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How Does Facebook Drum Up So Much Frothy Interest For Its Overpriced Shares? Help From The Media, Goldman, et. al.

Reggie Middleton's picture





 

I've had a few subscribers who, after reviewing the (subscriptiononly) FaceBook IPO & Valuation Note Update and Facebook Valuation Model, have seriously queried how Facebook is managing to drum up so much froth and interest for its obviously overpriced shares? The apparent answer is the marketing machine known as Goldman, et. al. The less recognized answer is assistance from the MSM, as demonstrted by this CNBC article - Facebook’s Premium Ad Prices Still Rising:

Pricing for Facebook’s premium “social” advertisements continues to rise, two recent studies have found—a positive indicator that could offset concerns about a dip in advertising growth and help sentiment towards the Internet company’s initial public offering.

This is a net positive statement, no?

A report to be released on Monday by Marin Software, a digital marketing platform that processes more than $100 million worth of spending on Facebook, found a 26 percent increase over the last year in the cost per click for “premium” ad formats such as Sponsored Stories, which highlight friends’ “likes”, comments and other endorsements of brands’ activity on the site.

Wow! That's pretty good growth and pricing elasticity, no? Bring on those newly public shares and let 'em rip!!!

However, Marin’s report also found the cost per click for Facebook’s standard ads, which make up an estimated three-quarters of the social network’s advertising revenues, fell 26 percent over the last year.

Wait a minute, if 75% of the companies product dropped in price, doesn't that easily swamp the 26% of the companies premium ads that rose in price? An even more direct questions is, why isn't this being reported as the net negative that is is? Let's walk though this step by step for the more arithmetically challenged amongst us...

 

   % of revenue  Increase/decrease in Average cost Net Change to Gross Revenue
Facebook Premium Ads 25% 26% 6.500%
Facebook Regular Ads 75% -26% -19.500%
      -13.000%

 

So, according to this MSM article, reporting a net 13% drop iin revenue somehow amounts to - and let me quote this so as to be as accurate as possible - "a positive indicator that could offset concerns about a dip in advertising growth and help sentiment towards the Internet company’s initial public offering". Please excuse me as I wipe the splattered bullshit from my computer screen - it's hard to type accurately with those opaque, stinking brown stains in the way. Even worse, it goes to show what portions of the MSM actually think in terms of the intellectual capacity of its readership.

Facebook will this week begin a roadshow to convince potential investors that its business is worth up to $96 billion in its initial public offering later this month.

So, slower subscriber growth...

Faster cost growth and lower profits - Facebook First-Quarter Profit Drops; Costs Almost Double, and a 13% drop in gross  ad pricing - virtually the sole source or revenue for Facebook, amount to a valuation for this company that at 99 Times Profit Exceeds 99% of S&P 500 Index. Hey, it gets better...

Marin’s report follows data published last month by TBG Digital, a digital advertising firm that buys Facebook ads on behalf of 235 companies in 190 countries, showing a 23 percent increase in cost per click for the first quarter of 2012 compared with the fourth quarter of 2011.

The cost of delivering an ad to 1,000 people increased 41 percent in the first quarter of 2012 compared with the same quarter last year. However, click-through rates on ads—a key measure of effectiveness—fell an average of 6 percent across Facebook’s top five territories.

Advertisers’ desire to grab the attention of the social network’s 900 million users is still running ahead of their ability to measure the returns from that investment, which is seen as a key long-term challenge for the social network.

 Here's where I broke it down on Capital Account

I also happened to do the same on the Max Kesier show...

Subscribers who haven't refreshed their viewing of our Facebook research should do so now - (subscription only) FaceBook IPO & Valuation Note Update. Pro and instititional subscribers are welcome to peruse the downloadable Facebook Valuation Model, allowing you to input your own assumptions in the very unlikely event you may not agree 180% with me :-)

And from the archives...

Reggie_Middleton_Facebooks_Valuation

Facebook Finally Faces The Fact Of BoomBustBlog Analsysis

I discussed Facebook on the Peter Schiff radio show, the Facebook excerpt is below...

From my previous Facebook analysis public excerpt:

Yeah, I was on a roll last year, wasn't I? That's not the gist of it either, as we reminisce even more...

Here is an excerpt for those who do subscribe to our research and services, YET!

Even with the fund taking 45%+ losses and the LP (limited partners, ex. Goldman's clients) losing every last single dime, Goldman easily pulls a 33% return. God forbid Facebook share actually do well, Goldman's numbers look... Well... Damn near illegal! Almost as if they can pump up a price without any fundamental justification or public disclosure of financials and still sell it retail to the public. Of course, such a thing could and would never occur - not with the every vigilant SEC to take our backs. Excuse me while a cough a up a lung from laughter...

You see, this is the dirty little secret of private equity funds. They are not in the business of investing money for client's maximum risk adjusted return. They are in the business of collecting fees. Those poor innocent (or not so, particularly when they are investing their clients monies, hence are in the same business) souls that actually believe as the commenter above quoted "Wow!!! If Goldman is putting their money in this, it must be serious!"simply the lamb being led to the private equity/IPO slaughterhouse. You see, there is no loss to GS - no matter how high they bid up the valuation nor how hard it comes crashing down. This gives them the incentive to shoot for the sky with the private equity deal, because when the IPO breaks, its bonuses bigger than nearly any have ever seen. Facebook makes and excellent marketing story as well. Boy Wunderkind CEO, a product nearly everyone uses and loves, and a mysterious dearth  of business model to give it a mystical effect. Don't forget the involvement of the "cream of the crop" of Wall Street banks, whose bankers, traders and analysts are all so much smarter than us guys from Brooklyn. Add this up, and you get "Wow!!! If Goldman is putting their money in this, it must be serious!".

Additional Facebook analysis, valuationa and commentary.

On Max Keiser, go to the 13:55 marker for more on Facebook...

Last month I released an update to our Facebook IPO analysis (subscribers may download it here FaceBook IPO & Valuation Note Update). In its caveats section, I made pains to make very clear that one of the biggest threats to Facebook investors actually emanates from within, to wit:

FB_Corporate_Governance_issues_pt_1

FB_Corporate_Governance_issues_pt_2

Of course Facebook enthusiasm is burning hot. The coals in the "investor" (and I put this lightly) fire are being stoked by none other than the sell side agents doing God's work, among others...

Professional and institutional BoomBustBlog subscribers have access to a simplified unlocked version of the valuation model used for this report, available for immediate download - Facebook Valuation Model 08Feb2012. The full forensic opinion is available to all subscribers here FaceBook IPO & Valuation Note Update. It is recommended that subscribers (click here to subscribe) also review the original analyses (file iconFB note final 01/11/2011) as well as the following free blog posts on the topic:

  1. Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week!
  2. Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!
  3. Here’s A Look At What The Goldman FaceBook Fund Will Look Like As It Ignores The SEC & Peddles Private Shares To The Public Without Full Disclosure
  4. The Anatomy Of The Record Bonus Pool As The Foregone Conclusion: We Plug The Numbers From Goldman’s Facebook Fund Marketing Brochure Into Our Models
  5. Did Goldman Just Rip Its HNW and Institutional Clients Once Again? Facebook Growth Slows Pre-IPO, Just As We Warned!
  6. The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1
  7. The Final Facebook Forensic IPO Analysis: the Good, the Bad & the Ugly

Follow me on Twitter, http://twitter.com/#!/ReggieMiddleton.

 


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Mon, 05/07/2012 - 22:30 | Link to Comment Godisanhftbot
Godisanhftbot's picture

 So here's the question, if they offer you 5000 shares at the ipo price, do you take it , flip it, or say, no, I don't want my good name soiled with ownership of such a bloated turd?

 

 

Mon, 05/07/2012 - 20:21 | Link to Comment TheCanimal
TheCanimal's picture

What about the children?

Mon, 05/07/2012 - 19:04 | Link to Comment besnook
besnook's picture

the facebook ipo will be the biggest sell the news event in history.

Mon, 05/07/2012 - 17:50 | Link to Comment ThisIsBob
ThisIsBob's picture

Wouldn't touch it with your groupon.

Mon, 05/07/2012 - 17:48 | Link to Comment jomama
jomama's picture

here's the reddit co-founder stating he won't buy simply because of Failbook's CISPA policy.

Mon, 05/07/2012 - 17:46 | Link to Comment YesWeKahn
YesWeKahn's picture

People will still buy facebook for the name of it.

Mon, 05/07/2012 - 16:21 | Link to Comment Widowmaker
Widowmaker's picture

Perhaps Mr. Middleton should try serving up money on a silver platter next time.

Fuckerberg's brick will go straight to the bottom.

Couldn't happen to a more arrogant twerp.

 

Mon, 05/07/2012 - 20:05 | Link to Comment lakecity55
lakecity55's picture

Zuckerstein is laundering $$ for his butt buddy and hero, Barry X.

He looks like he's getting a woodie whenever he's around the Man of Mystery.

Me, I want stock in the new NSA facility.

Will there be an IPO?

Mon, 05/07/2012 - 16:00 | Link to Comment Bartanist
Bartanist's picture

Well IMO, Facebook has very little interest frm the public. The obligatory debt fueled capital will be created by the banks, distributed to the co conspirators and they will overpay for Facebook ... laddering their way to some ungodly stupid valuation. Stupid if it was not part of the conspiracy.

From what I have read, the NSA created Facebook, not some connected son of a son who likes killing chickens. Taxpayer money was used to fund the growth of a super spy network... a portion of that is Facebook, where people input their own data for the master databank.

So since the core of the alternate government includes the heads of the globalist banks, fascist globalists, such as Soros, key components of the US military industrial complex (such as the NSA) and others ... they occasionally flop their assets around for a specific purpose.

HOWEVER, it should be understood that there is no connection between price and value. 

Mon, 05/07/2012 - 17:55 | Link to Comment ThisIsBob
ThisIsBob's picture

79,4564,990 people servng up their dossiers on a silver platter.

Go long storage.

Mon, 05/07/2012 - 15:56 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

You know when they are offering pre IPO shares on Etrade to retail investors that the deal is not very good.

I would not invest in a Company with a 27 year old in charge.  He is not mature enough to control a Billion Dollar Company.

Plus, who would even consider investing in Non Voting shares when an immature 27 year old could run the Company in the Ground?

I also think the IPO was pushed out fast because of the last earnings which missed and because there are a lot of people disconnecting their service with Facebook.  Information provided is being used to hurt people.  From the IRS, Employers, Government etc.   It has become a liability to have too much info on Facebook. Many are making all of their info private so it makes it difficult to check out other people.  So many making their profile private.  There is nothing to discover on Facebook anymore.  Just useless.

Mon, 05/07/2012 - 20:09 | Link to Comment lakecity55
lakecity55's picture

You bet there is a trend there. People are "unfriending" facebook except for perverts, I guess. There was a story where the site is full of pederasts.

Maybe that's it! A new site by Zionistberg: PedFace!

Mon, 05/07/2012 - 15:05 | Link to Comment SlorgGamma
SlorgGamma's picture

Reggie -

yep, you nailed it. Way, way overpriced, don't expect to get your money back for 20 years.

I study digital media for a living, so here's my twenty kopecks:

Facebook does deliver a useful service to customers and should do fine over the long haul. The problem is, the whole Vampire Squid bubble-machine is deeply toxic to functional capital markets, to building corporate cultures, or to producing anything of lasting value. Zuckerberg is a savvy entrepreneur and will retain control of his company, so Facebook will survive. The real damage will be in the ecosystem one level below Facebook: the small startups and medium-size firms who will deliver the next-gen community/gaming/entertainment content... precisely the ecosystem Facebook needs to justify those lofty valuations.

I can already hear the apologists for the Squid shouting, "But creative destruction is a good thing!" Nope. It will be destruction without the creation. The dotcom bubble was a disaster, but at least it gave us the broadband infrastructure for Web 2.0. But these microbubbles leave nothing behind but smoking wreckage and bankster bonuses.

The only winner: the BRICs are coming to town, and their software sectors are going to clean house.

Mon, 05/07/2012 - 14:47 | Link to Comment MrVincent
MrVincent's picture

Anyone who uses their real name on a site like that deserves to get their identity stolen.

Mon, 05/07/2012 - 13:59 | Link to Comment crawldaddy
crawldaddy's picture

why would any kid under 25 want to be in the same social space as their mom and aunt Ida?

Facebook will be a has been in 5 to 10 years.

Mon, 05/07/2012 - 15:08 | Link to Comment CH1
CH1's picture

Sadly, you should not discount the progress of Fascism.

FB will pay politicians to kill their competitors.

The politicians will be pleased to do it.

Mon, 05/07/2012 - 13:57 | Link to Comment q99x2
q99x2's picture

Froth = political bribes with the shares and I think the laws are able to be circumvented such that you can dump the IPO shares as soon as they become public. So ask Chuck Schumer. He'll laugh and probably just say Fuck you to let you know what the show is all about.

BANKSTA BRIBES to the Political CLASS as

They wage War against the middle class

Mon, 05/07/2012 - 13:57 | Link to Comment hotkarlandthecl...
hotkarlandtheclevelandsteamers's picture

didn't you think lnkd was overpriced at $40.

Mon, 05/07/2012 - 13:44 | Link to Comment RichardENixon
RichardENixon's picture

Matt Drudge has an interesting link regarding Facebook today:

http://www.wnd.com/2012/05/kids-raped-sodomized-on-facebook-pages/

I guess the shills will manage to spin this into "bullish" somehow

 

Mon, 05/07/2012 - 18:05 | Link to Comment indio007
indio007's picture

Drudge is dead meat now. All the cops and politicans are going to be pissed. They are the biggest pedophiles going.

 

Conspiracy of Silence

http://www.franklinscandal.com/cos/

 

Congress bought this expose' from Discovery beofre it could air.

Mon, 05/07/2012 - 13:34 | Link to Comment Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

Reggie Middleton is the African-American man who should be running the country.  

Ron Paul & he would make a good team.  Reggie crunches numbers like a computer, with NO Keynesian bullshit.  Reggie would've destroyed Obomber in debates.

Mon, 05/07/2012 - 13:21 | Link to Comment banksterhater
banksterhater's picture

Farcebook will go down as the biggest Piece of Sht SCAM IN US FINANCIAL HISTORY. Worth almost TWICE Conoco?  gfys! Deletion of your page takes a week, btw.

Mon, 05/07/2012 - 14:00 | Link to Comment crawldaddy
crawldaddy's picture

its the new AOL.  Maybe Warner could buy them too and destroy itself completely.

Mon, 05/07/2012 - 13:56 | Link to Comment The trend is yo...
The trend is your friend's picture

The number i'd really be interested in is....of those "active" users.  How quickly after signing up...as i did...and finding old friends....as i did...then getting bored of it...as i did....but still logging on once a week...then bi weekly...then monthly til inactive user.  Show me that data to convince me to buy this POS

Mon, 05/07/2012 - 13:19 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

Facebook is documented as a CIA company, set up with CIA funds, which was artificially pumped up into dominance by the CIA's Google - Google Inc. also documented as developed with CIA funds.

The CIA does much main recruiting at Harvard - going back more than half a century - and at Harvard they selected Mark Zuckerberg from the large group of ultra-Zionists there, to be the CIA dude getting wealthy from Facebook.

Zuckerberg is a CIA tool, as is arch-Zionist internet hoaxter and criminal Jimmy 'Jimbo' Wales, posing as the 'founder' of the CIA's Wikipedia, another website artificially pumped by Google for CIA and US regime related purposes.

The way that Google-CIA artificially pumped CIA-Wikipedia over several years, was practice for how they pumped CIA-Facebook.

The CIA funding at the origin of Facebook -

« ... funding into Facebook ($US12.7 million) came from venture capital firm Accel Partners. Its manager James Breyer ... served on the board ... of In-Q-Tel, a venture capital firm established by the Central Intelligence Agency in 1999. One of the company's key areas of expertise are in "data mining technologies". »
http://adventofdeception.com/facebook-ciacover-nwo-agenda/

Quite funny - 'satire' but truthful - Onion News Report on the CIA's Facebook project:
http://www.youtube.com/watch?v=cqggW08BWO0

'Ex-Agent: CIA Seed Money Helped Launch Google', retired intelligence agent Robert David Steele interviewed by Paul Joseph Watson, and speaking of the CIA's Dr Rick Steinheiser and his connections with Google:
http://www.infowars.com/articles/bb/google_cia_seed_money_launched_googl...

The CIA's main internet tool, Google Inc. at work - Here is Google's censoring of an important political refugee from the US in Belgium (whose avatar I use as a way of honouring him) - a Sachs unconnected with Goldman Sachs - who went to Harvard and the CIA tried to recruit him, too, but he became a dissident against America, and barely got out of America alive:

Live Photo: Google Inc. Caught Censoring EU Search Results (for USA - CIA)
Google Internet Censorship - Censure d'Internet par Google - Internet censuur door Google
http://www.flickr.com/photos/22325431@N05/6100668211/in/photostream

Mon, 05/07/2012 - 13:49 | Link to Comment Paul Atreides
Paul Atreides's picture

This has been going on for more then 50 years under CIA's Project Mockingbird and CISPA will tie it all together into one massive surveillance grid.

Mon, 05/07/2012 - 15:46 | Link to Comment LFMayor
LFMayor's picture

so you mean that they ran their first go at the testing scipts for facebook on ENIAC ?

Mon, 05/07/2012 - 13:19 | Link to Comment WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

 yes it is all fracked-up

Mon, 05/07/2012 - 13:14 | Link to Comment williambanzai7
williambanzai7's picture

SQUIDFACE WARNING

Mon, 05/07/2012 - 15:29 | Link to Comment battle axe
battle axe's picture

Hello, Dot Com Bubble part II....

Do NOT follow this link or you will be banned from the site!