has been identified.

Long-lived assets, including property and equipment and intangible assets are reviewed for possible impairment whenever events or circumstances indicate
that  the  carrying  amount  of  such  assets  may  not  be  recoverable.  The  evaluation  is  performed  at  the  lowest  level  for  which  identifiable  cash  flows  are  largely
independent  of  the  cash  flows  of  other  assets  and  liabilities.  Recoverability  of  these  assets  is  measured  by  a  comparison  of  the  carrying  amounts  to  the  future
undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and
equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant impairment
charges during the years presented.

The  useful  lives  of  our  long-lived  assets  including  property  and  equipment  and  finite-lived  intangible  assets  are  determined  by  management  when  those
assets are initially recognized and are routinely reviewed for the remaining estimated useful lives. The current estimate of useful lives represents our best estimate
based  on  current  facts  and  circumstances,  but  may  differ  from  the  actual  useful  lives  due  to  changes  in  future  circumstances  such  as  changes  to  our  business
operations,  changes  in  the  planned  use  of  assets,  and  technological  advancements.  When  we  change  the  estimated  useful  life  assumption  for  any  asset,  the
remaining carrying amount of the asset is accounted for prospectively and depreciated or amortized over the revised estimated useful life. Historically changes in
useful lives have not resulted in material changes to our depreciation and amortization expense.

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Components of Results of Operations

Revenue

Advertising. We generate substantially all of our revenue from advertising. Our advertising revenue is generated by displaying ad products on Facebook,
Instagram, Messenger, and third-party affiliated websites or mobile applications. Marketers pay for ad products either directly or through their relationships with
advertising agencies or resellers, based on the number of impressions delivered or the number of actions, such as clicks, taken by users.

We recognize revenue from the display of impression-based ads in the contracted period in which the impressions are delivered. Impressions are considered
delivered when an ad is displayed to a user. We recognize revenue from the delivery of action-based ads in the period in which a user takes the action the marketer
contracted for. The number of ads we show is subject to methodological changes as we continue to evolve our ads business and the structure of our ads products.
We calculate price per ad as total ad revenue divided by the number of ads delivered, representing the effective price paid per impression by a marketer regardless
of their desired objective such as impression or action. For advertising revenue arrangements where we are not the principal, we recognize revenue on a net basis.

Other  revenue. Other  revenue  consists  of  revenue  from  the  delivery  of  consumer  hardware  devices,  net  fees  we  receive  from  developers  using  our

Payments infrastructure, and revenue from various other sources.

Cost of Revenue and Operating Expenses

Cost of revenue. Our cost of revenue consists primarily of expenses associated with the delivery and distribution of our products. These include expenses
related  to  the  operation  of  our  data  centers  and  technical  infrastructure,  such  as  facility  and  server  equipment  depreciation,  salaries,  benefits,  and  share-based
compensation for employees on our operations teams, and energy and bandwidth costs. Cost of revenue also includes costs associated with partner arrangements,
including traffic acquisition and content costs, credit card and other transaction fees related to processing customer transactions, and cost of consumer hardware
devices sold.

Research  and  development. Research  and  development  expenses  consist  primarily  of  salaries  and  benefits,  share-based  compensation,  and  facilities-

related costs for employees on our engineering and technical teams who are responsible for building new products as well as improving existing products.

Marketing and sales. Marketing and sales expenses consist of salaries and benefits, and share-based compensation for our employees engaged in sales,
sales  support,  marketing,  business  development,  and  customer  service  functions.  Our  marketing  and  sales  expenses  also  include  marketing  and  promotional
expenditures and professional services such as content reviewers to support our community and product operations.

General and administrative. General and administrative expenses consist of legal-related costs; salaries and benefits, and share-based compensation for
certain  of  our  executives  as  well  as  our  legal,  finance,  human  resources,  corporate  communications  and  policy,  and  other  administrative  employees;  and
professional services.

Results of Operations

In  this  section,  we  discuss  the  results  of  our  operations  for  the  year  ended  December  31,  2020  compared  to  the  year  ended  December  31,  2019.  For  a
discussion of the year ended December 31, 2019 compared to the year ended December 31, 2018, please refer to Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2019.

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The following table sets forth our consolidated statements of income data (in millions):

Revenue
Costs and expenses:
Cost of revenue
Research and development
Marketing and sales
General and administrative

Total costs and expenses

Income from operations
Interest and other income, net
Income before provision for income taxes
Provision for income taxes

Net income

2020

Year Ended December 31,
2019

2018

$

85,965  $

70,697  $

55,838 

16,692 
18,447 
11,591 
6,564 
53,294 
32,671 
509 
33,180 
4,034 
29,146  $

12,770 
13,600 
9,876 
10,465 
46,711 
23,986 
826 
24,812 
6,327 
18,485  $

9,355 
10,273 
7,846 
3,451 
30,925 
24,913 
448 
25,361 
3,249 
22,112 

$

The following table sets forth our consolidated statements of income data (as a percentage of revenue)

(1)

:

Revenue
Costs and expenses:
Cost of revenue
Research and development
Marketing and sales
General and administrative

Total costs and expenses

Income from operations
Interest and other income, net
Income before provision for income taxes
Provision for income taxes

Net income

2020

Year Ended December 31,
2019

2018

100 %

100 %

100 %

19 
21 
13 
8 
62 
38 
1 
39 
5 
34 %

18 
19 
14 
15 
66 
34 
1 
35 
9 
26 %

17 
18 
14 
6 
55 
45 
1 
45 
6 
40 %

284 
3,022 
511 
335 
4,152 

_________________________
(1) Percentages have been rounded for presentation purposes and may differ from unrounded results.

Share-based compensation expense included in costs and expenses (in millions):

Cost of revenue
Research and development
Marketing and sales
General and administrative

Total share-based compensation expense

2020

Year Ended December 31, 
2019

2018

$

$

447  $

4,918 
691 
480 
6,536  $

377  $

3,488 
569 
402 
4,836  $

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Share-based compensation expense included in costs and expenses (as a percentage of revenue)

(1)

:

Cost of revenue
Research and development
Marketing and sales
General and administrative

Total share-based compensation expense

_________________________
(1) Percentages have been rounded for presentation purposes and may differ from unrounded results.

Year Ended December 31,

2020

2019

2018

1 %
6 
1 
1 
8 %

1 %
5 
1 
1 
7 %

1 %
5 
1 
1 
7 %

Revenue

Advertising
Other revenue

Total revenue

2020

Year Ended December 31,
2019
(in millions)

2018

$

$

84,169  $
1,796 
85,965  $

69,655  $
1,042 
70,697  $

55,013 
825 
55,838 

2020 vs 2019 % Change

2019 vs 2018 % Change

21  %
72  %

22  %

27  %
26  %

27  %

2020 Compared to 2019. Revenue in 2020 increased $15.27 billion, or 22%, compared to 2019. The increase was mostly due to an increase in advertising

revenue as a result of an increase in the number of ads delivered, partially offset by a decrease in the average price per ad.

In 2020, the number of ads delivered increased by 34%, as compared with approximately 33% in 2019. The increase in the ads delivered was driven by an
increase  in  the  number  and  frequency  of  ads  displayed  across  our  products,  and  an  increase  in  users.  In  2020,  the  average  price  per  ad  decreased  by  10%,  as
compared with a decrease of approximately 5% in 2019. The decrease in average price per ad during the year ended December 31, 2020 was primarily driven by a
decrease in advertising demand globally during the first two quarters of 2020 due to the COVID-19 pandemic and, to a lesser extent, by an increasing proportion of
the number of ads delivered as Stories ads and in geographies that monetize at lower rates.

In the near-term, we anticipate that future advertising revenue growth will be determined primarily by several factors: the extent to which we continue to see
increasing advertising demand in connection with the shift of commerce from offline to online, as well as increased consumer demand for purchasing products as
opposed to services, as a result of the COVID-19 pandemic; the status of the economic recovery from the slowdown caused by the COVID-19 pandemic and the
magnitude  of  fiscal  stimulus;  and  the  extent  to  which  changes  to  the  regulatory  environment  and  third-party  mobile  operating  systems  and  browsers  result  in
limitations on our ad targeting and measurement tools.

Advertising spending is traditionally seasonally strong in the fourth quarter of each year. We believe that this seasonality in advertising spending affects our
quarterly  results,  which  generally  reflect  significant  growth  in  advertising  revenue  between  the  third  and  fourth  quarters  and  a  decline  in  advertising  spending
between  the fourth  and  subsequent  first  quarters.  For instance,  our advertising  revenue  increased  28%, 19%,  and  23%  between  the  third  and  fourth  quarters  of
2020, 2019, and 2018, respectively, while advertising revenue for both the first quarters of 2020 and 2019 declined 16% and 10% compared to the fourth quarters
of 2019 and 2018, respectively.

No customer represented 10% or more of total revenue during the years ended December 31, 2020, 2019, and 2018.

Foreign Exchange Impact on Revenue

The  general  strengthening  of  the  U.S.  dollar  relative  to  certain  foreign  currencies  in  the  full  year  2020  compared  to  the  same  period  in  2019,  had  an
unfavorable  impact  on  revenue.  If  we  had  translated  revenue  for  the  full  year  2020  using  the  prior  year's  monthly  exchange  rates  for  our  settlement  or  billing
currencies other than the U.S. dollar, our total revenue and

66

 
 
 
 
 
 
 
 
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advertising revenue would have been $86.08 billion and $84.30 billion, respectively. Using these constant rates, total revenue and advertising revenue would have
been $120 million and $129 million, respectively, higher than actual total revenue and advertising revenue for the full year 2020. Using the same constant rates,
full  year  2020  total  revenue  and  advertising  revenue  would  have  been  $15.39  billion  and  $14.64  billion,  respectively,  higher  than  actual  total  revenue  and
advertising revenue for the full year 2019.

Cost of revenue

Cost of revenue
Percentage of revenue

$

16,692  $

19%

12,770  $

18%

9,355 
17%

31  %

37%

Year Ended December 31,

2020

2019
(dollars in millions)

2018

2020 vs 2019 %
Change

2019 vs 2018 %
Change

2020  Compared  to  2019.  Cost  of  revenue  in  2020  increased  $3.92  billion,  or  31%,  compared  to  2019.  The  increase  was  mostly  due  to  an  increase  in
operational  expenses  related  to  our  data  centers  and  technical  infrastructure,  higher  cost  associated  with  partner  arrangements,  including  traffic  acquisition  and
content costs and, to a lesser extent, an increase in cost of consumer hardware devices sold.

In 2021, we anticipate that the cost of revenue will increase as we continue to expand our data center capacity and technical infrastructure to support user
growth, increased user engagement, and the delivery of new products and services and, to a lesser extent, due to higher costs associated with partner arrangements
and consumer hardware devices.

Research and development

Year Ended December 31,

2020

2019
(dollars in millions)

2018

2020 vs 2019 %
Change

2019 vs 2018 %
Change

Research and development
Percentage of revenue

$

18,447  $

21%

13,600  $

19%

10,273 
18%

36  %

32  %

2020 Compared to 2019. Research and development expenses in 2020 increased $4.85 billion, or 36%, compared to 2019. The increase was primarily due to
increases in payroll and benefits expenses as a result of a 40% growth in employee headcount from December 31, 2019 to December 31, 2020 in engineering and
other technical functions supporting our continued investment in our Family of products and consumer hardware products.

In  2021,  we  plan  to  continue  to  hire  software  engineers  and  other  technical  employees,  and  to  increase  our  investment  to  support  our  research  and

development initiatives.

Marketing and sales

Marketing and sales
Percentage of revenue

$

11,591  $

13%

9,876  $
14%

7,846 
14%

17  %

26%

Year Ended December 31,

2020

2019
(dollars in millions)

2018

2020 vs 2019 %
Change

2019 vs 2018 %
Change

2020 Compared to 2019. Marketing and sales expenses in 2020 increased $1.72 billion, or 17%, compared to 2019. The increase was primarily driven by
increases  in  marketing  expenses  and  payroll  and  benefits  expenses,  which  were  partially  offset  by  a  decrease  in  travel-related  expenses  due  to  the  COVID-19
pandemic. Our payroll and benefits expenses increased as a result of a 16% increase in employee headcount from December 31, 2019 to December 31, 2020 in our
marketing and sales functions.

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Table of Contents

In  2021,  we  plan  to  continue  the  hiring  of  marketing  and  sales  employees  to  support  our  marketing,  sales,  and  partnership  efforts,  and  we  anticipate

marketing expenses will increase.

General and administrative

Legal accrual related to FTC settlement
Other general and administrative

General and administrative
Percentage of revenue

Year Ended December 31,

2020

2019
(dollars in millions)

—  $

6,564 
6,564  $

8%

5,000  $
5,465 
10,465  $

15%

$

$

2018

2020 vs 2019 %
Change

2019 vs 2018 %
Change

— 
3,451 
3,451 

6%

NM
20  %

(37) %

NM
58 %

203 %

2020  Compared  to  2019.  Excluding  the  $5.0  billion  FTC  settlement  accrual  recorded  in  2019,  general  and  administrative  expenses  in  2020  increased
$1.10 billion, or 20%, compared to 2019. The increase was primarily due to higher professional services costs and an increase in payroll and benefits expenses as a
result of a 23% increase in employee headcount from December 31, 2019 to December 31, 2020 in our general and administrative functions.

In 2021, we plan to continue to increase general and administrative expenses to support overall company growth.

Interest and other income, net

Interest income, net
Foreign currency exchange losses, net
Other income (expense), net

Interest and other income, net

Year Ended December 31,

2020

2019
(in millions)

$

$

672  $
(129)
(34)
509  $

904  $
(105)
27 
826  $

2018

2020 vs 2019 %
Change

2019 vs 2018 %
Change

652 
(213)
9 
448 

(26) %
(23) %
NM

(38) %

39  %
51  %
NM

84  %

2020  Compared  to  2019.  Interest  and  other  income,  net  in  2020  decreased  $317  million  compared  to  2019.  The  majority  of  the  decrease  was  due  to  a

decrease in interest income related to lower interest rates compared to 2019.

Provision for income taxes

Provision for income taxes
Effective tax rate

$

4,034  $

12.2%

6,327  $

25.5%

3,249 

12.8%

(36) %

95  %

Year Ended December 31,

2020

2019
(dollars in millions)

2018

2020 vs 2019 %
Change

2019 vs 2018 % Change

2020  Compared  to  2019.  Our  provision  for  income  taxes  in  2020  decreased  $2.29  billion,  or  36%,  compared  to  2019,  mostly  due  to  the  additional  tax
expense  incurred  in  2019  from  the  Altera Ninth  Circuit  Opinion  and  the  effects  of  a  tax  election  to  capitalize  and  amortize  certain  research  and  development
expenses for U.S. income tax purposes, both discussed below.

Our effective tax rate in 2020 decreased compared to 2019, primarily due to the 2019 legal accrual related to the FTC settlement that was not tax-deductible,
the additional tax expense incurred in 2019 from the Altera Ninth Circuit Opinion, and the effects of a tax election to capitalize and amortize certain research and
development expenses for U.S. income tax purposes.

In  the  third  quarter  of  2020,  as  part  of  finalizing  our  U.S.  income  tax  return,  we  elected  to  capitalize  and  amortize  certain  research  and  development

expenses for U.S. income tax purposes. As a result, we recorded a total of $1.07 billion

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income tax benefit for the year ended December 31, 2020. The income tax benefit resulted from recording a deferred income tax asset that was greater than the
current  income  tax liability  due to different  tax rates  applicable  for the  periods in which capitalized  expenses  will be amortized  versus the period  in which the
increased current tax liability was accrued. We do not believe this election will materially affect our effective tax rate trend in the future.

On July 27, 2015, the United States Tax Court issued a decision (Tax Court Decision) in Altera Corp. v. Commissioner, which concluded that related parties
in a cost sharing arrangement are not required to share expenses related to share-based compensation. The Tax Court Decision was appealed by the Commissioner
to the Ninth Circuit Court of Appeals (Ninth Circuit). On June 7, 2019, the Ninth Circuit issued an opinion (Altera Ninth Circuit Opinion) that reversed the Tax
Court Decision. Based on the Altera Ninth Circuit Opinion, we recorded a cumulative income tax expense of $1.11 billion in the second quarter of 2019. On July
22, 2019, the taxpayer requested a rehearing before the full Ninth Circuit and the request was denied on November 12, 2019. The taxpayer requested a hearing
before the Supreme Court of the United States and the request was denied on June 22, 2020. Since we started to accrue income tax for share-based compensation
cost-sharing expense in the second quarter of 2019, the denial of the request by the Supreme Court did not have a material impact to our financial results in 2020.

Effective Tax Rate Items. Our effective tax rate in the future will depend upon the proportion between the following items and income before provision for
income taxes: U.S. tax benefits from foreign derived intangible income, tax effects from share-based compensation, tax effects of integrating intellectual property
from acquisitions, settlement of tax contingency items, tax effects of changes in our business, and the effects of changes in tax law.

The  accounting  for  share-based  compensation  may  increase  or  decrease  our  effective  tax  rate  based  upon  the  difference  between  our  share-based
compensation expense and the deductions taken on our tax return which depends upon the stock price at the time of employee award vesting. If our stock price
remains constant to the January 22, 2021 price, we expect our effective tax rate for the full year of 2021 will be in the high-teens.

Integrating  intellectual  property  from  acquisitions  into  our  business  generally  involves  intercompany  transactions  that  have  the  impact  of  increasing  our
provision  for  income  taxes.  Consequently,  our  provision  for  income  taxes  and  our  effective  tax  rate  may  initially  increase  in  the  period  of  an  acquisition  and
integration.  The  magnitude  of  this  impact  will  depend  upon  the  specific  type,  size,  and  taxing  jurisdictions  of  the  intellectual  property  as  well  as  the  relative
contribution to income in subsequent periods.

Unrecognized Tax Benefits. As of December 31, 2020, we had net unrecognized tax benefits of $3.48 billion which were accrued as other liabilities. These
unrecognized  tax  benefits  were  predominantly  accrued  for  uncertainties  related  to  transfer  pricing  with  our  foreign  subsidiaries,  which  includes  licensing  of
intellectual property, providing services and other transactions, as well as for uncertainties with our research tax credits. The ultimate settlement of the liabilities
will  depend  upon  resolution  of  tax  audits,  litigation,  or  events  that  would  otherwise  change  the  assessment  of  such  items.  Based  upon  the  status  of  litigation
described below and the current status of tax audits in various jurisdictions, we do not anticipate a material change to such amounts within the next 12 months.

In July 2016, we received a Statutory Notice of Deficiency (Notice) from the IRS related to transfer pricing with our foreign subsidiaries in conjunction with
the examination of the 2010 tax year. While the Notice applies only to the 2010 tax year, the IRS stated that it will also apply its position for tax years subsequent
to 2010. We do not agree with the position of the IRS and have filed a petition in the Tax Court challenging the Notice. On January 15, 2020, the IRS filed its
Pretrial Memorandum in the case stating that it planned to assert at trial an adjustment that is higher than the adjustment stated in the Notice. The first sessions of
the trial began in February 2020, and additional sessions are expected to continue in 2021. The IRS did not provide any information about how it intends to apply
the  revised  adjustment  to  future  years.  Based  on  the  information  provided,  we  believe  that,  if  the  IRS  prevails  in  its  updated  position,  this  could  result  in  an
additional federal tax liability of an estimated, aggregate amount of up to approximately $9.0 billion in excess of the amounts in our originally filed U.S. return,
plus interest and any penalties asserted.

In March 2018, we received a second Notice from the IRS in conjunction with the examination of our 2011 through 2013 tax years. The IRS applied its
position from the 2010 tax year to each of these years and also proposed new adjustments related to other transfer pricing with our foreign subsidiaries and certain
tax  credits  that  we  claimed.  If  the  IRS  prevails  in  its  position  for  these  new  adjustments,  this  could  result  in  an  additional  federal  tax  liability  of  up  to
approximately $680 million

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Table of Contents

in excess of the amounts in our originally filed U.S. returns, plus interest and any penalties asserted. We do not agree with the positions of the IRS in the second
Notice and have filed a petition in the Tax Court challenging the second Notice.

We have previously accrued an estimated unrecognized tax benefit consistent with the guidance in ASC 740, Income Taxes, that is lower than the potential
additional federal tax liability from the positions taken by the IRS in the two Notices and its Pretrial Memorandum. In addition, if the IRS prevails in its positions
related to transfer pricing with our foreign subsidiaries, the additional tax that we would owe would be partially offset by a reduction in the tax that we owe under
the mandatory transition tax on accumulated foreign earnings from the 2017 Tax Cuts and Jobs Act (Tax Act). As of December 31, 2020, we have not resolved
these matters and proceedings continue in the Tax Court.

We believe that adequate amounts have been reserved in accordance with ASC 740, Income Taxes, for any adjustments to the provision for income taxes or
other tax items that may ultimately result from these examinations. The timing of the resolution, settlement, and closure of any audits is highly uncertain, and it is
reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. Given the number of years remaining that
are  subject  to  examination  in  various  jurisdictions,  we  are  unable  to  estimate  the  full  range  of  possible  adjustments  to  the  balance  of  gross  unrecognized  tax
benefits. If the taxing authorities prevail in the assessment of additional tax due, the assessed tax, interest, and penalties, if any, could have a material adverse effect
on our financial position, results of operations, and cash flows.

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Table of Contents

Quarterly Results of Operations Data

The following tables set forth our unaudited quarterly consolidated statements of income data in dollars and as a percentage of total revenue for each of the
eight  quarters  in  the  period  ended  December  31,  2020.  We  have  prepared  the  quarterly  consolidated  statements  of  income  data  on  a  basis  consistent  with  the
audited consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K. In the
opinion of management, the financial information reflects all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair
presentation of this data. This information should be read in conjunction with the audited consolidated financial statements and related notes included in Part II,
Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K. The results of historical periods are not necessarily indicative of the
results of operations for any future period.

Revenue:

Advertising
Other revenue

Total revenue

Costs and expenses:

Cost of revenue
Research and development
Marketing and sales
General and administrative

Total costs and expenses

Income from operations
Interest and other income (expense), net
Income before provision for income taxes
Provision for income taxes
Net income
Earnings per share attributable to Class A and

Class B common stockholders:
Basic

Diluted

$

$

$

Dec 31, 
2020

Sep 30, 
2020

Jun 30, 
2020

Three Months Ended 
Dec 31, 
Mar 31, 
2019
2020

Sep 30, 
2019

Jun 30, 
2019

Mar 31, 
2019

(in millions, except per share amounts)

$

27,187  $
885 
28,072 

21,221  $
249 
21,470 

18,321  $
366 
18,687 

17,440  $
297 
17,737 

20,736  $
346 
21,082 

17,383  $
269 
17,652 

16,624  $
262 
16,886 

14,912 
165 
15,077 

5,210 
5,208 
3,280 
1,599 
15,297 
12,775 
280 
13,055 
1,836 
11,219  $

4,194 
4,763 
2,683 
1,790 
13,430 
8,040 
93 
8,133 
287 
7,846  $

3,829 
4,462 
2,840 
1,593 
12,724 
5,963 
168 
6,131 
953 
5,178  $

3,459 
4,015 
2,787 
1,583 
11,844 
5,893 
(32)
5,861 
959 
4,902  $

3,492 
3,877 
3,026 
1,829 
12,224 
8,858 
311 
9,169 
1,820 
7,349  $

3,155 
3,548 
2,416 
1,348 
10,467 
7,185 
144 
7,329 
1,238 
6,091  $

3,307 
3,315 
2,414 
3,224 
12,260 
4,626 
206 
4,832 
2,216 
2,616  $

2,816 
2,860 
2,020 
4,064 
11,760 
3,317 
165 
3,482 
1,053 
2,429 

3.94  $

3.88  $

2.75  $

2.71  $

1.82  $

1.80  $

1.72  $

1.71  $

2.58  $

2.56  $

2.13  $

2.12  $

0.92  $

0.91  $

0.85 

0.85 

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The following tables set forth our consolidated statements of income data (as a percentage of revenue)

(1)

:

Revenue:

Advertising
Other revenue

Total revenue

Costs and expenses:
Cost of revenue
Research and development
Marketing and sales
General and administrative

Total costs and expenses

Income from operations

Interest and other income (expense), net
Income before provision for income taxes
Provision for income taxes

Net income

Dec 31, 
2020

Sep 30, 
2020

Jun 30, 
2020

Three Months Ended 
Dec 31, 
2019

Mar 31, 
2020

Sep 30, 
2019

Jun 30, 
2019

Mar 31, 
2019

97 %
3 
100 %

19 
19 
12 
6 
54 
46 
1 
47 
7 
40 %

99 %
1 
100 %

20 
22 
12 
8 
63 
37 
— 
38 
1 
37 %

98 %
2 
100 %

20 
24 
15 
9 
68 
32 
1 
33 
5 
28 %

98 %
2 
100 %

20 
23 
16 
9 
67 
33 
— 
33 
5 
28 %

98 %
2 
100 %

17 
18 
14 
9 
58 
42 
1 
43 
9 
35 %

98 %
2 
100 %

18 
20 
14 
8 
59 
41 
1 
42 
7 
35 %

98 %
2 
100 %

20 
20 
14 
19 
73 
27 
1 
29 
13 
15 %

99 %
1 
100 %

19 
19 
13 
27 
78 
22 
1 
23 
7 
16 %

_________________________
(1) Percentages have been rounded for presentation purposes and may differ from unrounded results.

Share-based compensation expense included in costs and expenses:

Cost of revenue
Research and development
Marketing and sales
General and administrative

Total share-based compensation expense

Dec 31, 
2020

Sep 30, 
2020

Jun 30, 
2020

$

$

120  $

1,361 
175 
128 
1,784  $

116  $

1,297 
180 
129 
1,722  $

117  $

1,261 
187 
130 
1,695  $

Three Months Ended 
Dec 31, 
Mar 31, 
2019
2020

(in millions)
94  $
999 
149 
93 
1,335  $

90  $
931 
147 
105 
1,273  $

Sep 30, 
2019

Jun 30, 
2019

Mar 31, 
2019

91  $

907 
148 
103 
1,249  $

109  $
927 
160 
107 
1,303  $

87 
723 
113 
87 
1,010 

Share-based compensation expense included in costs and expenses (as a percentage of revenue)

(1)

:

Cost of revenue
Research and development
Marketing and sales
General and administrative

Total share-based compensation expense

Dec 31, 
2020

Sep 30, 
2020

Jun 30, 
2020

— %
5 
1 
— 
6 %

1 %
6 
1 
1 
8 %

1 %
7 
1 
1 
9 %

Three Months Ended 
Dec 31, 
2019

Mar 31, 
2020

1 %
6 
1 
1 
8 %

— %
4 
1 
— 
6 %

Sep 30, 
2019

Jun 30, 
2019

Mar 31, 
2019

1 %
5 
1 
1 
7 %

1 %
5 
1 
1 
8 %

1 %
5 
1 
1 
7 %

_________________________
(1) Percentages have been rounded for presentation purposes and may differ from unrounded results.

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Liquidity and Capital Resources

Consolidated Statements of Cash Flows Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Purchase of property and equipment and principal payments on finance leases
Depreciation and amortization
Share-based compensation

2020

Year Ended December 31,
2019
(in millions)

2018

$
$
$
$
$
$

38,747  $
(30,059) $
(10,292) $
15,719  $
6,862  $
6,536  $

36,314  $
(19,864) $
(7,299) $
15,654  $
5,741  $
4,836  $

29,274 
(11,603)
(15,572)
13,915 
4,315 
4,152 

Our principal sources of liquidity are our cash and cash equivalents, marketable securities, and cash generated from operations. Cash and cash equivalents
and marketable securities consist mostly of cash on deposit with banks, investments in money market funds, and investments in U.S. government securities, U.S.
government agency securities, and corporate debt securities. Cash and cash equivalents and marketable securities were $61.95 billion as of December 31, 2020, an
increase of $7.10 billion from December 31, 2019. The increase was mostly due to $38.75 billion of cash generated from operations, offset by $15.72 billion for
capital expenditures, including principal payments on finance leases, $6.36 billion for purchases of equity investments, $6.27 billion for repurchases of our Class A
common stock, and $3.56 billion of taxes paid related to net share settlement of employee restricted stock units (RSU) awards.

Cash paid for income taxes was $4.23 billion for the year ended December 31, 2020. As of December 31, 2020, our federal net operating loss carryforward
was $10.62 billion and our federal tax credit carryforward was $424 million. We anticipate the utilization of a significant portion of these net operating losses and
credits within the next three years.

Our board of directors has authorized a share repurchase program of our Class A common stock, which commenced in January 2017 and does not have an
expiration  date.  As  of  December  31,  2019,  $4.90  billion  remained  available  and  authorized for  repurchases  under  this  program.  In  2020,  we  repurchased  and
subsequently retired 27 million shares of our Class A common stock for $6.30 billion. As of December 31, 2020, $8.60 billion remained available and authorized
for repurchases. In January 2021, an additional $25 billion of repurchases was authorized under this program.

As of December 31, 2020, $7.18 billion of the $61.95 billion in cash and cash equivalents and marketable securities was held by our foreign subsidiaries.
The  Tax  Act  imposed  a  mandatory  transition  tax  on  accumulated  foreign  earnings  and  eliminated  U.S.  taxes  on  foreign  subsidiary  distributions.  As  a  result,
earnings in foreign jurisdictions are available for distribution to the U.S. without incremental U.S. taxes.

In July 2019, we entered into a settlement and modified consent order to resolve the inquiry of the FTC into our platform and user data practices, which was
approved by the federal court and took effect in April 2020. We paid the penalty of $5.0 billion in April 2020 upon the effectiveness of the modified consent order.
On April 21, 2020, we entered into a definitive agreement to invest in Jio Platforms Limited, a subsidiary of Reliance Industries Limited. The transaction closed on
July 7, 2020, and we paid approximately $5.8 billion at the then-current exchange rate.

We  currently  anticipate  that  our  available  funds  and  cash  flow  from  operations  will  be  sufficient  to  meet  our  operational  cash  needs  and  fund  our  share

repurchase program for the foreseeable future.

Cash Provided by Operating Activities

Cash flow from operating activities during 2020 mostly consisted of net income adjusted for certain non-cash items, including $6.86 billion of depreciation
and amortization and $6.54 billion of share-based compensation expense, and offset by a cash payment of $5.0 billion for the FTC legal settlement. The increase in
cash flow from operating activities during 2020 compared to 2019 was mostly due to higher net income as adjusted for certain non-cash items, such as depreciation
and

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amortization, share-based compensation expense and deferred income tax, partially offset by the payment of $5.0 billion for the FTC legal settlement.

Cash  flow  from  operating  activities  during  2019  primarily  consisted  of  net  income,  adjusted  for  certain  non-cash  items,  including  $5.74  billion  of
depreciation and amortization and $4.84 billion of share-based compensation expense. The increase in cash flow from operating activities during 2019 compared
to 2018 was primarily due to higher net income prior to the effect of the $5.0 billion FTC legal settlement accrual, an increase in taxes payable as well as increases
in the non-cash items, including depreciation and amortization, and share-based compensation expense.

Cash Used in Investing Activities

Cash used in investing activities during 2020 mostly resulted from $15.11 billion of purchases of property and equipment as we continued to invest in data
centers,  servers,  office  facilities,  and  network  infrastructure,  $8.16  billion  of  net  purchases  of  marketable  securities,  and  $6.36  billion  of  purchases  of  equity
investments. The increase in cash used in investing activities during 2020 compared to 2019 was due to increases in purchases of equity investments and in net
purchases of marketable securities.

Cash used in investing activities during 2019 mostly resulted from $15.10 billion of net purchase of property and equipment as we continued to invest in
data centers, servers, network infrastructure, and $4.19 billion of net purchases of marketable securities. The increase in cash used in investing activities during
2019 compared to 2018 was mostly due to increases in the net purchases of marketable securities and property and equipment.

We anticipate making capital expenditures of approximately $21 billion to $23 billion in 2021.

Cash Used in Financing Activities

Cash used in financing activities during 2020 mostly consisted of $6.27 billion for repurchases of our Class A common stock and $3.56 billion of taxes paid
related to net share settlement of RSUs. The increase in cash used in financing activities during 2020 compared to 2019 was due to increases in repurchases of our
Class A common stock and in taxes paid related to net share settlement of RSUs.

Cash used in financing activities during 2019 mostly consisted of $4.20 billion used to settle repurchases of our Class A common stock, and $2.34 billion of
taxes  paid  related  to  net  share  settlement  of  equity  awards,  and  $552  million  of  principal  payments  on  finance  leases.  The  decrease  in  cash  used  in  financing
activities during 2019 compared to 2018 was mostly due to a decrease in repurchases of our Class A common stock.

Off-Balance Sheet Arrangements

As of December 31, 2020, we did not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our

financial condition, results of operations, liquidity, capital expenditures, or capital resources.

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Contractual Obligations

Our principal commitments consist mostly of obligations under operating leases and other contractual commitments. Our obligations under operating leases
include  among  others,  certain  of  our  offices,  data  centers,  land,  colocations,  and  equipment.  Our  other  contractual  commitments  are  mostly  related  to  our
investments in network infrastructure, consumer hardware, content costs, and data center operations. The following table summarizes our commitments to settle
contractual obligations in cash as of December 31, 2020:

Total

2021

2022-2023
(in millions)

2024-2025

Thereafter

Payment Due by Period 

Operating lease obligations, including imputed interest
(1)
Finance lease obligations, including imputed interest
Transition tax payable
Other contractual commitments

(1)

Total contractual obligations

$

$

20,751  $
1,088 
1,543 
7,504 
30,886  $

1,316  $
249 
— 
4,213 
5,778  $

3,017  $
214 
300 
1,071 
4,602  $

3,065  $
100 
1,243 
244 
4,652  $

13,353 
525 
— 
1,976 
15,854 

_________________________
(1)

Includes variable lease payments that were fixed subsequent to lease commencement or modification.

Additionally, as part of the normal course of the business, we may also enter into multi-year agreements to purchase renewable energy that do not specify a
fixed or minimum volume commitment. These agreements are generally entered into in order to secure either volume or price. Using projected market prices or
expected volume consumption, the total estimated spend is approximately $4.94 billion. The ultimate spend under these agreements may vary and will be based on
prevailing market prices or actual volume purchased.

Our  other  liabilities  also  include  $3.48  billion  related  to  net  uncertain  tax  positions  as  of  December  31,  2020.  Due  to  uncertainties  in  the  timing  of  the
completion  of  tax  audits,  the  timing  of  the  resolution  of  these  positions  is  uncertain  and  we  are  unable  to  make  a  reasonably  reliable  estimate  of  the  timing  of
payments in individual years beyond 12 months. As a result, this amount is not included in the above contractual obligations table.

Contingencies

We are involved in legal proceedings, claims, and regulatory, tax or government inquiries and investigations. We record a liability when we believe that it is
both probable that a liability has been incurred, and that the amount can be reasonably estimated. If we determine there is a reasonable possibility that we may
incur a loss and the loss or range of loss can be estimated, we disclose the possible loss in the accompanying notes to the consolidated financial statements to the
extent material. Significant judgment is required to determine both probability and the estimated amount of loss. Such matters are inherently unpredictable and
subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to be incorrect, it could
have a material impact on our results of operations, financial position, and cash flows.

See  Note  12—Commitments  and  Contingencies  and  Note  15—Income  Taxes  in  the  notes  to  our  consolidated  financial  statements  included  in  Part  II,
Item 8, "Financial Statements and Supplementary Data" and Part I, Item 3, "Legal Proceedings" of this Annual Report on Form 10-K for additional information
regarding contingencies.

Recently Issued Accounting Pronouncements

For  further  information  on  recently  issued  accounting  pronouncements,  see  Note  1—Summary  of  Significant  Accounting  Policies  in  the  accompanying

notes to consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, including changes to foreign currency exchange rates, interest rates, equity investment risk, and inflation.

Foreign Currency Exchange Risk

We  have  foreign  currency  risks  related  to  our  revenue  and  operating  expenses  denominated  in  currencies  other  than  the  U.S.  dollar,  primarily  the  Euro.
Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, have in the past, and may in the future, negatively affect our revenue
and other operating results as expressed in U.S. dollars.

We have experienced and will continue to experience fluctuations in our net income as a result of transaction gains or losses related to revaluing monetary
asset and liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. At this time, we have
not entered into, but in the future we may enter into, derivatives  or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is
difficult to predict the effect hedging activities would have on our results of operations. Foreign currency losses of $129 million, $105 million, and $213 million
were recognized in 2020, 2019, and 2018, respectively, as interest and other income (expense), net in our consolidated statements of income.

Interest Rate Sensitivity

Our exposure to changes in interest rates relates primarily to interest earned and market value on our cash and cash equivalents and marketable securities.

Our  cash  and  cash  equivalents  and  marketable  securities  consist  of  cash,  certificates  of  deposit,  time  deposits,  money  market  funds,  U.S.  government
securities, U.S. government agency securities, and investment grade corporate debt securities. Our investment policy and strategy are focused on preservation of
capital  and  supporting  our  liquidity  requirements.  Changes  in  U.S.  interest  rates  affect  the  interest  earned  on  our  cash  and  cash  equivalents  and  marketable
securities, and the market value of those securities. A hypothetical 100 basis point increase in interest rates would have resulted in a decrease of $794 million and
$525 million in the market value of our available-for-sale debt securities as of December 31, 2020 and December 31, 2019, respectively. Any realized gains or
losses resulting from such interest rate changes would only occur if we sold the investments prior to maturity.

Equity Investment Risk

Our equity investments are subject to a wide variety of market-related risks that could have a material impact on the carrying value of our holdings. We

continually evaluate our equity investments in privately-held companies.

Our equity investments are investments in equity securities of privately-held companies without readily determinable market values. We elected to account
for  most  of  our  equity  investments  using  the  measurement  alternative,  which  is  cost,  less  any  impairment,  adjusted  for  changes  in  fair  value  resulting  from
observable transactions for identical or similar investments of the same issuer. We perform a qualitative assessment at each reporting date to determine whether
there are triggering events for impairment. The qualitative assessment considers factors such as, but not limited to, the investee's financial condition and business
outlook; industry and sector performance; economic or technological environment; and other relevant events and factors affecting the investee. Valuations of our
equity investments are complex due to the lack of readily available market data and observable transactions. Volatility in the global economic climate and financial
markets, including recent and ongoing effects related to the impact of the COVID-19 pandemic, which requires significant judgments, could result in a material
impairment  charge  on  our  equity  investments.  Equity  investments  accounted  for  under  the  equity  method  were  immaterial  as  of  December  31,  2020  and
December 31, 2019. Our equity investments had a carrying value of $6.23 billion as of December 31, 2020.

For additional information about our equity investments, see Note 1 — Summary of Significant Accounting Policies, Note 5 — Equity Investments, and
Note 6 — Fair Value Measurements in the notes to the consolidated financial statements included in Part II, Item 8, and "Financial Statements and Supplementary
Data"  and  Part  II,  Item  7,  "Management’s  Discussion  and  Analysis  of  Financial  Conditions  and  Results  of  Operations  —  Critical  Accounting  Policies  and
Estimates" contained in this Annual Report on Form 10-K.

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Item 8. Financial Statements and Supplementary Data

FACEBOOK, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Page
78

82
83
84
85
86
88

The supplementary financial information required by this Item 8, is included in Part II, Item 7 under the caption "Quarterly Results of Operations Data," which is
incorporated herein by reference.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Facebook, Inc.

Opinion on the Financial Statements

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Facebook,  Inc.  (the  Company)  as  of  December  31, 2020 and  2019,  the  related  consolidated
statements  of  income,  comprehensive  income,  stockholders'  equity  and  cash  flows  for  each  of  the  three  years  in  the  period  ended  December  31,  2020, and  the
related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated January 27, 2021 expressed an unqualified opinion thereon.

Adoption of ASU No. 2016-02

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of
Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We  conducted  our  audits  in  accordance  with  the  standards  of  the  PCAOB.  Those  standards  require  that  we  plan  and  perform  the  audit  to  obtain  reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to
be  communicated  to  the  Audit  &  Risk  Oversight  Committee  and  that:  (1)  relate  to  accounts  or  disclosures  that  are  material  to  the  financial  statements  and  (2)
involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.

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Description of the Matter

Loss Contingencies

As described in Note 12 to the consolidated financial statements, the Company is party to various legal proceedings, claims, and
regulatory, tax or government inquiries and investigations. The Company accrues a liability when it believes a loss is probable
and the amount can be reasonably estimated. In addition, the Company believes it is reasonably possible that it will incur a loss
in some of these cases, actions or inquiries described above. For certain of these matters, the Company discloses an estimate of
the amount of loss or range of possible loss that may be incurred. However, for certain other matters, the Company discloses that
the amount of such losses or a range of possible losses cannot be reasonably estimated at this time.

Auditing  the  Company's  accounting  for,  and  disclosure  of,  loss  contingencies  related  to  the  various  legal  proceedings  was
especially challenging due to the significant judgment required to evaluate management's assessments of the likelihood of a loss,
and their estimate of the potential amount or range of such losses.

How We Addressed the Matter
in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the identification and
evaluation of these matters, including controls relating to the Company's assessment of the likelihood that a loss will be realized
and their ability to reasonably estimate the potential range of possible losses.

To test the Company's assessment of the probability of incurrence of a loss, whether the loss was reasonably estimable, and the
conclusion and disclosure regarding any range of possible losses, including when the Company believes it cannot be reasonably
estimated at this time, we read the minutes or a summary of the meetings of the committees of the board of directors, read the
proceedings,  claims,  and  regulatory,  or  government  inquiries  and  investigations,  or  summaries  as  we  deemed  appropriate,
requested and received internal and external legal counsel confirmation letters, met with internal and external legal counsel to
discuss the nature of the various matters, and obtained representations from management. We also evaluated the appropriateness
of the related disclosures included in Note 12 to the consolidated financial statements.

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Description of the Matter

Uncertain Tax Positions
As  discussed  in  Note  15  to  the  consolidated  financial  statements,  the  Company  has  received  certain  notices  from  the  Internal
Revenue  Service  (IRS)  related  to  transfer  pricing  agreements  with  the  Company's  foreign  subsidiaries  for  certain  periods
examined. The IRS has stated that it will also apply its position to tax years subsequent to those examined. If the IRS prevails in
its  position,  it  could  result  in  an  additional  federal  tax  liability,  plus  interest  and  any  penalties  asserted.  The  Company  uses
judgment to (1) determine whether a tax position's technical merits are more-likely-than-not to be sustained and (2) measure the
amount of tax benefit that qualifies for recognition.

Auditing  the  Company's accounting  for, and disclosure  of, these  uncertain  tax  positions  was especially  challenging  due  to the
significant  judgment  required  to  assess  management's  evaluation  of  technical  merits  and  the  measurement  of  the  tax  position
based on interpretations of tax laws and legal rulings.

How We Addressed the Matter
in Our Audit

We  obtained  an  understanding,  evaluated  the  design  and  tested  the  operating  effectiveness  of  controls  over  the  Company's
process to assess the technical merits of tax positions related to these transfer pricing agreements and to measure the benefit of
those tax positions.

As part of our audit procedures over the Company's accounting for these positions, we involved our tax professionals to assist
with  our  assessment  of  the  technical  merits  of  the  Company's  tax  positions.  This  included  assessing  the  Company's
correspondence  with  the  relevant  tax  authorities,  evaluating  income  tax  opinions  or  other  third-party  advice  obtained  by  the
Company,  and  requesting  and  receiving  confirmation  letters  from  third-party  advisors.  We  also  used  our  knowledge  of,  and
experience with, the application of international and local income tax laws by the relevant income tax authorities to evaluate the
Company's accounting for those tax positions. We analyzed the Company's assumptions and data used to determine the amount
of  the  federal  tax  liability  recognized  and  tested  the  mathematical  accuracy  of  the  underlying  data  and  calculations.  We  also
evaluated the appropriateness of the related disclosures included in Note 15 to the consolidated financial statements in relation to
these matters.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2007.
Redwood City, California
January 27, 2021

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Facebook, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Facebook, Inc.'s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Facebook,
Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance
sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated January 27, 2021 expressed an unqualified
opinion thereon.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required  to  be  independent  with  respect  to  the  Company  in  accordance  with  the  U.S.  federal  securities  laws  and  the  applicable  rules  and  regulations  of  the
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating
the  design  and  operating  effectiveness  of  internal  control  based  on  the  assessed  risk,  and  performing  such  other  procedures  as  we  considered  necessary  in  the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial
reporting  includes  those  policies  and  procedures  that  (1)  pertain  to  the  maintenance  of  records  that,  in  reasonable  detail,  accurately  and  fairly  reflect  the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial  statements  in  accordance  with  generally  accepted  accounting  principles,  and  that  receipts  and  expenditures  of  the  company  are  being  made  only  in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because  of  its  inherent  limitations,  internal  control  over  financial  reporting  may  not  prevent  or  detect  misstatements.  Also,  projections  of  any  evaluation  of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Redwood City, California
January 27, 2021

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Assets
Current assets:

FACEBOOK, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except for number of shares and par value)

December 31,

2020

2019

Cash and cash equivalents
Marketable securities
Accounts receivable, net of allowances of $114 million and $92 million as of December 31, 2020 and 2019,
respectively
Prepaid expenses and other current assets

Total current assets

Equity investments
Property and equipment, net
Operating lease right-of-use assets, net
Intangible assets, net
Goodwill
Other assets

Total assets

Liabilities and stockholders' equity
Current liabilities:

Accounts payable
Partners payable
Operating lease liabilities, current
Accrued expenses and other current liabilities
Deferred revenue and deposits
Total current liabilities

Operating lease liabilities, non-current
Other liabilities

Total liabilities

Commitments and contingencies
Stockholders' equity:

Common stock, $0.000006 par value; 5,000 million Class A shares authorized, 2,406 million and 2,407 million
shares issued and outstanding, as of December 31, 2020 and 2019, respectively; 4,141 million Class B shares
authorized, 443 million and 445 million shares issued and outstanding, as of December 31, 2020 and 2019,
respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings

Total stockholders' equity

Total liabilities and stockholders' equity

See Accompanying Notes to Consolidated Financial Statements.

82

$

$

$

$

17,576  $
44,378 

11,335 
2,381 
75,670 
6,234 
45,633 
9,348 
623 
19,050 
2,758 
159,316  $

1,331  $
1,093 
1,023 
11,152 
382 
14,981 
9,631 
6,414 
31,026 

— 
50,018 
927 
77,345 
128,290 
159,316  $

19,079 
35,776 

9,518 
1,852 
66,225 
86 
35,323 
9,460 
894 
18,715 
2,673 
133,376 

1,363 
886 
800 
11,735 
269 
15,053 
9,524 
7,745 
32,322 

— 
45,851 
(489)
55,692 
101,054 
133,376 

 
 
 
 
 
 
 
 
 
 
 
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FACEBOOK, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)

Revenue
Costs and expenses:
Cost of revenue
Research and development
Marketing and sales
General and administrative

Total costs and expenses

Income from operations
Interest and other income, net
Income before provision for income taxes
Provision for income taxes
Net income
Less: Net income attributable to participating securities

Net income attributable to Class A and Class B common stockholders
Earnings per share attributable to Class A and Class B common stockholders:

Basic

Diluted

Weighted-average shares used to compute earnings per share attributable to Class A and
Class B common stockholders:

Basic

Diluted

Share-based compensation expense included in costs and expenses:

Cost of revenue
Research and development
Marketing and sales
General and administrative

Total share-based compensation expense

$

$

$

$

$

See Accompanying Notes to Consolidated Financial Statements.

83

2020

Year Ended December 31,
2019

2018

$

85,965  $

70,697  $

55,838 

16,692 
18,447 
11,591 
6,564 
53,294 
32,671 
509 
33,180 
4,034 
29,146 
— 
29,146  $

10.22  $

10.09  $

2,851 

2,888 

447  $

4,918 
691 
480 
6,536  $

12,770 
13,600 
9,876 
10,465 
46,711 
23,986 
826 
24,812 
6,327 
18,485 
— 
18,485  $

6.48  $

6.43  $

2,854 

2,876 

377  $

3,488 
569 
402 
4,836  $

9,355 
10,273 
7,846 
3,451 
30,925 
24,913 
448 
25,361 
3,249 
22,112 
(1)
22,111 

7.65 

7.57 

2,890 

2,921 

284 
3,022 
511 
335 
4,152 

 
 
 
 
 
 
 
 
 
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FACEBOOK, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)

Net income
Other comprehensive income (loss):

Change in foreign currency translation adjustment, net of tax
Change in unrealized gain (loss) on available-for-sale investments and other, net of tax

Comprehensive income

2020

Year Ended December 31, 
2019

2018

29,146  $

18,485  $

22,112 

1,056 
360 
30,562  $

(151)
422 
18,756  $

(450)
(52)
21,610 

$

$

See Accompanying Notes to Consolidated Financial Statements.

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FACEBOOK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In millions) 

Class A and Class B
Common Stock

Shares

Par Value

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings

Total
Stockholders'
Equity

Balances at December 31, 2017

Impact of the adoption of new accounting pronouncements
Issuance of common stock for cash upon exercise of stock options
Issuance of common stock for settlement of RSUs
Shares withheld related to net share settlement
Share-based compensation
Share repurchases
Other comprehensive loss
Net income

Balances at December 31, 2018

Issuance of common stock for cash upon exercise of stock options
Issuance of common stock for settlement of RSUs
Shares withheld related to net share settlement and other
Share-based compensation
Share repurchases
Other comprehensive income
Net income

Balances at December 31, 2019

Issuance of common stock for settlement of RSUs
Shares withheld related to net share settlement
Share-based compensation
Share repurchases
Other comprehensive income
Net income

Balances at December 31, 2020

2,906  $
— 
2 
44 
(19)
— 
(79)
— 
— 
2,854 
1 
32 
(13)
— 
(22)
— 
— 
2,852 
38 
(14)
— 
(27)
— 
— 
2,849  $

—  $
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
— 
—  $

40,584  $
— 
15 
— 
(1,845)
4,152 
— 
— 
— 
42,906 
15 
— 
(1,906)
4,836 
— 
— 
— 
45,851 
— 
(2,369)
6,536 
— 
— 
— 
50,018  $

(227) $
(31)
— 
— 
— 
— 
— 
(502)
— 
(760)
— 
— 
— 
— 
— 
271 
— 
(489)
— 
— 
— 
— 
1,416 
— 
927  $

33,990  $
172 
— 
— 
(1,363)
— 
(12,930)
— 
22,112 
41,981 
— 
— 
(675)
— 
(4,099)
— 
18,485 
55,692 
— 
(1,195)
— 
(6,298)
— 
29,146 
77,345  $

74,347 
141 
15 
— 
(3,208)
4,152 
(12,930)
(502)
22,112 
84,127 
15 
— 
(2,581)
4,836 
(4,099)
271 
18,485 
101,054 
— 
(3,564)
6,536 
(6,298)
1,416 
29,146 
128,290 

See Accompanying Notes to Consolidated Financial Statements.

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FACEBOOK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) 

Cash flows from operating activities

Net income
Adjustments to reconcile net income to net cash provided by operating activities:

2020

Year Ended December 31, 
2019

2018

$

29,146  $

18,485  $

22,112 

   Depreciation and amortization
   Share-based compensation
   Deferred income taxes
   Other

Changes in assets and liabilities:

   Accounts receivable
   Prepaid expenses and other current assets
   Other assets
   Accounts payable
   Partners payable
   Accrued expenses and other current liabilities
   Deferred revenue and deposits
   Other liabilities

Net cash provided by operating activities

Cash flows from investing activities

Purchases of property and equipment
Purchases of marketable securities
Sales of marketable securities
Maturities of marketable securities
Purchases of equity investments
Acquisitions of businesses, net of cash acquired, and purchases of intangible assets
Other investing activities

Net cash used in investing activities

Cash flows from financing activities

Taxes paid related to net share settlement of equity awards
Repurchases of Class A common stock
Principal payments on finance leases
Net change in overdraft in cash pooling entities
Other financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of the period

Cash, cash equivalents, and restricted cash at end of the period

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets

Cash and cash equivalents
Restricted cash, included in prepaid expenses and other current assets
Restricted cash, included in other assets

Total cash, cash equivalents, and restricted cash

$

$

$

6,862 
6,536 
(1,192)
118 

(1,512)
135 
(34)
(17)
178 
(1,054)
108 
(527)
38,747 

(15,115)
(33,930)
11,787 
13,984 
(6,361)
(388)
(36)
(30,059)

(3,564)
(6,272)
(604)
24 
124 
(10,292)
279 
(1,325)
19,279 
17,954  $

17,576  $
241 
137 
17,954  $

5,741 
4,836 
(37)
39 

(1,961)
47 
41 
113 
348 
7,300 
123 
1,239 
36,314 

(15,102)
(23,910)
9,565 
10,152 
(61)
(508)
— 
(19,864)

(2,337)
(4,202)
(552)
(223)
15 
(7,299)
4 
9,155 
10,124 
19,279  $

19,079  $
8 
192 
19,279  $

4,315 
4,152 
286 
(64)

(1,892)
(690)
(159)
221 
157 
1,417 
53 
(634)
29,274 

(13,915)
(14,656)
12,358 
4,772 
(25)
(137)
— 
(11,603)

(3,208)
(12,879)
— 
500 
15 
(15,572)
(179)
1,920 
8,204 
10,124 

10,019 
10 
95 
10,124 

See Accompanying Notes to Consolidated Financial Statements.

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FACEBOOK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

Supplemental cash flow data
Cash paid for income taxes
Non-cash investing activities:

Acquisition of businesses in accrued expenses and other current liabilities and other liabilities
Property and equipment in accounts payable and accrued expenses and other current liabilities

2020

Year Ended December 31, 
2019

2018

$

$
$

4,229  $

5,182  $

118  $
2,201  $

—  $
1,887  $

3,762 

— 
1,955 

See Accompanying Notes to Consolidated Financial Statements.

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FACEBOOK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Organization and Description of Business

Facebook was incorporated in Delaware in July 2004. Our mission is to give people the power to build community and bring the world closer together. We

generate substantially all of our revenue from advertising.

Basis of Presentation

We prepared the consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP). The consolidated financial
statements include the accounts of Facebook, Inc., its subsidiaries where we have controlling financial interests, and any variable interest entities for which we are
deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated.

Certain prior period amounts have been reclassified to conform to the current year's presentation. None of these reclassifications had a material impact to

our consolidated financial statements.

Use of Estimates

Preparation of consolidated financial statements in conformity with GAAP requires the use of estimates and judgments that affect the reported amounts in
the consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and
liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that
we believe are reasonable under the circumstances. GAAP requires us to make estimates and judgments in several areas, including, but not limited to, those related
to revenue recognition, valuation of equity investments, income taxes, loss contingencies, valuation of long-lived assets including goodwill and intangible assets
and  their  associated  estimated  useful  lives,  collectibility  of  accounts  receivable,  credit  losses  of  available-for-sale  (AFS)  debt  securities,  fair  value  of  financial
instruments,  and  leases.  These  estimates  are  based  on  management's  knowledge  about  current  events  and  expectations  about  actions  we  may  undertake  in  the
future. Actual results could differ materially from those estimates.

The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business
slowdowns or shutdowns, depress demand for our advertising business, and adversely impact our results of operations. During the year ended December 31, 2020,
we  faced  uncertainties  around  our  estimates  of  revenue  collectibility  and  accounts  receivable  credit  losses.  We  expect  uncertainties  around  our  key  accounting
estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. Our estimates may change as new events
occur and additional information emerges, and such changes are recognized or disclosed in our consolidated financial statements.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect

to be entitled to in exchange for those goods or services.

We determine revenue recognition by applying the following steps:

•
•
•
•
•

identification of the contract, or contracts, with a customer;
identification of the performance obligations in the contract;
determination of the transaction price;
allocation of the transaction price to the performance obligations in the contract; and
recognition of revenue when, or as, we satisfy a performance obligation.

Revenue excludes sales and usage‑based taxes where it has been determined that we are acting as a pass‑through agent.

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Advertising

Advertising revenue is generated by displaying ad products on Facebook, Instagram, Messenger, and third-party affiliated websites or mobile applications.
Marketers pay for ad products either directly or through their relationships with advertising agencies or resellers, based on the number of impressions delivered or
the number of actions, such as clicks, taken by our users.

We recognize revenue from the display of impression-based ads in the contracted period in which the impressions are delivered. Impressions are considered
delivered when an ad is displayed to users. We recognize revenue from the delivery of action-based ads in the period in which a user takes the action the marketer
contracted for. In general, we report advertising revenue on a gross basis, since we control the advertising inventory before it is transferred to our customers. Our
control is evidenced by our sole ability to monetize the advertising inventory before it is transferred to our customers. For revenue generated from arrangements
that involve third-party publishers, we evaluate whether we are the principal or the agent, and for those advertising revenue arrangements where we are the agent,
we recognize revenue on a net basis.

We may accept  lower consideration  than the amount promised  per the contract for certain  revenue transactions  and certain customers  may receive  cash-
based incentives, credits, or refunds, which are accounted for as variable consideration when estimating the amount of revenue to recognize. We estimate these
amounts based on the expected amount to be provided to customers and reduce revenue. We believe that there will not be significant changes to our estimates of
variable consideration.

Other Revenue

Other revenue consists of revenue from the delivery of Facebook Reality Labs (FRL) consumer hardware devices, net fees we receive from developers using

our Payments infrastructure, as well as revenue from various other sources.

Deferred Revenue and Deposits

Deferred  revenue  mostly  consists  of  billings  and  payments  we  receive  from  marketers  in  advance  of  revenue  recognition  as  well  as  revenue  not  yet
recognized for unspecified software upgrades and updates for various FRL products. Deposits relate to unused balances held on behalf of our users who primarily
use these balances to make purchases in games on our platform. Once this balance is utilized by a user, the majority of this amount would then be payable to the
developer and the balance would be recognized as revenue. The increase in the deferred revenue balance for the year ended December 31, 2020 was driven by cash
payments  from  customers  in  advance  of  satisfying  our  performance  obligations  in  FRL  sales  and  advertising  revenue,  offset  by  revenue  recognized  that  was
included in the deferred revenue balance at the beginning of the period.

Our payment terms vary by the products or services offered. The term between billings and when payment is due is not significant. For certain products or

services and customer types, we require payment before the products or services are delivered to the customer.

Practical Expedients and Exemptions

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within

marketing and sales on our consolidated statements of income.

We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts

for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Cost of Revenue

Our  cost  of  revenue  consists  primarily  of  expenses  associated  with  the  delivery  and  distribution  of  our  products.  These  include  expenses  related  to  the
operation of our data centers and technical infrastructure, such as facility and server equipment depreciation, salaries, benefits, and share-based compensation for
employees on our operations teams, and energy and bandwidth costs. Cost of revenue also includes costs associated with partner arrangements, including traffic
acquisition

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and content costs, credit card and other transaction fees related to processing customer transactions, and cost of consumer hardware devices sold.

Content Costs

Our content costs are mostly related to payments to content providers from whom we license video and music to increase engagement on the platform. For
licensed video, we expense the cost per title when the title is accepted and available for viewing if the capitalization criteria are not met. Video content costs that
meet the criteria for capitalization were not material to date.

For  licensed  music,  we  expense  the  license  fees  over  the  contractual  license  period.  Expensed  content  costs  are  included  in  cost  of  revenue  on  the

consolidated statements of income.

Software Development Costs

Software development costs, including costs to develop software products or the software component of products to be marketed or sold to external users,

are expensed before the software or technology reach technological feasibility, which is typically reached shortly before the release of such products.

Software development costs also include costs to develop software to be used solely to meet internal needs and applications used to deliver our services.
These  software  development  costs  meet  the  criteria  for  capitalization  once  the  preliminary  project  stage  is  complete  and  it  is  probable  that  the  project  will  be
completed and the software will be used to perform the function intended.

Development costs that meet the criteria for capitalization were not material to date.

Income Taxes

We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our provision for

income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

We record a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Under
this method, we recognize deferred income tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting
and tax bases of assets and liabilities, as well as for loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are
expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. We recognize the deferred income
tax effects of a change in tax rates in the period of the enactment.

We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. We consider all
available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and
ongoing tax planning strategies in assessing the need for a valuation allowance.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination
by  the  taxing  authorities  based  on  the  technical  merits  of  the  position.  These  uncertain  tax  positions  include  our  estimates  for  transfer  pricing  that  have  been
developed  based upon analyses  of  appropriate  arms-length  prices.  Similarly,  our  estimates  related  to  uncertain  tax  positions  concerning  research  tax credits  are
based on an assessment of whether our available documentation corroborating the nature of our activities supporting the tax credits will be sufficient. Although we
believe  that  we  have  adequately  reserved  for  our  uncertain  tax  positions  (including  net  interest  and  penalties),  we  can  provide  no  assurance  that  the  final  tax
outcome of these matters will not be materially different. We make adjustments to these reserves in accordance with the income tax accounting guidance when
facts and circumstances  change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is
different from the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made, and could have
a material impact on our financial condition and operating results.

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Advertising Expense

Advertising  costs  are  expensed  when incurred  and  are  included  in  marketing  and  sales  expenses  on  the  consolidated  statements  of  income.  We  incurred

advertising expenses of $2.26 billion, $1.57 billion, and $1.10 billion for the years ended December 31, 2020, 2019, and 2018, respectively.

Cash and Cash Equivalents, Marketable Securities, and Restricted Cash

Cash and cash equivalents consist of cash on deposit with banks and highly liquid investments with maturities of 90 days or less from the date of purchase.

We hold investments in marketable securities, consisting of U.S. government securities, U.S. government agency securities, and investment grade corporate
debt  securities.  We  classify  our  marketable  securities  as  available-for-sale  (AFS)  investments  in  our  current  assets  because  they  represent  investments  of  cash
available for current operations. Our AFS investments are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated
other  comprehensive  income  (loss)  in  stockholders'  equity.  AFS  debt  securities  with  an  amortized  cost  basis  in  excess  of  estimated  fair  value  are  assessed  to
determine what amount of that difference, if any, is caused by expected credit losses. Allowance for credit losses on AFS debt securities are recognized as a charge
in  interest  and  other  income  (expense),  net  on  our  consolidated  statements  of  income,  and  any  remaining  unrealized  losses,  net  of  taxes,  are  included  in
accumulated  other  comprehensive  income  (loss)  in  stockholders'  equity.  The  amount  of  credit  losses  recorded  for  the  year  ended  December  31,  2020  was  not
material. There was no impairment charge for any unrealized losses in 2019 and 2018. We determine realized gains or losses on sale of marketable securities on a
specific identification method and record such gains or losses as interest and other income (expense), net on the consolidated statements of income.

We also maintain a multi-currency notional cash pool for our participating entities with a third-party bank provider. Actual cash balances are not physically
converted and are not commingled between participating legal entities. We classify the overdraft balances within accrued expenses and other current liabilities on
the consolidated balance sheets.

We classify certain restricted cash balances within prepaid expenses and other current assets and other assets on the consolidated balance sheets based upon

the term of the remaining restrictions.

Equity Investments

Our equity investments are investments in equity securities of privately-held companies without readily determinable market values. We elected to account
for  most  of  our  equity  investments  using  the  measurement  alternative,  which  is  cost,  less  any  impairment,  adjusted  for  changes  in  fair  value  resulting  from
observable transactions for identical  or similar investments of the same issuer. The change in carrying value, if any, is recognized in interest and other income
(expense), net on our consolidated statements of income. We periodically review our equity investments for impairment. If indicators exist and the estimated fair
value of an investment is below the carrying amount, we will write down the investment to fair value. In addition, we also held equity investments accounted for
under the equity method which were immaterial as of December 31, 2020 and 2019. Equity investments had a carrying value of $6.23 billion and $86 million as of
December 31, 2020 and 2019, respectively. There was no material impairment in 2020, 2019 and 2018.

Fair Value of Financial Instruments

We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in
the  financial  statements  on  a  recurring  basis.  We  define  fair  value  as  the  price  that  would  be  received  from  selling  an  asset  or  paid  to  transfer  a  liability  in  an
orderly  transaction  between  market  participants  at  the  measurement  date.  When  determining  the  fair  value  measurements  for  assets  and  liabilities,  which  are
required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements
or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk.
Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization
within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1- Quoted prices in active markets for identical assets or liabilities.

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Level 2-  Observable  inputs  other  than  quoted  prices  in  active  markets  for  identical  assets  and  liabilities,  quoted  prices  for  identical  or  similar  assets  or
liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or
liabilities.

Level 3- Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing the

asset or liability.

Our  valuation  techniques  used  to  measure  the  fair  value  of  cash  equivalents  and  marketable  debt  securities  were  derived  from  quoted  market  prices  or

alternative pricing sources and models utilizing observable market inputs.

Accounts Receivable and Allowances

Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. We make estimates
of expected credit and collectibility trends for the allowance for credit losses and allowance for unbilled receivables based upon our assessment of various factors,
including  historical  experience,  the  age  of  the  accounts  receivable  balances,  credit  quality  of  our  customers,  current  economic  conditions,  reasonable  and
supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers. Expected credit losses are recorded as
general  and  administrative  expenses  on  our  consolidated  statements  of  income.  As  of  December  31,  2020  and  2019,  our  accounts  receivable,  net  were
$11.33 billion and $9.52 billion, respectively, and the allowances of accounts receivable were immaterial.

Property and Equipment

Property and equipment, which includes amounts recorded under finance leases, are stated at cost less accumulated depreciation. Depreciation is computed

using the straight-line method over the estimated useful lives of the assets or the remaining lease term, whichever is shorter.

The estimated useful lives of property and equipment are described below:

Property and Equipment 
Network equipment
Buildings
Computer software, office equipment and other
Finance lease right-of-use assets
Leasehold improvements

Useful Life 
Three to 20 years
Three to 30 years
Two to five years
Three to 20 years
Lesser of estimated useful life or remaining lease term

The useful lives of our property and equipment are determined by management when those assets are initially recognized and are routinely reviewed for the
remaining estimated useful lives. Our current estimate of useful lives represents the best estimate of the useful lives based on current facts and circumstances, but
may differ from the actual useful lives due to changes in future circumstances such as changes to our business operations, changes in the planned use of assets, and
technological  advancements.  When  we  change  the  estimated  useful  life  assumption  for  any  asset,  the  remaining  carrying  amount  of  the  asset  is  accounted  for
prospectively and depreciated or amortized over the revised estimated useful life. Historically changes in useful lives have not resulted in material changes to our
depreciation and amortization expense.

Land and assets held within construction in progress are not depreciated. Construction in progress is related to the construction or development of property

and equipment that have not yet been placed in service for their intended use.

The cost of maintenance and repairs is expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation

are removed from their respective accounts, and any gain or loss on such sale or disposal is reflected in income from operations.

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Lease Obligations

We have operating leases comprised of certain offices, data center, land, colocations, and equipment leases. We also have finance leases for certain network
equipment. We determine if an arrangement is a lease at inception. Most of our leases contain lease and non-lease components. Non-lease components include
fixed payments for maintenance, utilities, real estate taxes, and management fees. We combine fixed lease and non-lease components and account for them as a
single  lease  component.  Our lease  agreements  may  contain  variable  costs  such as  contingent  rent  escalations,  common  area  maintenance,  insurance,  real  estate
taxes or other costs. Such variable lease costs are expensed as incurred on the consolidated statements of income. For certain colocation and equipment leases, we
apply a portfolio approach to effectively account for the operating lease right-of-use (ROU) assets and lease liabilities.

For leases that have greater than 12-month lease term, ROU assets and lease liabilities are recognized on the consolidated balance sheet at commencement

date based on the present value of remaining fixed lease payments. We consider only payments that are fixed and determinable at the time of commencement.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. When determining the

probability of exercising such options, we consider contract-based, asset-based, entity-based, and market-based factors.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in
determining the present value of lease payments. Our incremental borrowing rate is a hypothetical rate based on our understanding of what our credit rating would
be in a similar economic environment.

Operating  leases  are  included  in  operating  lease  ROU  assets,  operating  lease  liabilities,  current  and  operating  lease  liabilities,  non-current  on  our
consolidated balance sheets. Finance leases are included in property and equipment, net, accrued expenses and other current liabilities, and other liabilities on our
consolidated balance sheets.

Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts have

not been adjusted and continue to be reported under Topic 840.

Loss Contingencies

We are involved in legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business.
Certain  of  these  matters  include  speculative  claims  for  substantial  or  indeterminate  amounts  of  damages.  Additionally,  we  are  required  to  comply  with  various
legal  and  regulatory  obligations  around  the  world.  The  requirements  for  complying  with  these  obligations  may  be  uncertain  and  subject  to  interpretation  and
enforcement by regulatory and other authorities, and any failure to comply with such obligations could eventually lead to asserted legal or regulatory action. With
respect to these matters, asserted and unasserted, we evaluate the developments on a regular basis and accrue a liability when we believe that it is both probable
that a loss has been incurred and the amount can be reasonably estimated. If we determine there is a reasonable possibility that we may incur a loss and the loss or
range of loss can be estimated, we disclose the possible loss in the notes to the consolidated financial statements to the extent material.

We  review  the  developments  in  our contingencies  that  could  affect  the  amount  of  the provisions  that  has  been previously  recorded,  and  the matters  and
related  possible  losses  disclosed.  We  make  adjustments  to  our  provisions  and  changes  to  our  disclosures  accordingly  to  reflect  the  impact  of  negotiations,
settlements,  rulings,  advice  of  legal  counsel,  and  updated  information.  Significant  judgment  is  required  to  determine  the  probability  of  loss  and  the  estimated
amount of loss, including when and if the probability and estimate has changed for asserted and unasserted matters.

Business Combinations

We  allocate  the  fair  value  of  purchase  consideration  to  the  tangible  assets  acquired,  liabilities  assumed  and  intangible  assets  acquired  based  on  their
estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.
Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing
certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flows from acquired users,

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acquired technology, acquired patents, and trade names from a market participant perspective, useful lives and discount rates. Management's estimates of fair value
are  based  upon  assumptions  believed  to  be  reasonable,  but  which  are  inherently  uncertain  and  unpredictable  and,  as  a  result,  actual  results  may  differ  from
estimates. Allocation of purchase consideration to identifiable assets and liabilities affects Company amortization expense, as acquired finite-lived intangible assets
are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. During the measurement period, which is
not to exceed one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.
Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Long-lived Assets Including Goodwill and Other Acquired Intangibles Assets

We  evaluate  the  recoverability  of  property  and  equipment  and  acquired  finite-lived  intangible  assets  for  possible  impairment  whenever  events  or
circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash
flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts
to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of
property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. We have not recorded any significant
impairment charges during the years presented.

We review goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair

value of our single reporting unit below its carrying value. As of December 31, 2020, no impairment of goodwill has been identified.

Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. We routinely review the remaining
estimated useful lives of property and equipment and finite-lived intangible assets. If we change the estimated useful life assumption for any asset, the remaining
unamortized balance is amortized or depreciated over the revised estimated useful life.

Foreign Currency

Generally, the functional currency of our international subsidiaries is the local currency. We translate the financial statements of these subsidiaries to U.S.
dollars using month-end rates of exchange for assets and liabilities, and average rates of exchange for revenue, costs, and expenses. Translation gains and losses are
recorded in accumulated other comprehensive income (loss) as a component of stockholders' equity. As of December 31, 2020 we had a cumulative translation
gain, net of tax of $439 million and as of December 31, 2019, we had a cumulative translation loss, net of tax of $617 million. Net losses resulting from foreign
exchange transactions were $129 million, $105 million, and $213 million for the years ended December 31, 2020, 2019, and 2018, respectively. These losses were
recorded as interest and other income (expense), net on our consolidated statements of income.

Credit Risk and Concentration

Our financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable
securities,  and  accounts  receivable.  The  majority  of  cash  equivalents  consists  of  money  market  funds,  that  primarily  invest  in  U.S.  government  and  agency
securities.  Marketable  securities  consist  of  investments  in  U.S.  government  securities,  U.S.  government  agency  securities,  and  investment  grade  corporate  debt
securities. Our investment portfolio in corporate debt securities is highly liquid and diversified among individual issuers. The amount of credit losses recorded for
the year ended December 31, 2020 was not material.

Accounts receivable are typically unsecured and are derived from revenue earned from customers across different industries and countries. We generated
42%  of  our  revenue  for  the  year  ended  December  31,  2020  and  43%  of  our  revenue  for  the  years  ended  December  31,  2019  and  2018  from  marketers  and
developers based in the United States, with the majority of revenue outside of the United States coming from customers located in western Europe, China, Canada,
Australia, Japan, Vietnam and Brazil.

We perform ongoing credit evaluations of our customers and generally do not require collateral. We maintain an allowance for estimated credit losses and

bad debt expense on these losses was not material during the years ended

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December  31,  2020,  2019,  or  2018.  In  the  event  that  accounts  receivable  collection  cycles  deteriorate,  our  operating  results  and  financial  position  could  be
adversely affected.

No customer represented 10% or more of total revenue during the years ended December 31, 2020, 2019, and 2018.

Segments

Our chief operating decision-maker is our Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial
information presented on a consolidated basis. There are no segment managers who are held accountable by the chief operating decision-maker, or anyone else, for
operations,  operating  results,  and  planning  for  levels  or  components  below  the  consolidated  unit  level.  Accordingly,  we have  determined  that  we  have  a  single
reportable segment and operating segment structure.

Recently Adopted Accounting Pronouncements

Fair Value Measurements

On  January  1,  2020,  we  adopted  Accounting  Standards  Update  No.  2018-13,  Changes  to  Disclosure  Requirements  for  Fair  Value  Measurements  (Topic
820), which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and
adds certain disclosure requirements. The adoption of this new standard did not have a material impact on our consolidated financial statements.

Credit Losses

On  January  1,  2020,  we  adopted  Accounting  Standards  Update  No.  2016-13,  Financial  Instruments-Credit  Losses (Topic 326): Measurement  of  Credit
Losses  on  Financial  Instruments,  using  the  modified  retrospective  transition  method.  Upon  adoption,  we  changed  our  impairment  model  to  utilize  a  current
expected  credit  losses  (CECL)  model  in  place  of  the  incurred  loss  methodology  for  financial  instruments  measured  at  amortized  cost,  including  our  accounts
receivable. In addition, we modified our impairment model for AFS debt securities and to discontinue using the concept of "other than temporary" impairment on
AFS  debt  securities.  CECL  estimates  on  accounts  receivable  are  recorded  as  general  and  administrative  expenses  on  our  consolidated  statements  of  income.
Allowance for credit losses on AFS debt securities are recognized as a charge in interest and other income (expense), net on our consolidated statements of income.
The cumulative effect adjustment from adoption was immaterial to our consolidated financial statements. We continue to monitor the financial implications of the
COVID-19 pandemic on expected credit losses.

Income Taxes

On October 1, 2020, we early adopted Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
(ASU  2019-12),  which  simplifies  the  accounting  for  income  taxes.  This  guidance  was  effective  beginning  January  1,  2021, with  early  adoption  permitted.  The
adoption of this new standard did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In  January  2020,  the  Financial  Accounting  Standards  Board  (FASB)  issued  Accounting  Standards  Update  No.  2020-01,  Investments—Equity Securities
(Topic  321),  Investments—Equity  Method  and  Joint  Ventures  (Topic  323),  and  Derivatives  and  Hedging  (Topic  815)  (ASU  2020-01),  which  clarifies  the
interaction  of  the  accounting  for  equity  securities  under  Topic  321,  the  accounting  for  equity  method  investments  in  Topic  323,  and  the  accounting  for  certain
forward contracts and purchased options in Topic 815. We will adopt the new standard effective January 1, 2021 and do not expect the adoption of this guidance to
have a material impact on our consolidated financial statements.

In  August  2020,  the  FASB  issued  Accounting  Standards  Update  No.  2020-06, Debt—Debt  with  Conversion  and  Other  Options  (Subtopic  470-20)  and
Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
(ASU  2020-06),  which  simplifies  the  accounting  for  convertible  instruments  by  reducing  the  number  of  accounting  models  available  for  convertible  debt
instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the
if-converted method. This guidance will be effective for us in the first quarter of 2022 on a full

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or  modified  retrospective  basis,  with  early  adoption  permitted.  We  do  not  expect  the  adoption  of  this  guidance  to  have  a  material  impact  on  our  consolidated
financial statements.

Note 2. Revenue

Revenue disaggregated by revenue source consists of the following (in millions):

Advertising
Other revenue

Total revenue

2020

Year Ended December 31, 
2019

2018

$

$

84,169  $
1,796 
85,965  $

69,655  $
1,042 
70,697  $

55,013 
825 
55,838 

Revenue disaggregated by geography, based on the billing address of our customers, consists of the following (in millions):

Revenue:

(2)

United States and Canada
Europe
Asia-Pacific
Rest of World

(2)

Total revenue

(1)

2020

Year Ended December 31, 
2019

2018

$

$

38,433  $
20,349 
19,848 
7,335 
85,965  $

32,206  $
16,826 
15,406 
6,259 
70,697  $

25,727 
13,631 
11,733 
4,747 
55,838 

_________________________
(1) United States revenue was $36.25 billion, $30.23 billion, and $24.10 billion for the years ended December 31, 2020, 2019, and 2018, respectively.
(2) Europe includes Russia and Turkey, and Rest of World includes Africa, Latin America, and the Middle East.

Deferred revenue and deposits consists of the following (in millions):

Deferred revenue
Deposits

Total deferred revenue and deposits

Note 3. Earnings per Share

December 31,

2020

2019

$

$

335  $
47 
382  $

234 
35 
269 

We compute earnings per share (EPS) of Class A and Class B common stock using the two-class method required for participating securities. We consider
restricted  stock  awards  to  be  participating  securities  because  holders  of  such  shares  have  non-forfeitable  dividend  rights  in  the  event  of  our  declaration  of  a
dividend for common shares.

Undistributed earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders.
Basic  EPS  is  computed  by  dividing  net  income  attributable  to  common  stockholders  by  the  weighted-average  number  of  shares  of  our  Class  A  and  Class  B
common stock outstanding, adjusted for outstanding shares that are subject to repurchase.

For the calculation of diluted EPS, net income attributable to common stockholders for basic EPS is adjusted by the effect of dilutive securities, including
awards  under  our  equity  compensation  plans.  In  2018,  the  calculation  of  diluted  EPS  also  included  the  effect  of  inducement  awards  under  separate  non-plan
restricted stock unit (RSU) award agreements.

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In addition, the computation of the diluted EPS of Class A common stock assumes the conversion of our Class B common stock to Class A common stock,
while the diluted EPS of Class B common stock does not assume the conversion of those shares to Class A common stock. Diluted EPS attributable to common
stockholders  is  computed  by  dividing  the  resulting  net  income  attributable  to  common  stockholders  by  the  weighted-average  number  of  fully  diluted  common
shares outstanding.

RSUs with anti-dilutive effect were excluded from the EPS calculation and they were not material for the years ended December 31, 2020, 2019, and 2018.

Basic and diluted EPS are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.

The numerators and denominators of the basic and diluted EPS computations for our common stock are calculated as follows (in millions, except per share

amounts):

Basic EPS:

2020

Year Ended December 31,
2019

2018

Class 
A

Class 
B

Class 
A

Class 
B

Class 
A

Class
B 

Numerator
Net income
Less: Net income attributable to participating securities
Net income attributable to common stockholders

Denominator
Weighted-average shares outstanding

Basic EPS

Diluted EPS:
Numerator
Net income attributable to common stockholders
Reallocation of net income attributable to participating securities
Reallocation of net income as a result of conversion of Class B to Class A
common stock
Reallocation of net income to Class B common stock

Net income for diluted EPS

Denominator
Number of shares used for basic EPS computation
Conversion of Class B to Class A common stock
Weighted-average effect of dilutive RSUs and employee stock options

Number of shares used for diluted EPS computation

$

$

$

$

$

24,607  $
— 
24,607  $

4,539  $
— 
4,539  $

15,569  $
— 
15,569  $

2,916  $
— 
2,916  $

18,411  $
(1)
18,410  $

2,407 

444 

2,404 

450 

2,406 

10.22  $

10.22  $

6.48  $

6.48  $

7.65  $

24,607  $
— 

4,539  $
— 

15,569  $
— 

2,916  $
— 

18,410  $
1 

4,539 
— 
29,146  $

— 
(58)
4,481  $

2,916 
— 
18,485  $

— 
(18)
2,898  $

3,701 
— 
22,112  $

2,407 
444 
37 
2,888 

444 
— 
— 
444 

2,404 
450 
22 
2,876 

450 
— 
1 
451 

2,406 
484 
31 
2,921 

3,701 
— 
3,701 

484 

7.65 

3,701 
— 

— 
(16)
3,685 

484 
— 
3 
487 

Diluted EPS

$

10.09  $

10.09  $

6.43  $

6.43  $

7.57  $

7.57 

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Note 4. Cash and Cash Equivalents and Marketable Securities

The following table sets forth the cash and cash equivalents and marketable securities (in millions):

Cash and cash equivalents:

Cash
Money market funds
U.S. government securities
U.S. government agency securities
Certificate of deposits and time deposits
Corporate debt securities

Total cash and cash equivalents
Marketable securities:

U.S. government securities
U.S. government agency securities
Corporate debt securities

Total marketable securities

Total cash and cash equivalents and marketable securities

December 31,

2020

2019

6,488  $
9,755 
1,016 
— 
305 
12 
17,576 

20,921 
11,698 
11,759 
44,378 
61,954  $

4,735 
12,787 
815 
444 
217 
81 
19,079 

18,679 
6,712 
10,385 
35,776 
54,855 

$

$

The gross unrealized gains on our marketable securities were $641 million and $205 million as of December 31, 2020 and 2019, respectively. The gross
unrealized  losses  on  our  marketable  securities  were  not  material  as  of  December  31,  2020  and  2019.  The  allowance  for  credit  losses  was  not  material  as  of
December 31, 2020.

The following table classifies our marketable securities by contractual maturities (in millions):

Due in one year
Due after one year to five years

Total

Note 5. Equity Investments

December 31,

2020

2019

$

$

12,826  $
31,552 
44,378  $

12,803 
22,973 
35,776 

Our equity investments are investments in equity securities of privately-held companies without readily determinable market values. On July 7, 2020, we
completed our equity investment in Jio Platforms Limited (Jio), a subsidiary of Reliance Industries Limited, for $5.82 billion. There was no material impairment
for the years ended December 31, 2020, 2019 or 2018.

The changes in the carrying value of equity investments  for the year ended December  31, 2019 were not material.  The changes in the carrying value of

equity investments for the year ended December 31, 2020 were as follows (in millions):

Balance as of December 31, 2019
Jio
Other investments
Adjustments

Balance as of December 31, 2020

$

$

86 
5,824 
323 
1 
6,234 

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Note 6. Fair Value Measurement

The following table summarizes our assets measured at fair value and the classification by level of input within the fair value hierarchy (in millions): 

Description 
Cash equivalents:

Money market funds
U.S. government securities
Certificate of deposits and time deposits
Corporate debt securities

Marketable securities:

U.S. government securities
U.S. government agency securities
Corporate debt securities

Total cash equivalents and marketable securities

Description
Cash equivalents:

Money market funds
U.S. government securities
U.S. government agency securities
Certificate of deposits and time deposits
Corporate debt securities

Marketable securities:

U.S. government securities
U.S. government agency securities
Corporate debt securities

Total cash equivalents and marketable securities

Fair Value Measurement at Reporting Date Using

December 31, 
2020

Quoted Prices in
Active Markets for
Identical Assets 
(Level 1)

Significant Other
Observable Inputs 
(Level 2)

Significant
Unobservable Inputs 
(Level 3)

9,755  $
1,016 
305 
12 

20,921 
11,698 
11,759 
55,466  $

9,755  $
1,016 
— 
— 

20,921 
11,698 
— 
43,390  $

—  $
— 
305 
12 

— 
— 
11,759 
12,076  $

— 
— 
— 
— 

— 
— 
— 
— 

Fair Value Measurement at Reporting Date Using

December 31, 
2019

Quoted Prices in
Active Markets for
Identical Assets 
(Level 1)

Significant Other
Observable Inputs 
(Level 2)

Significant
Unobservable Inputs
(Level 3) 

12,787  $
815 
444 
217 
81 

18,679 
6,712 
10,385 
50,120  $

12,787  $
815 
444 
— 
— 

18,679 
6,712 
— 
39,437  $

—  $
— 
— 
217 
81 

— 
— 
10,385 
10,683  $

— 
— 
— 
— 
— 

— 
— 
— 
— 

$

$

$

$

We classify our cash equivalents and marketable securities within Level 1 or Level 2 because we use quoted market prices or alternative pricing sources and

models utilizing market observable inputs to determine their fair value.

Beginning in 2020, we had other assets and liabilities classified within Level 3 because factors used to develop the estimated fair value are unobservable
inputs that are not supported by market activity. The aggregate absolute value of these Level 3 assets and liabilities was not material to our consolidated financial
statements as of December 31, 2020.

On July 7, 2020, we completed our equity investment in Jio and noted observable transactions in similar securities subsequent to the date of our investment.
Based  on  our  assessment,  we  concluded  no  change  in  fair  value  from  the  initial  carrying  value  of  $5.82  billion  was  required  as  a  result  of  these  observable
transactions. Had there been a change in the fair value, our investment in Jio would be classified within Level 3. For information regarding our investment in Jio,
see Note 5 — Equity Investments.

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Note 7. Property and Equipment

Property and equipment, net consists of the following (in millions):

Land
Buildings
Leasehold improvements
Network equipment
Computer software, office equipment and other
Finance lease right-of-use assets
Construction in progress

Total

Less: Accumulated depreciation

Property and equipment, net

December 31,

2020

2019

1,326  $

17,360 
4,321 
22,003 
2,458 
2,295 
11,288 
61,051 
(15,418)
45,633  $

1,097 
11,226 
3,112 
17,004 
1,813 
1,635 
10,099 
45,986 
(10,663)
35,323 

$

$

Depreciation  expense on property  and equipment  were $6.39 billion,  $5.18 billion,  and $3.68 billion  for the  years ended December  31, 2020, 2019, and
2018, respectively. The majority of the property and equipment depreciation expense was from network equipment depreciation of $4.58 billion, $3.83 billion, and
$2.94 billion for the years ended December 31, 2020, 2019, and 2018, respectively. Construction in progress includes costs mostly related to construction of data
centers, network equipment infrastructure to support our data centers around the world, and office buildings.

Note 8. Leases

We have entered into various non-cancelable operating lease agreements for certain of our offices, data centers, land, colocations, and equipment. We have
also entered into various non-cancelable finance lease agreements for certain network equipment. Our leases have original lease periods expiring between 2021 and
2093. Many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be
reasonably assured. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

The components of lease costs for the years ended December 31, 2020 and 2019 are as follows (in millions):

Finance lease cost
     Amortization of right-of-use assets
     Interest
Operating lease cost
Variable lease cost and other, net

       Total lease cost

Operating lease expense was $629 million for the year ended December 31, 2018 under Topic 840.

100

December 31,

2020

2019

$

$

259  $
14 
1,391 
269 
1,933  $

195 
12 
1,139 
160 
1,506 

 
 
 
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Supplemental balance sheet information related to leases is as follows:

Weighted-average remaining lease term
     Operating leases
     Finance leases
Weighted-average discount rate
     Operating leases
     Finance leases

The following is a schedule, by years, of maturities of lease liabilities as of December 31, 2020 (in millions):

December 31,

2020

2019

12.2 years
14.9 years

3.1 %
2.9 %

13.0 years
15.3 years

3.2 %
3.1 %

Operating Leases

Finance Leases

2021
2022
2023
2024
2025
Thereafter
Total undiscounted cash flows
Less: Imputed interest

Present value of lease liabilities

Lease liabilities, current
Lease liabilities, non-current

Present value of lease liabilities

$

$

$

$

1,300  $
1,394 
1,266 
1,163 
1,001 
7,206 
13,330 
(2,676)
10,654  $

1,023  $
9,631 
10,654  $

68 
51 
41 
41 
41 
401 
643 
(120)
523 

54 
469 
523 

The table above does not include lease payments that were not fixed at commencement or lease modification. As of December 31, 2020, we have additional
operating and finance leases, that have not yet commenced, with lease obligations of approximately $7.41 billion and $443 million, respectively, mostly for offices,
data  centers  and  network  equipment.  These  operating  and  finance  leases  will  commence  between  2021  and  2025  with  lease  terms  of  greater  than  one year  to
30 years.

Supplemental cash flow information related to leases for the years ended December 31, 2020 and 2019 are as follows (in millions):

Cash paid for amounts included in the measurement of lease liabilities:

     Operating cash flows for operating leases
     Operating cash flows for finance leases
     Financing cash flows for finance leases

Lease liabilities arising from obtaining right-of-use assets:

     Operating leases
     Finance leases

December 31,

2020

2019

$
$
$

$
$

1,208  $
14  $
604  $

1,158  $
121  $

902 
12 
552 

5,081 
193 

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Note 9. Goodwill and Intangible Assets

During the year ended December 31, 2020, we purchased certain intangible assets and completed several business acquisitions that were not material to our
consolidated  financial  statements,  either  individually  or  in  the  aggregate.  Accordingly,  pro  forma  historical  results  of  operations  related  to  these  business
acquisitions  during  the  year  ended  December  31,  2020  have  not  been  presented.  We  have  included  the  financial  results  of  these  business  acquisitions  in  our
consolidated financial statements from their respective dates of acquisition.

Goodwill generated from all business acquisitions completed was primarily attributable to expected synergies from future growth and potential monetization

opportunities. The amount of goodwill generated that was deductible for tax purposes was not material.

The changes in the carrying amount of goodwill for the years ended December 31, 2020 and 2019 are as follows (in millions):

Balance as of December 31, 2018

Goodwill acquired
Effect of currency translation adjustment

Balance as of December 31, 2019

Goodwill acquired
Effect of currency translation adjustment

Balance as of December 31, 2020

$

$

18,301 
408 
6 
18,715 
322 
13 
19,050 

The following table sets forth the major categories of the intangible assets and the weighted-average remaining useful lives for those assets that are not

already fully amortized (in millions):

Acquired users
Acquired technology
Acquired patents
Trade names
Other

Total intangible assets

December 31, 2020

December 31, 2019

Weighted-Average
Remaining Useful
Lives (in years)
0.8
2.8
4.0
1.4
3.2

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

$

$

2,057  $
1,297 
805 
636 
223 
5,018  $

(1,840) $
(1,088)
(677)
(622)
(168)
(4,395) $

217  $
209 
128 
14 
55 
623  $

2,056  $
1,158 
805 
635 
162 
4,816  $

(1,550) $
(986)
(625)
(604)
(157)
(3,922) $

506 
172 
180 
31 
5 
894 

Amortization  expense  of  intangible  assets  for  the  years  ended  December  31,  2020,  2019,  and  2018  was  $473  million,  $562  million,  and  $640  million,

respectively.

As of December 31, 2020, expected amortization expense for the unamortized acquired intangible assets for the next five years and thereafter is as follows

(in millions):

2021
2022
2023
2024
2025
Thereafter

Total

$

$

387 
121 
53 
29 
17 
16 
623 

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Note 10. Liabilities

The components of accrued expenses and other current liabilities are as follows (in millions):

(1)

Legal-related accruals 
Accrued compensation and benefits
Accrued property and equipment
Accrued taxes
Other current liabilities

Accrued expenses and other current liabilities

December 31,

2020

2019

1,622  $
2,609 
1,414 
2,038 
3,469 
11,152  $

5,998 
1,704 
1,082 
624 
2,327 
11,735 

$

$

_________________________
(1)

Includes accrued legal settlements and fines as well as other legal fees. In 2020 and 2019, the amounts include accrued legal settlement for Illinois Biometric Information
Privacy Act (BIPA) of $650 million and $550 million, respectively. In 2019, the amount includes accrued legal settlements for U.S. Federal Trade Commission (FTC) of
$5.0 billion. For further information, see Legal and Related Matters in Note 12 — Commitments and Contingencies.

The components of other liabilities are as follows (in millions):

Income tax payable
Other liabilities

Other liabilities

Note 11. Long-term Debt

December 31,

2020

2019

$

$

5,025  $
1,389 
6,414  $

5,651 
2,094 
7,745 

In May 2016, we entered into a $2.0 billion senior unsecured revolving credit facility, and any amounts outstanding under this facility would be due and
payable on May 20, 2021. No amount had been drawn down under this credit facility, and it was terminated on December 24, 2020. As of December 31, 2020, we
had no outstanding long-term debt.

Note 12. Commitments and Contingencies

Guarantee

In  2018,  we  established  a  multi-currency  notional  cash  pool  for  certain  of  our  entities  with  a  third-party  bank  provider.  Actual  cash  balances  are  not
physically converted and are not commingled between participating legal entities. As part of the notional cash pool agreement, the bank extends overdraft credit to
our participating entities as needed, provided that the overall notionally pooled balance of all accounts in the pool at the end of each day is at least zero. In the
unlikely event of a default by our collective entities participating in the pool, any overdraft balances incurred would be guaranteed by Facebook, Inc.

Other Contractual Commitments

We also have $7.50 billion of non-cancelable contractual commitments as of December 31, 2020, which are mostly related to our investments in network

infrastructure, consumer hardware, content costs and data center operations. The majority of these commitments are due within five years.

Legal and Related Matters

Beginning on March 20, 2018, multiple putative class actions and derivative actions were filed in state and federal courts in the United States and elsewhere
against us and certain of our directors and officers alleging violations of securities laws, breach of fiduciary duties, and other causes of action in connection with
our platform and user data practices as well as

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the  misuse  of  certain  data  by  a  developer  that  shared  such  data  with  third  parties  in  violation  of  our  terms  and  policies,  and  seeking  unspecified  damages  and
injunctive relief. Beginning on July 27, 2018, two putative class actions were filed in federal court in the United States against us and certain of our directors and
officers  alleging  violations  of  securities  laws  in  connection  with  the  disclosure  of  our  earnings  results  for  the  second  quarter  of  2018  and  seeking  unspecified
damages.  These  two  actions  subsequently  were  transferred  and  consolidated  in  the  U.S.  District  Court  for  the  Northern  District  of  California  with  the  putative
securities class action described above relating to our platform and user data practices. On September 25, 2019, the district court granted our motion to dismiss the
consolidated  putative  securities  class  action,  with  leave  to  amend.  On  November  15,  2019,  a  second  amended  complaint  was  filed  in  the  consolidated  putative
securities class action. On August 7, 2020, the district court granted our motion to dismiss the second amended complaint, with leave to amend. On October 16,
2020, a third amended complaint was filed in the consolidated putative securities class action. We believe these lawsuits are without merit, and we are vigorously
defending them. In addition, our platform and user data practices, as well as the events surrounding the misuse of certain data by a developer, became the subject of
U.S. Federal Trade Commission (FTC), state attorneys general, and other government inquiries in the United States, Europe, and other jurisdictions. In July 2019,
we entered into a settlement and modified consent order to resolve the FTC inquiry, which was approved by the federal court and took effect in April 2020. Among
other matters, our settlement with the FTC required us to pay a penalty of $5.0 billion which was paid in April 2020 upon the effectiveness of the modified consent
order.

On April 1, 2015, a putative class action was filed against us in the U.S. District Court for the Northern District of California by Facebook users alleging
that the "tag suggestions" facial recognition feature violates the Illinois Biometric Information Privacy Act, and seeking statutory damages and injunctive relief. On
April 16, 2018, the district court certified a class of Illinois residents, and on May 14, 2018, the district court denied both parties' motions for summary judgment.
On May 29, 2018, the U.S. Court of Appeals for the Ninth Circuit granted our petition for review of the class certification order and stayed the proceeding. On
August 8, 2019, the Ninth Circuit affirmed the class certification order. On December 2, 2019, we filed a petition with the U.S. Supreme Court seeking review of
the decision of the Ninth Circuit, which was denied. On January 15, 2020, the parties agreed to a settlement in principle to resolve the lawsuit, which provided for a
payment of $550 million by us and was subject to court approval. On or about May 8, 2020, the parties executed a formal settlement agreement, and plaintiffs filed
a motion for preliminary approval of the settlement by the district court. On June 4, 2020, the district court denied the plaintiffs' motion without prejudice. On July
22, 2020, the parties executed an amended settlement agreement, which, among other terms, provides for a payment of $650 million by us. On August 19, 2020,
the court granted preliminary approval of the settlement. The settlement is subject to final court approval. The settlement amount is reflected in accrued expenses
and other current liabilities on our consolidated balance sheet as of December 31, 2020.

Beginning  on  September  28,  2018,  multiple  putative  class  actions  were  filed  in  state  and  federal  courts  in  the  United  States  and  elsewhere  against  us
alleging violations of consumer protection laws and other causes of action in connection with a third-party cyber-attack that exploited a vulnerability in Facebook's
code to steal user access tokens and access certain profile information from user accounts on Facebook, and seeking unspecified damages and injunctive relief. The
actions filed in the United States were consolidated in the U.S. District Court for the Northern District of California. On November 26, 2019, the district court
certified a class for injunctive relief purposes but denied certification of a class for purposes of pursuing damages. On January 16, 2020, the parties agreed to a
settlement in principle to resolve the lawsuit. On November 15, 2020, the court granted preliminary approval of the settlement. The settlement is subject to final
court approval. We believe the remaining lawsuits are without merit, and we are vigorously defending them. In addition, the events surrounding this cyber-attack
became the subject of Irish Data Protection Commission (IDPC) and other government inquiries.

From  time  to  time  we  also  notify  the  IDPC,  our  designated  European  privacy  regulator  under  the  General  Data  Protection  Regulation,  of  certain  other
personal data breaches and privacy issues, and are subject to inquiries and investigations regarding various aspects of our regulatory compliance. Although we are
vigorously  defending  our  regulatory  compliance,  we  believe  there  is  a  reasonable  possibility  that  the  ultimate  potential  loss  related  to  the  inquiries  and
investigations by the IDPC could be material in the aggregate.

In  addition,  from  time  to  time,  we  are  subject  to  litigation  and  other  proceedings  involving  law  enforcement  and  other  regulatory  agencies,  including  in
particular  in  Brazil  and  Europe,  in  order  to  ascertain  the  precise  scope  of  our  legal  obligations  to  comply  with  the  requests  of  those  agencies,  including  our
obligation to disclose user information in particular circumstances. A number of such instances have resulted in the assessment of fines and penalties against us.
We believe we have multiple legal grounds to satisfy these requests or prevail against associated fines and penalties, and we intend to vigorously defend such fines
and penalties.

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With respect to the cases, actions, and inquiries described above, we evaluate the associated developments on a regular basis and accrue a liability when we
believe a loss is probable and the amount can be reasonably estimated. In addition, we believe there is a reasonable possibility that we may incur a loss in some of
these matters. With respect to the matters described above that do not include an estimate of the amount of loss or range of possible loss, such losses or range of
possible  losses  either  cannot  be  estimated  or  are  not  individually  material,  but  we  believe  there  is  a  reasonable  possibility  that  they  may  be  material  in  the
aggregate.

We are also party to various other legal proceedings, claims, and regulatory, tax or government inquiries and investigations that arise in the ordinary course
of business. For example, from time to time we are subject to various litigation and government inquiries and investigations, formal or informal, by competition
authorities in the United States, Europe, and other jurisdictions. Such investigations, inquiries, and lawsuits concern, among other things, our business practices in
the areas of social networking or social media services, digital advertising, and/or mobile or online applications, as well as past acquisitions. For example, in June
2019 we were informed by the FTC that it had opened an antitrust investigation of our company. On December 9, 2020, the FTC filed a complaint against us in the
U.S. District Court for the District of Columbia alleging that we engaged in anticompetitive conduct and unfair methods of competition in violation of Section 5 of
the Federal Trade Commission Act and Section 2 of the Sherman Act by acquiring Instagram in 2012 and WhatsApp in 2014 and by maintaining conditions on
access to our platform. In addition, beginning in the third quarter of 2019, we became the subject of antitrust investigations by the U.S. Department of Justice and
state attorneys general. On December 9, 2020, the attorneys general from 46 states, the territory of Guam, and the District of Columbia filed a complaint against us
in  the  U.S.  District  Court  for  the  District  of  Columbia  alleging  that  we  engaged  in  anticompetitive  conduct  in  violation  of  Section  2  of  the  Sherman  Act  by
acquiring Instagram in 2012 and WhatsApp in 2014 and by maintaining conditions on access to our platform. The complaint also alleges that we violated Section 7
of the Clayton Act by acquiring Instagram and WhatsApp. The lawsuits of the FTC and attorneys general both seek a permanent injunction against our company's
alleged  violations  of  the  antitrust  laws,  and  other  equitable  relief,  including  divestiture  or  reconstruction  of  Instagram  and  WhatsApp.  Multiple  putative  class
actions have also been filed in state and federal courts in the United States against us alleging violations of antitrust laws and other causes of action in connection
with these acquisitions and other alleged anticompetitive conduct, and seeking unspecified damages and injunctive relief. We believe these lawsuits are without
merit, and we are vigorously defending them.

Additionally,  we  are  required  to  comply  with  various  legal  and  regulatory  obligations  around  the  world.  The  requirements  for  complying  with  these
obligations may be uncertain and subject to interpretation and enforcement by regulatory and other authorities, and any failure to comply with such obligations
could  eventually  lead  to  asserted  legal  or  regulatory  action.  With  respect  to  these  other  legal  proceedings,  claims,  regulatory,  tax,  or  government  inquiries  and
investigations, and other matters, asserted and unasserted, we evaluate the associated developments on a regular basis and accrue a liability when we believe a loss
is probable and the amount can be reasonably estimated. In addition, we believe there is a reasonable possibility that we may incur a loss in some of these other
matters. We believe that the amount of losses or any estimable range of possible losses with respect to these other matters will not, either individually or in the
aggregate, have a material adverse effect on our business and consolidated financial statements.

The ultimate  outcome of the legal  and related  matters  described  in this section, such as whether the likelihood  of loss is remote,  reasonably  possible, or
probable, or if and when the reasonably possible range of loss is estimable, is inherently uncertain. Therefore, if one or more of these matters were resolved against
us for amounts in excess of management's estimates of loss, our results of operations and financial condition, including in a particular reporting period in which
any such outcome becomes probable and estimable, could be materially adversely affected.

For information regarding income tax contingencies, see Note 15—Income Taxes.

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Indemnifications

In  the  normal  course  of  business,  to  facilitate  transactions  of  services  and  products,  we  have  agreed  to  indemnify  certain  parties  with  respect  to  certain
matters.  We  have  agreed  to  hold  certain  parties  harmless  against  losses  arising  from  a  breach  of  representations  or  covenants,  or  out  of  intellectual  property
infringement or other claims made by third parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the
claim. In addition, we have entered into indemnification agreements with our officers, directors, and certain employees, and our certificate of incorporation and
bylaws contain similar indemnification obligations.

It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification
claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a
material impact on our consolidated financial statements. In our opinion, as of December 31, 2020, there was not at least a reasonable possibility we had incurred a
material loss with respect to indemnification of such parties. We have not recorded any liability for costs related to indemnification through December 31, 2020.

Note 13. Stockholders' Equity

Common Stock

Our certificate of incorporation authorizes the issuance of Class A common stock and Class B common stock. As of December 31, 2020, we are authorized
to issue 5,000 million shares of Class A common stock and 4,141 million shares of Class B common stock, each with a par value of $0.000006 per share. Holders
of our Class A common stock and Class B common stock are entitled to dividends when, as and if, declared by our board of directors, subject to the rights of the
holders of all classes of stock outstanding having priority rights to dividends. As of December 31, 2020, we have not declared any dividends. The holder of each
share of Class A common stock is entitled to one vote, while the holder of each share of Class B common stock is entitled to ten votes. Shares of our Class B
common stock are convertible into an equivalent number of shares of our Class A common stock and generally convert into shares of our Class A common stock
upon  transfer.  Class  A  common  stock  and  Class  B  common  stock  are  referred  to  as  common  stock  throughout  the  notes  to  these  financial  statements,  unless
otherwise noted.

As  of  December  31,  2020,  there  were  2,406  million  shares  of  Class  A  common  stock  and  443  million  shares  of  Class  B  common  stock  issued  and

outstanding.

Share Repurchase Program

Our board of directors has authorized a share repurchase program of our Class A common stock, which commenced in January 2017 and does not have an
expiration  date.  As  of  December  31,  2019,  $4.90  billion  remained  available  and  authorized for  repurchases  under  this  program.  In  January  2020, an  additional
$10.00 billion of repurchases was authorized under this program. In 2020, we repurchased and subsequently retired 27 million shares of our Class A common stock
for  $6.30  billion.  As  of  December  31,  2020,  $8.60  billion  remained  available  and  authorized  for  repurchases.  In  January  2021,  an  additional  $25  billion  of
repurchases was authorized under this program.

The timing and actual number of shares repurchased under the repurchase program depend on a variety of factors, including price, general  business and
market  conditions,  and  other  investment  opportunities,  and  shares  may  be  repurchased  through  open  market  purchases  or  privately  negotiated  transactions,
including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

Share-based Compensation Plans

In 2020, we maintained one active share-based employee compensation plan, the 2012 Equity Incentive Plan, which was amended in each of June 2016 and
February 2018 (Amended 2012 Plan). Our Amended 2012 Plan provides for the issuance of incentive and nonstatutory stock options, restricted stock awards, stock
appreciation rights, RSUs, performance shares, and stock bonuses to qualified employees, directors and consultants. Shares that are withheld in connection with the
net settlement of RSUs or forfeited under our stock plan are added to the reserves of the Amended 2012 Plan. We account for forfeitures as they occur.

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Share-based compensation expense mostly consists of the Company's restricted stock units (RSUs) expense. RSUs granted to employees are measured based
on the grant-date fair value. In general, our RSUs vest over a service period of four years. Share-based compensation expense is generally recognized based on the
straight-line basis over the requisite service period.

As of December 31, 2020, there were 129 million shares of our Class A common stock reserved for future issuance under our Amended 2012 Plan. Pursuant
to the automatic increase provision under our Amended 2012 Plan, the number of shares reserved for issuance increases automatically on January 1 of each of the
calendar years during the term of the Amended 2012 Plan, which will continue through April 2026 , by a number of shares of Class A common stock equal to the
lesser of (i) 2.5% of the total issued and outstanding shares of our Class A common stock as of the immediately preceding December 31st or (ii) a number of shares
determined by our board of directors. Pursuant to this automatic increase provision, our board of directors approved an increase of 16 million shares reserved for
issuance effective January 1, 2021.

The following table summarizes the activities for our unvested RSUs for the year ended December 31, 2020:

Unvested at December 31, 2019

Granted
Vested
Forfeited

Unvested at December 31, 2020

Number of Shares
(in thousands)

Weighted-Average
Grant Date Fair Value

78,851  $
62,032  $
(38,857) $
(5,293) $
96,733  $

165.74 
188.73 
162.27 
165.72 

181.88 

The  fair  value  as  of  the  respective  vesting  dates  of  RSUs  that  vested  during  the  years  ended  December  31,  2020,  2019,  and  2018  was  $9.38  billion,

$6.01 billion, and $7.57 billion, respectively.

As  of  December  31,  2020,  there  was  $16.50  billion  of  unrecognized  share-based  compensation  expense  related  to  RSUs  awards.  This  unrecognized
compensation  expense  is  expected  to  be  recognized  over  a  weighted-average  period  of  approximately  three  years  based  on  vesting  under  the  award  service
conditions.

Note 14. Interest and Other Income, Net

The following table presents the detail of interest and other income, net, is as follows (in millions):

Interest income, net
Foreign currency exchange losses, net
Other income (expense), net

Interest and other income, net

2020

Year Ended December 31,
2019

2018

$

$

672  $
(129)
(34)
509  $

904  $
(105)
27 
826  $

652 
(213)
9 
448 

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Note 15. Income Taxes

The components of income before provision for income taxes are as follows (in millions):

Domestic
Foreign

Income before provision for income taxes

The provision for income taxes consisted of the following (in millions):

2020

Year Ended December 31, 
2019

2018

$

$

24,233  $
8,947 
33,180  $

5,317  $
19,495 
24,812  $

8,800 
16,561 
25,361 

Current:

Federal
State
Foreign

Total current tax expense
Deferred:
Federal
State
Foreign

Total deferred tax (benefits)/expense

Provision for income taxes

2020

Year Ended December 31, 
2019

2018

$

$

3,297  $
523 
1,211 
5,031 

(859)
(122)
(16)
(997)
4,034  $

4,321  $
565 
1,481 
6,367 

(39)
19 
(20)
(40)
6,327  $

A reconciliation of the U.S. federal statutory income tax rates to our effective tax rate is as follows (in percentages):

U.S. federal statutory income tax rate
State income taxes, net of federal benefit
Research and development tax credits
Share-based compensation
Excess tax benefits related to share-based compensation
Foreign-derived intangible income deduction
Effect of non-U.S. operations
Non-deductible FTC settlement accrual
Research and development capitalization
Other

Effective tax rate

2020

Year Ended December 31, 
2019

2018

21.0 %
0.8 
(1.3)
0.2 
(1.6)
(1.9)
(2.4)
— 
(3.0)
0.4 
12.2 %

21.0 %
1.8 
(0.8)
4.5 
(0.7)
— 
(5.8)
4.5 
— 
1.0 
25.5 %

108

1,747 
176 
1,031 
2,954 

316 
34 
(55)
295 
3,249 

21.0 %
0.7 
(1.0)
0.3 
(2.6)
— 
(5.9)
— 
— 
0.3 
12.8 %

 
 
 
 
 
 
 
 
 
 
 
 
 
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Our deferred tax assets (liabilities) are as follows (in millions):

Deferred tax assets:

Net operating loss carryforward
Tax credit carryforward
Share-based compensation
Accrued expenses and other liabilities
Lease liabilities
Capitalized research and development
Other

Total deferred tax assets

Less: valuation allowance

Deferred tax assets, net of valuation allowance

Deferred tax liabilities:

Depreciation and amortization
Right-of-use assets

Total deferred tax liabilities

Net deferred tax assets

December 31, 

2020

2019

2,437  $
1,055 
243 
1,108 
2,058 
1,922 
340 
9,163 
(1,218)
7,945 

(3,811)
(1,876)
(5,687)
2,258  $

2,051 
1,333 
135 
798 
1,999 
— 
149 
6,465 
(1,012)
5,453 

(2,387)
(1,910)
(4,297)
1,156 

$

$

The valuation allowance was approximately $1.22 billion and $1.01 billion as of December 31, 2020 and 2019, respectively, mostly relating to U.S. state tax

credit carryforwards and U.S. foreign tax credits for which we do not believe a tax benefit is more likely than not to be realized.

As of December 31, 2020, the U.S. federal and state net operating loss carryforwards were $10.62 billion and $2.19 billion, which will begin to expire in
2028 and 2027, respectively, if not utilized. We have federal tax credit carryforwards of $424 million, which will begin to expire in 2029, if not utilized, and state
tax credit carryforwards of $2.65 billion, most of which do not expire.

Utilization of our net operating loss and tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations
provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating loss and tax credit
carryforwards before their utilization. The events that may cause ownership changes include, but are not limited to, a cumulative stock ownership change of greater
than 50% over a three‑year period.

The following table reflects changes in the gross unrecognized tax benefits (in millions):

Gross unrecognized tax benefits ‑ beginning of period
Increases related to prior year tax positions
Decreases related to prior year tax positions
Increases related to current year tax positions
Decreases related to settlements of prior year tax positions

Gross unrecognized tax benefits ‑ end of period

2020

Year Ended December 31, 
2019

2018

$

$

7,863  $
356 
(253)
1,045 
(319)
8,692  $

4,678  $
2,309 
(525)
1,402 
(1)
7,863  $

3,870 
457 
(396)
831 
(84)
4,678 

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During  all  years  presented,  we  recognized  interest  and  penalties  related  to  unrecognized  tax  benefits  within  the  provision  for  income  taxes  on  the
consolidated  statements  of  income.  The  amount  of  interest  and  penalties  accrued  as  of  December  31,  2020  and  2019  were  $774  million  and  $747  million,
respectively.

If the balance of gross unrecognized tax benefits of $8.69 billion as of December 31, 2020 were realized in a future period, this would result in a tax benefit

of $4.85 billion within our provision of income taxes at such time.

On July 27, 2015, the United States Tax Court issued a decision (Tax Court Decision) in Altera Corp. v. Commissioner, which concluded that related parties
in a cost sharing arrangement are not required to share expenses related to share-based compensation. The Tax Court Decision was appealed by the Commissioner
to the Ninth Circuit Court of Appeals (Ninth Circuit). On June 7, 2019, the Ninth Circuit issued an opinion (Altera Ninth Circuit Opinion) that reversed the Tax
Court Decision. Based on the Altera Ninth Circuit Opinion, we recorded a cumulative income tax expense of $1.11 billion in the second quarter of 2019. On July
22, 2019, the taxpayer requested a rehearing before the full Ninth Circuit and the request was denied on November 12, 2019. The taxpayer requested a hearing
before the Supreme Court of the United States and the request was denied on June 22, 2020. Since we started to accrue income tax for share-based compensation
cost-sharing expense in the second quarter of 2019, the denial of the request by the Supreme Court did not have a material impact to our financial results in 2020.

We  are  subject  to  taxation  in  the  United  States  and  various  other  state  and  foreign  jurisdictions.  The  material  jurisdictions  in  which  we  are  subject  to
potential examination include the United States and Ireland. We are under examination by the Internal Revenue Service (IRS) for our 2014 through 2016 and 2018
tax years and by the Irish tax authorities for our 2016 through 2018 tax years. Our 2017 and subsequent tax years remain open to examination by the IRS. Our 2019
and subsequent tax years remain open to examination in Ireland.

In July 2016, we received a Statutory Notice of Deficiency (Notice) from the IRS related to transfer pricing with our foreign subsidiaries in conjunction with
the examination of the 2010 tax year. While the Notice applies only to the 2010 tax year, the IRS stated that it will also apply its position for tax years subsequent
to 2010. We do not agree with the position of the IRS and have filed a petition in the Tax Court challenging the Notice. On January 15, 2020, the IRS filed its
Pretrial Memorandum in the case stating that it planned to assert at trial an adjustment that is higher than the adjustment stated in the Notice. The first session of
the trial began in February 2020 and a second session is expected to continue in 2021. It is not clear how the IRS intends to apply the revised adjustment to future
years. Based on the information provided, we believe that, if the IRS prevails in its updated position, this could result in an additional federal tax liability of an
estimated,  aggregate  amount  of  up  to  approximately  $9.0  billion  in  excess  of  the  amounts  in  our  originally  filed  U.S.  return,  plus  interest  and  any  penalties
asserted.

In March 2018, we received a second Notice from the IRS in conjunction with the examination of our 2011 through 2013 tax years. The IRS applied its
position from the 2010 tax year to each of these years and also proposed new adjustments related to other transfer pricing with our foreign subsidiaries and certain
tax  credits  that  we  claimed.  If  the  IRS  prevails  in  its  position  for  these  new  adjustments,  this  could  result  in  an  additional  federal  tax  liability  of  up  to
approximately  $680  million  in  excess  of  the  amounts  in  our  originally  filed  U.S.  returns,  plus  interest  and  any  penalties  asserted.  We  do  not  agree  with  the
positions of the IRS in the second Notice and have filed a petition in the Tax Court challenging the second Notice.

We have previously accrued an estimated unrecognized tax benefit consistent with the guidance in ASC 740, Income Taxes, that is lower than the potential
additional federal tax liability from the positions taken by the IRS in the two Notices and its Pretrial Memorandum. In addition, if the IRS prevails in its positions
related to transfer pricing with our foreign subsidiaries, the additional tax that we would owe would be partially offset by a reduction in the tax that we owe under
the mandatory transition tax on accumulated foreign earnings from the 2017 Tax Cuts and Jobs Act (Tax Act). As of December 31, 2020, we have not resolved
these matters and proceedings continue in the Tax Court.

We believe that adequate amounts have been reserved in accordance with ASC 740 for any adjustments to the provision for income taxes or other tax items
that  may  ultimately  result  from  these  examinations.  The  timing  of the  resolution,  settlement,  and  closure  of any  audits  is highly  uncertain,  and it  is reasonably
possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. Given the number of years remaining that are subject
to examination, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized

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tax benefits. If the taxing authorities prevail in the assessment of additional tax due, the assessed tax, interest, and penalties, if any, could have a material adverse
impact on our financial position, results of operations, and cash flows.

Note 16. Geographical Information

The following table sets forth our long-lived assets by geographic area, which consist of property and equipment, net and operating lease right-of-use assets,

net (in millions):

Long-lived assets:
United States
Rest of the world

(1)

Total long-lived assets

December 31,

2020

2019

$

$

43,128  $
11,853 
54,981  $

35,858 
8,925 
44,783 

_________________________
(1) No individual country, other than disclosed above, exceeded 10% of our total long-lived assets for any period presented.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our  management,  with  the  participation  of  our  chief  executive  officer  (CEO)  and  chief  financial  officer  (CFO),  has  evaluated  the  effectiveness  of  our
disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)), as of
the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our CEO and CFO have concluded that as of December 31, 2020,
our  disclosure  controls  and  procedures  are  designed  at  a  reasonable  assurance  level  and  are  effective  to  provide  reasonable  assurance  that  information  we  are
required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in
the rules and forms of the Securities and Exchange Commission (SEC), and that such information is accumulated and communicated to our management, including
our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act). Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the assessment,
management has concluded that its internal control over financial reporting was effective as of December 31, 2020 to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Our independent registered public accounting firm,
Ernst & Young LLP, has issued an audit report with respect to our internal control over financial reporting, which appears in Part II, Item 8 of this Annual Report
on Form 10-K.

Changes in Internal Control

There were no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the

Exchange Act during the fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls
and  procedures,  no  matter  how  well  designed  and  operated,  can  provide  only  reasonable  assurance  of  achieving  the  desired  control  objectives.  In  addition,  the
design  of  disclosure  controls  and  procedures  and  internal  control  over  financial  reporting  must  reflect  the  fact  that  there  are  resource  constraints  and  that
management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Item 9B. Other Information

None.

112

Table of Contents

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the

SEC within 120 days of the fiscal year ended December 31, 2020.

Our  board  of  directors  has  adopted  a  Code  of  Conduct  applicable  to  all  officers,  directors  and  employees,  which  is  available  on  our  website
(investor.fb.com) under "Corporate Governance." We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver
from, a provision of our Code of Conduct by posting such information on the website address and location specified above.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the

SEC within 120 days of the fiscal year ended December 31, 2020.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the

SEC within 120 days of the fiscal year ended December 31, 2020.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the

SEC within 120 days of the fiscal year ended December 31, 2020.

Item 14. Principal Accounting Fees and Services

The information required by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with the

SEC within 120 days of the fiscal year ended December 31, 2020.

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Table of Contents

PART IV

Item 15. Exhibits, Financial Statement Schedules

We have filed the following documents as part of this Form 10-K:

1. Consolidated Financial Statements: 

Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

2. Financial Statement Schedules

Page
78
82
83
84
85
86
88

All  schedules  have  been  omitted  because  they  are  not  required,  not  applicable,  not  present  in  amounts  sufficient  to  require  submission  of  the  schedule,  or  the
required information is otherwise included.

3. Exhibits

Exhibit

Number

3.1
3.2
3.3
4.1
4.2
4.3

10.1+
10.2(A)+
10.2(B)+

10.2(C)+

10.2(D)+

10.2(E)+

10.2(F)+

10.2(G)+

10.2(H)+

10.2(I)+

Exhibit Description

Form

File No.

Exhibit

Filing Date

Incorporated by Reference

Filed 
Herewith

Restated Certificate of Incorporation.
Amended and Restated Bylaws.
Description of Registrant's Capital Stock.
Form of Class A Common Stock Certificate.
Form of Class B Common Stock Certificate.
Form of "Type 1" Holder Voting Agreement,
between Registrant, Mark Zuckerberg, and certain
parties thereto.
Form of Indemnification Agreement.
2012 Equity Incentive Plan, as amended.
2012 Equity Incentive Plan forms of award
agreements.
2012 Equity Incentive Plan forms of award
agreements (Additional Forms).
2012 Equity Incentive Plan forms of award
agreements (Additional Forms).
2012 Equity Incentive Plan forms of award
agreements (Additional Forms).
2012 Equity Incentive Plan forms of award
agreements (Additional Forms).
2012 Equity Incentive Plan forms of award
agreements (Additional Forms).
2012 Equity Incentive Plan forms of award
agreements (Additional Forms).
2012 Equity Incentive Plan forms of award
agreements (Additional Forms).

10-Q
8-K
10-K
S-1
S-8
S-1

8-K
10-Q
10-Q

10-K

10-Q

10-Q

10-Q

10-K

10-Q

10-Q

001-35551
001-35551
001-35551
333-179287
333-181566
333-179287

333-179287
001-35551
001-35551

3.1
3.1
3.3
4.1
4.4
4.3

10.1
10.1
10.2

October 30, 2020
April 15, 2019
January 30, 2020
February 8, 2012
May 21, 2012
February 8, 2012

April 15, 2019
April 30, 2020
July 31, 2012

001-35551

10.3(C)

January 29, 2015

001-35551

001-35551

001-35551

10.1

10.1

10.2

May 4, 2017

July 27, 2017

April 26, 2018

001-35551

10.3(G)

January 31, 2019

001-35551

001-35551

10.2

10.2

April 25, 2019

April 30, 2020

114

    
Table of Contents

Exhibit

Number

10.3+
10.4+

10.5+

10.6+

10.7+

10.8+

10.9+
10.10+
10.11+
10.12+

21.1
23.1

31.1

31.2

32.1#

32.2#

101.INS
101.SCH
101.CAL

101.DEF

101.LAB

Exhibit Description

Form

File No.

Exhibit

Filing Date

Incorporated by Reference

Filed 
Herewith

10-Q
S-1

S-1

S-1

10-K

10-Q

10-Q
10-Q
10-Q

001-35551
333-179287

333-179287

10.3
10.6

10.7

April 25, 2019
February 8, 2012

February 8, 2012

333-179287

10.9

February 8, 2012

001-35551

10.10

January 29, 2015

001-35551

001-35551
001-35551
001-35551

10.3

10.3
10.4
10.2

April 30, 2020

July 25, 2019
July 25, 2019
July 31, 2020

Bonus Plan.
Amended and Restated Offer Letter, dated January
27, 2012, between Registrant and Mark Zuckerberg.
Amended and Restated Employment Agreement,
dated January 27, 2012, between Registrant and
Sheryl K. Sandberg.
Amended and Restated Offer Letter, dated
January 27, 2012, between Registrant and
Mike Schroepfer.
Amended and Restated Offer Letter, dated August
25, 2014, between Registrant and David M. Wehner.
Offer Letter, dated May 6, 2019, between Registrant
and Jennifer G. Newstead.
Form of Executive Officer Offer Letter.
Executive Sales Incentive Plan.
Director Compensation Policy.
Form Indemnification Agreement Relating to
Subsidiary Operations.
List of subsidiaries.
Consent of Independent Registered Public
Accounting Firm.
Certification of Mark Zuckerberg, Chief Executive
Officer, pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of David M. Wehner, Chief Financial
Officer, pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of Mark Zuckerberg, Chief Executive
Officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
Certification of David M. Wehner, Chief Financial
Officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
XBRL Instance Document.
XBRL Taxonomy Extension Schema Document.
XBRL Taxonomy Extension Calculation Linkbase
Document.
XBRL Taxonomy Extension Definition Linkbase
Document.
XBRL Taxonomy Extension Labels Linkbase
Document.

115

X

X
X

X

X

X

X

X
X
X

X

X

Table of Contents

Exhibit

Number

101.PRE

104

Exhibit Description

Form

File No.

Exhibit

Filing Date

Incorporated by Reference

XBRL Taxonomy Extension Presentation Linkbase
Document.
Cover Page Interactive Data File (formatted as
inline XBRL and contained in Exhibit 101).

Filed 
Herewith

X

X

+ Indicates a management contract or compensatory plan.    

# This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject

to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.

Item 16. Form 10-K Summary

None.

116

Table of Contents

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-

K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Menlo Park, State of California, on this 27th day of January 2021.

SIGNATURES

Date:

January 27, 2021

FACEBOOK, INC.

/s/ David M. Wehner 
David M. Wehner
Chief Financial Officer

117

 
Table of Contents

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David M. Wehner and David
W. Kling, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf

of the Registrant and in the capacities and on the dates indicated: 

Signature

Title

Date

/s/ Mark Zuckerberg
Mark Zuckerberg

/s/ David M. Wehner
David M. Wehner

/S/ Susan J.S. Taylor
Susan J.S. Taylor

/s/ Peggy Alford
Peggy Alford

/s/ Marc L. Andreessen
Marc L. Andreessen

/s/ Andrew W. Houston
Andrew W. Houston

/s/ Nancy Killefer
Nancy Killefer

/s/ Robert M. Kimmitt
Robert M. Kimmitt

/s/ Sheryl K. Sandberg
Sheryl K. Sandberg

/s/ Peter A. Thiel
Peter A. Thiel

/s/ Tracey T. Travis
Tracey T. Travis

Chairman and Chief Executive Officer
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial Officer)

Chief Accounting Officer
(Principal Accounting Officer)

Director

Director

Director

Director

Director

Director

Director

Director

118

January 27, 2021

January 27, 2021

January 27, 2021

January 27, 2021

January 27, 2021

January 27, 2021

January 27, 2021

January 27, 2021

January 27, 2021

January 27, 2021

January 27, 2021

FACEBOOK, INC.

INDEMNIFICATION AGREEMENT RELATING TO SUBSIDIARY OPERATIONS

EXHIBIT 10.12

This  Indemnification  Agreement  (“Agreement”)  is  effective  as  of  ____,  by  and  between  Facebook,  Inc.,  a  Delaware  corporation  (the  “Company” or
“Facebook”), and the undersigned (“Indemnitee”). For purposes of this Agreement, the “Company” shall be deemed to include Facebook and its subsidiaries, as
appropriate.

WHEREAS, the Company has determined that it is in the best interest of the Company to enter into certain business activities in ____ through ____ (the

“Subsidiary”);

WHEREAS,  in  connection  with  the  application  of  the  Subsidiary  to  conduct  such  business  activities  under  the  laws,  regulations  and  rules  of  ____
(collectively, “Applicable Law”), Indemnitee may be subject to potential liability should the Subsidiary fail to comply with Applicable Law due to Indemnitee’s
control over the Company; and

WHEREAS, the operations of the Subsidiary benefit the Company and, therefore, the Company has agreed to indemnify Indemnitee as set forth herein.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, and intending to be legally bound, the Company and Indemnitee hereby agree as set forth below.

1.

Indemnification of Expenses and Other Liabilities.

(a)    The Company shall indemnify Indemnitee to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or other
participant in, or is threatened to be made a party to or other participant in, any Claim (as defined herein) under Applicable Law arising from or related to
any  failure  or  alleged  failure  by  the  Subsidiary  to  comply  with  any  requirement  (including,  without  limitation,  any  capitalization  requirement)  under
Applicable Law, or on any other basis under Applicable Law that would assign, or purport to assign, liability to Indemnitee by reason of his control over
the  Company,  for  any  Expenses  (as  defined  herein)  or  any  Other  Liabilities  (as  defined  herein),  including,  without  limitation,  all  interest,  penalties,
assessments and other charges paid or payable in connection with or in respect of such Expenses or Other Liabilities, unless and only to the extent such
Expenses  or  Other  Liabilities  are  finally  judicially  determined  (after  exhaustion  of  all  appeals)  to  have  arisen  out  of  Indemnitee’s  bad  faith  or  willful
misconduct (with the burden of proof on the Company) (any such Claim, a “Covered Claim”). Such payment of Expenses or Other Liabilities shall be
made by the Company as soon as practicable but in any event no later than five (5) business days after written demand by Indemnitee therefor is presented
to the Company (including, for clarity, prior to the final disposition of any Covered Claim).

(b)        Indemnitee  shall,  as  a  condition  precedent  to  Indemnitee’s  right  to  be  indemnified  under  this  Agreement,  give  the  Company  notice  in
writing as soon as practicable of any Covered Claim made against Indemnitee for which indemnification will or could be sought under this Agreement;
provided, however, that the failure to so provide notice to the Company shall not relieve the Company from any liability that it may have to Indemnitee
hereunder unless and only to the extent the Company’s ability to participate in the defense of such Covered Claim was materially and adversely affected
by such failure. In addition, at the Company’s sole cost and expense, Indemnitee shall give the Company such information and cooperation with respect to
a Covered Claim as the Company may reasonably require and as shall be within Indemnitee’s power, to the extent that doing so is consistent with the
exercise of Indemnitee’s rights under applicable federal, state, local or foreign law. The Company shall, at the Company’s sole cost and expense, provide
Indemnitee with such information and cooperation with respect to a Covered Claim as Indemnitee

1

may reasonably require, to the extent that doing so is consistent with the Company’s obligation to cooperate with regulatory or law enforcement agencies.

(c)        In  connection  with  any  Covered  Claim,  the  Company  shall  indemnify  Indemnitee  to  the  fullest  extent  permitted  by  law  against  any
Expenses or Other Liabilities incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights (i) under this
Agreement, (ii) under any other document, agreement, vote of stockholders or disinterested directors, insurance policy or other written instrument, or (iii)
under  any  applicable  federal,  state,  local  or  foreign  law.  Such  payment  of  Expenses  or  Other  Liabilities  shall  be  made  by  the  Company  as  soon  as
practicable but in any event no later than five (5) business days after written demand by Indemnitee therefor is presented to the Company (including, for
clarity, prior to the final disposition of any Covered Claim).

(d)        The  indemnification  provided  by  this  Agreement  shall  be  in  addition  to  any  rights  to  which  Indemnitee  may  be  entitled  under  the
Company’s Certificate of Incorporation, its Bylaws (as now hereafter in effect), any other agreement (including, without limitation, the Indemnification
Agreement between the Company and Indemnitee dated as of ____), any vote of stockholders or disinterested directors, the General Corporation Law of
the State of Delaware, or otherwise. The indemnification provided under this Agreement shall continue in perpetuity as to Indemnitee for any action taken
or not taken while serving in an indemnified capacity, regardless of whether Indemnitee continues to serve in such capacity.

(e)    In the event the Company shall be obligated hereunder to pay the Expenses or Other Liabilities of any Covered Claim, the Company shall
be entitled to assume the defense of such Covered Claim with counsel approved by Indemnitee (not to be unreasonably withheld) upon the delivery to
Indemnitee  of  written  notice  of  the  Company’s  election  so  to  do.  If  the  Company  elects  to  do  so,  the  Company  agrees  to  indemnify  and  reimburse
Indemnitee  for  any  Expenses  or  Other  Liabilities  incurred  by  Indemnitee  in  connection  with  such  Covered  Claim  prior  to  and  after  such  election;
provided,  that,  the  Company  shall  not  be  entitled  to  settle  any  such  Covered  Claim  without  the  prior  written  consent  of  Indemnitee  (not  to  be
unreasonably  withheld),  unless  such  settlement  solely  involves  the  payment  of  money  and  provides  for  a  full  and  final  release  of  all  Claims  asserted
against Indemnitee.

(f)    The Company hereby agrees to indemnify Indemnitee with respect to any Claims referenced in clauses (a), (c) and (e) of this Section 1 to
the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the
Company’s Certificate of Incorporation, the Company’s Bylaws (as now or hereafter in effect) or by statute.

(g)    For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of
conduct  or  have  any  particular  belief  or  that  a  court  has  determined  that  indemnification  is  not  permitted  by  applicable  law.  For  purposes  of  this
Agreement,  without  creating  any  presumption  as  to  the  existence  of  bad  faith  or  willful  misconduct  if  the  following  circumstances  do  not  exist,
Indemnitee shall be deemed to have acted in good faith and without willful misconduct if Indemnitee’s actions or omissions to act are taken in good faith
reliance  upon the records  of the  Company, including,  without limitation,  its financial  statements,  or upon information,  opinions, reports,  statements  or
recommendations  furnished  or  made  to  Indemnitee  by  the  officers  or  employees  of  the  Company  or  its  subsidiaries  (including,  without  limitation,  the
Subsidiary) in the course of their duties, or by committees of the Board, or by any other person (including, without limitation, legal counsel, accountants
and financial advisors), as to matters Indemnitee reasonably believes are within such other person’s professional or expert competence and who has been
selected with reasonable care by or on behalf of the Company.

(h)    For purposes of this Agreement, the following terms shall be defined as follows:

2

i.         “Claim”  shall  mean  any  actual,  threatened,  pending  or  completed  action,  suit,  proceeding,  claim,  counterclaim,  cross  claim,  arbitration,
mediation, regulatory process, alternative dispute resolution mechanism, hearing, inquiry or investigation, whether brought in the right
of  the  Company  or  otherwise  and  whether  of  a  civil,  criminal,  administrative,  legislative,  regulatory,  enforcement  or  investigative
(formal  or  informal)  nature,  including,  without  limitation,  any  appeal  therefrom.  If  Indemnitee  believes  in  good  faith  that  a  given
situation may lead to, or result in, the institution of a Claim, then such situation shall be considered a Claim.

ii.    “Expenses” shall mean any and all expenses (including, without limitation, reasonable attorneys’ fees, costs and expenses and all other fees,
costs, expenses and retainers, including, without limitation, court costs, transcript costs, the fees and other costs of experts and other
professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service
fees and all other charges, disbursements and obligations) incurred in connection with, or as a result of, investigating, defending, being
a witness in or participating in (including, without limitation, on appeal), or preparing to defend, to be a witness in or to participate in,
any Claim. Expenses also shall include expenses incurred in connection with any appeal resulting from any Claim, including, without
limitation, the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent.

iii.    “Other Liabilities” shall mean damages (including, without limitation, incidental, consequential, special, exemplary, indirect and punitive
damages),  losses,  liabilities,  awards,  judgments,  fines,  penalties,  assessments,  deficiencies  and  amounts  paid  in  settlement  (if  such
settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) arising from or related to any
Claim, and any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments
under this Agreement.

2.     Contribution and Reimbursement.

(a)    Whether or not the indemnification provided in Section 1 hereof is available, in respect of any actual, threatened, pending or completed
Covered Claim in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall pay
the  entire  amount  of  any  Expenses  and  Other  Liabilities  of  such  Covered  Claim  without  requiring  Indemnitee  to  contribute  to  such  payment  and  the
Company hereby waives and relinquishes any right of contribution it may have against Indemnitee.

(b)    The Company shall not enter into any settlement of any Covered Claim in which the Company is jointly liable with Indemnitee (or would
be if joined in such action, suit or proceeding), without the prior written consent of Indemnitee (which shall not be unreasonably withheld), unless such
settlement solely involves the payment of money and provides for a full and final release of all Claims asserted against Indemnitee.

(c)        Without  diminishing  or  impairing  the  obligations  of  the  Company  set  forth  in  clauses  (a)  and  (b)  of  this  Section  2,  if,  for  any  reason,
Indemnitee  shall  elect  or  be  required  to  pay  all  or  any  portion  of  any  Expenses  or  Other  Liabilities  in  any  actual,  threatened,  pending  or  completed
Covered Claim, the Company shall reimburse Indemnitee for the entire amount of Expenses or Other Liabilities actually incurred and paid or payable by
Indemnitee.

3.    Advancement of Expenses. Notwithstanding any other provision of this Agreement to the contrary,  the Company shall advance all Expenses and

Other Liabilities incurred by or on behalf of Indemnitee in connection with any Covered Claim within five (5) business days after the receipt

3

by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after
final disposition of such Covered Claim. Such statement or statements shall include or be preceded or accompanied by a written undertaking by
or on behalf of Indemnitee to repay any Expenses or Other Liabilities advanced if it shall ultimately be determined that Indemnitee is not entitled
to  be  indemnified  against  such  Expenses  or  Other  Liabilities.  Any  advances  and  undertakings  to  repay  pursuant  to  this  Section  3  shall  be
unsecured and interest free.

4.     Miscellaneous.

(a)    The knowledge or actions, or failure to act, of any director, officer, employee, agent or fiduciary of the Company or the Company itself

shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

(b)    This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

(c)    This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors,
assigns (including, without limitation,  any direct  or indirect  successor  by purchase, merger, consolidation  or otherwise to all or substantially  all of the
business or assets of the Company), spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether
direct or indirect, and whether by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business or assets of
the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

(d)    This Agreement shall continue in effect until such time as Indemnitee is no longer the ultimate controlling shareholder of the Subsidiary as
defined under Applicable Law and no longer subject to any potential liability for any Covered Claim (including, without limitation, the pendency of any
proceeding or appeal), regardless of whether Indemnitee continues to serve in an indemnified capacity.

(e)    This Agreement shall be governed by, and its provisions construed and enforced in accordance with, the laws of the State of Delaware as

applied to contracts between Delaware residents entered into and to be performed entirely within the State of Delaware.

(f)    No amendment,  modification,  termination  or cancellation  of this Agreement  shall be effective  unless it is in writing signed by both the
parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver.

(g)    This Agreement sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes and
merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties
hereto.

[Signature Page Next]

4

IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written.

FACEBOOK, INC.

By: ___________________________

Name: ___________________________

Title: ___________________________

AGREED TO AND ACCEPTED
INDEMNITEE:

___________________________
Signature

___________________________
(address)

5

LIST OF SUBSIDIARIES
FACEBOOK, INC. 

EXHIBIT 21.1

Andale, LLC (Delaware)

Cassin Networks ApS (Denmark)

Facebook Holdings, LLC (Delaware)

Facebook Ireland Holdings Unlimited (Ireland)

Facebook Ireland Limited (Ireland)

Facebook Operations, LLC (Delaware)

Facebook Payments Inc. (Delaware)

Facebook Technologies, LLC (Delaware)

FCL Tech Limited (Ireland)

Goldframe LLC (Delaware)

Greater Kudu LLC (Delaware)

Instagram, LLC (Delaware)

KUSU PTE. LTD. (Singapore)

MALKOHA PTE LTD. (Singapore)

Morning Hornet LLC (Delaware)

Novi Financial, Inc. (Delaware)

Pinnacle Sweden AB (Sweden)

Raven Northbrook LLC (Delaware)

Runways Information Services Limited (Ireland)

Scout Development LLC (Delaware)

Siculus, Inc. (Delaware)

Sidecat LLC (Delaware)

Stadion LLC (Delaware)

Starbelt LLC (Delaware)

Vitesse, LLC (Delaware)

WhatsApp Inc. (Delaware)

Winner LLC (Delaware)

Woolhawk LLC (Delaware)

EXHIBIT 23.1

We consent to the incorporation by reference in the following Registration Statements:

Consent of Independent Registered Public Accounting Firm

(1)     Registration Statement (Form S-8 No. 333-236161) pertaining to the 2012 Equity Incentive Plan of Facebook, Inc.,

(2)     Registration Statement (Form S-8 No. 333-229457) pertaining to the 2012 Equity Incentive Plan of Facebook, Inc.,

(3)     Registration Statement (Form S-8 No. 333-222823) pertaining to the 2012 Equity Incentive Plan of Facebook, Inc.,

(4)     Registration Statement (Form S-8 No. 333-186402) pertaining to the 2012 Equity Incentive Plan of Facebook, Inc., and

(5)     Registration Statement (Form S-8 No. 333-181566) pertaining to the 2005 Officers’ Stock Plan, 2005 Stock Plan, and 2012 Equity Incentive Plan of

Facebook, Inc.

of our reports dated January 27, 2021, with respect to the consolidated financial statements of Facebook, Inc. and the effectiveness of internal control over financial
reporting of Facebook, Inc. included in this Annual Report (Form 10-K) of Facebook, Inc. for the year ended December 31, 2020.

Redwood City, California
January 27, 2021

/s/ Ernst & Young LLP

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 31.1

I, Mark Zuckerberg, certify that:

1. I have reviewed this annual report on Form 10-K of Facebook, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other  financial  information  included  in  this  report,  fairly  present  in  all  material  respects  the  financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules  13a-15(e)  and  15d-15(e))  and  internal  control  over  financial  reporting  (as  defined  in  Exchange  Act  Rules  13a-15(f)  and  15d-15(f))  for  the  registrant  and
have:

a)  Designed  such  disclosure  controls  and  procedures,  or  caused  such  disclosure  controls  and  procedures  to  be  designed  under  our  supervision,  to  ensure  that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

c)  Evaluated  the  effectiveness  of  the  registrant’s  disclosure  controls  and  procedures  and  presented  in  this  report  our  conclusions  about  the  effectiveness  of  the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)  All  significant  deficiencies  and  material  weaknesses  in  the  design  or  operation  of  internal  control  over  financial  reporting  which  are  reasonably  likely  to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.

Date:

January 27, 2021

/s/ MARK ZUCKERBERG
Mark Zuckerberg
Chairman and Chief Executive Officer
(Principal Executive Officer)

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 31.2

I, David M. Wehner, certify that:

1. I have reviewed this annual report on Form 10-K of Facebook, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other  financial  information  included  in  this  report,  fairly  present  in  all  material  respects  the  financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules  13a-15(e)  and  15d-15(e))  and  internal  control  over  financial  reporting  (as  defined  in  Exchange  Act  Rules  13a-15(f)  and  15d-15(f))  for  the  registrant  and
have:

a)  Designed  such  disclosure  controls  and  procedures,  or  caused  such  disclosure  controls  and  procedures  to  be  designed  under  our  supervision,  to  ensure  that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

c)  Evaluated  the  effectiveness  of  the  registrant’s  disclosure  controls  and  procedures  and  presented  in  this  report  our  conclusions  about  the  effectiveness  of  the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)  All  significant  deficiencies  and  material  weaknesses  in  the  design  or  operation  of  internal  control  over  financial  reporting  which  are  reasonably  likely  to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.

Date:

January 27, 2021

/s/ DAVID M. WEHNER
David M. Wehner
Chief Financial Officer
(Principal Financial Officer)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.1

I,  Mark  Zuckerberg,  Chairman  and  Chief  Executive  Officer  of  Facebook,  Inc.  (Company),  do  hereby  certify,  pursuant  to  18  U.S.C.  Section  1350,  as  adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

•

•

the Annual Report on Form 10-K of the Company for the year ended December 31, 2020 (Report) fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

the  information  contained  in  the  Report  fairly  presents,  in  all  material  respects,  the  financial  condition  and  results  of  operations  of  the  Company  for  the
periods presented therein.

Date:

January 27, 2021

/s/ MARK ZUCKERBERG
Mark Zuckerberg
Chairman and Chief Executive Officer
(Principal Executive Officer)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.2

I,  David  M.  Wehner,  Chief  Financial  Officer  of  Facebook,  Inc.  (Company),  do  hereby  certify,  pursuant  to  18  U.S.C.  Section  1350,  as  adopted  pursuant  to
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

•

•

the Annual Report on Form 10-K of the Company for the year ended December 31, 2020 (Report) fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

the  information  contained  in  the  Report  fairly  presents,  in  all  material  respects,  the  financial  condition  and  results  of  operations  of  the  Company  for  the
periods presented therein.

Date:

January 27, 2021

/s/ DAVID M. WEHNER
David M. Wehner
Chief Financial Officer
(Principal Financial Officer)