This page has been archived and commenting is disabled.

As I Promised Last Year, Facebook Is Being Proven To Be Overhyped and Overpriced!

Reggie Middleton's picture




 

With Facebook slated to start trading in a few days, I feel it is appropriate to brush off some of the BoomBustBlog research and opinion that can help subscribers wade through the sell side waters. To wit, CNBC reports Facebook Faces User Distrust, Advertising Apathy: Poll:

More than half (57 percent) of Facebook users polled said they never click on ads or other sponsored content when they use the site, according to a new AP-CNBC poll. Another 26 percent said they hardly ever engage in such activity. Only 4 percent of users say they often click on ads — results that are only slightly better than the 2-3 percent clickthrough rate some experts consider the benchmark for effective banner ads.

This doesn't sound too good does it. Well, you can't say I didn't warn you last year: 

  1. Did Goldman Just Rip Its HNW and Institutional Clients Once Again? Facebook Growth Slows Pre-IPO, Just As We Warned!
  2. The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1

Facebook users have consistently cast a wary and suspicious eye on the platform: 59 percent of respondents said that they had little to no trust in Facebook to keep their information private.

That doesn't sound very good either, does it?

Yet despite those ongoing concerns, the number of users (and their engagement) continues to increase. Facebook has grown to 901 million monthly active users worldwide, with personal computer users spending six to seven hours per month on the site (compared to just 3 minutes for Google+ users), according to recent data from ComScore.

Now, this sounds very, very good. Of course, it doesn't sound as good when you look at it in context...

Slower subscriber growth...

As for Mark Zuckerberg, the wunderkind CEO who turned 28 on Monday inspires somewhat tepid confidence as a leader, with only 18 percent of respondents saying they were extremely or very confident in his ability to run a large publicly traded company like Facebook. Yet pinning down a specific reason was difficult for respondents, who neither cited his age, temperament, nor reputation as significantly affecting those abilities.

Now if one were to ask me why I would be tepid in my confidence in Zuckerberg as a leader, I would say that its not his leadership abilities that are the biggest concern, it is the fact that he can single handedly wreck the company and the weak ass board of directors and the shareholders would be powerless to do anything about it. Instead of referring to him as the leader you can refer to him as the 28 year oldpotentialtyrant and dictator. Reference Facebook CEO Running From Investors 'Cause He IS The Only Investor Whose Opinion Actually Counts?

CNBC also included this following chart...

Hmmm. That doesn't sound too promising, does it? Well, despite all of this, Facebook is finding absolutely no shortage of suckers asses for which to place in the Facebook IPO seat.... 

Hey, it gets worse. WSJ.com and Reuters report GM plans to stop advertising on Facebook:

General Motors Co will stop advertising on Facebook, a move that comes during the same week the social networking website is due to go public.

The U.S. automaker confirmed a report by the Wall Street Journal. A source familiar with the automaker's plans said GM's marketing executives decided Facebook's ads had little impact on consumers.

GM said it will still have Facebook pages marketing its vehicles, but it will drop use of paid ads. Anyone can create a Facebook page at no cost. GM pays no fee to Facebook for its pages, which allow the automaker to reach consumers directly.

... "In terms of Facebook specifically, while we currently do not plan to continue with advertising, we remain committed to an aggressive content strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers," GM said.

GM spends about $40 million on its Facebook presence, but only about $10 million of that is paid to Facebook for advertising. The rest covers the creation of content and the agencies involved, The Journal said.

GM, the country's third largest advertiser behind Procter & Gamble Co and AT&T Inc, spent $1.11 billion on U.S. ads last year, according to Kantar Media, an ad-tracking firm owned by WPP PLC. About $271 million of GM's total ad spend last year was for online display and search ads excluding Facebook advertising.

Hmmm... It appears as if the MSM has it out for Facebook today, in direct contravention of its historical actions pushing this company. I wonder if its because I wrote How Does Facebook Drum Up So Much Frothy Interest For Its Overpriced Shares? Help From The Media, Goldman, et. al.

I've had a few subscribers who, after reviewing the (subscription only) 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 in 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. 

It would seem that Facebook Finally Faces The Fact Of BoomBustBlog Analsysis

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.

It is strongly recommended that said subscribers download and input their own assumptions into said model in order for confident preparation before the IPO launch! I just nominally input some very generous numbers and the best case scenario chart (see the chart tab after your own individual inputs) is quite revealing, indeed! 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).

 Here's where I broke it down on Capital Account

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

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

Additional Facebook analysis, valuationa and commentary.

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

Here are the 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
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 05/16/2012 - 12:00 | 2431697 Marginal Call
Marginal Call's picture

This post is short your normal Reggie logo and Reggie picture and Reggie video quota.  You're slipping.

Thu, 12/06/2012 - 03:21 | 3038472 jaffa
jaffa's picture

It's going to be very difficult to create a business using social networks unless you have an unique idea. There are so many people looking at social networking now, so the competition will be very tough. Also, the success stories are talking about the one in ten thousand who actually manage to create something, not the average. Thanks.
Regards,
[guest blogging sites]

Fri, 10/05/2012 - 01:17 | 2858423 jaffa
jaffa's picture

Social media applications used on mobile devices are called mobile social media. In comparison to traditional social media running on computers, mobile social media display a higher location and time sensitivity. Thanks. Regards,
inbound marketing company

Wed, 05/16/2012 - 11:53 | 2431670 Stroke
Stroke's picture

Myspace...Facebook...Oh Lauren sit on myface...hey wait a minute..

Wed, 05/16/2012 - 11:52 | 2431666 Along Came Betty
Along Came Betty's picture

Reply to Derek Vineyard...

Perhaps, but repeat appearances on Bloomberg TV, CNBC, and RT Channel probably is.

Haters.  Can't live with 'em, can't holocaust'em...

Wed, 05/16/2012 - 11:39 | 2431633 derek_vineyard
derek_vineyard's picture

Headlining your articles as "i told you so" over and over is not the path to credibility.

Wed, 05/16/2012 - 13:52 | 2432243 Reggie Middleton
Reggie Middleton's picture

Actually, my friend, the path to credibility is being right. Let that be the metric that guides you and you'll find it works just fine.

Wed, 05/16/2012 - 11:37 | 2431631 YesWeKahn
YesWeKahn's picture

Tyler, get ZH to IPO too. it also has millions of LOYAL users! Sell some shares to me now!

Wed, 05/16/2012 - 11:30 | 2431594 Richard Whitney
Richard Whitney's picture

Reg, I love ya, but a GM decision should never be used as an example of wisdom. I am surprised that GM customers are online.

 

Wed, 05/16/2012 - 10:37 | 2431375 crawldaddy
crawldaddy's picture

its a fad, and its not a product that someone esle cant and doesnt copy.  All that keeps Facebook in the spotlight is "street Cred" with the kids, as soon as its deemed the" uncool place "( aka myspace) it will join myspace. Facebook does and is nothig special tech wise.  Its basically like a popular blog, why is it popular, who the fuck knows but popularity can always change at any time.

Wed, 05/16/2012 - 11:33 | 2431608 Bollixed
Bollixed's picture

"All that keeps Facebook in the spotlight is "street Cred" with the kids,"

My wife and her friends are all in their 50s and 60s and they spend half the day on FB. They use it to keep in touch and share fotos, etc.

Basically bandwidth hogs that would never click on an ad. They love the place. Why? Because it's FREE.

 

Wed, 05/16/2012 - 10:36 | 2431366 Keith Piccirillo
Keith Piccirillo's picture

Felix Salmon has a good piece today  as well.

Fleecebook will exose the whole market, and shear holders of their share value and leave them shivering in the cold.

 

 

Wed, 05/16/2012 - 12:30 | 2431809 garypaul
garypaul's picture

WTF is an exose?

Wed, 05/16/2012 - 10:32 | 2431358 adr
adr's picture

Sorry Reggie. Analysis, numbers, and truth mean nothing in the stock market today. The only two things that matter are hype and insider selling.

You are trying to convince people a real market exists and analysis really matters. If that were the case the market would be at 9000 and Facebook wouldn't be going public. Groupon would have already failed and there would be closed signs on every Bank of America branch.

America is over buddy. The country is a rotting corpse. Those pumping the stock market are vultures picking choice pieces of meat from the carcass. Once they have their fill, they will fly off leaving the rest to fight over the spoiled remnants. 

Wed, 05/16/2012 - 10:28 | 2431343 Bicycle Repairman
Bicycle Repairman's picture

Facebook is essentially a hula hoop.

Wed, 05/16/2012 - 10:47 | 2431423 crawldaddy
crawldaddy's picture

if that, It's not as if Facebook has a patent for social media.

Wed, 05/16/2012 - 10:20 | 2431306 BeetleBailey
BeetleBailey's picture

"GM spends about $40 million on its Facebook presence, but only about $10 million of that is paid to Facebook for advertising. The rest covers the creation of content and the agencies involved, The Journal said."

30 million.....to "create ADS...and the agencies involved".

Mad Men indeed.

Mad Money.

How much for that Volt again?

Wed, 05/16/2012 - 10:40 | 2431384 adr
adr's picture

Most of the ads are created by agencies in NYC or LA. Gotta pay for that pricy housing somehow.

Ad agencies are the bastard children of stock brokerages and law firms. Way overpaid and way overhyped. You can find a better ad agency in the midwest than any in NYC for 1/10th the price.

At least the midwest agency probably won;t come up with some crap social justice propaganda ad masquerading as a  car commercial. Wow we have a black president so now all of the power people in ads must be black.

Like the save for your kids college ad. White people sitting around a table all asking, "Hey have you started saving for college yet." Relies are. "No, I don't even know where to start, why she's only two." Cut to the black couple, "Oh we've started and it couldn't be easier. We're actually way ahead of the game." The white people are schooled by their much smarter and better prepared company.

Wed, 05/16/2012 - 11:23 | 2431570 Lord Koos
Lord Koos's picture

You need to get a life...

Wed, 05/16/2012 - 10:39 | 2431380 crawldaddy
crawldaddy's picture

30 million for ads that dont work.  My god.  It take all of a few hours to create html 5 and/or flash ads and banners.

Wed, 05/16/2012 - 10:16 | 2431292 Winston Smith 2009
Winston Smith 2009's picture

Pets.com x 100. 

Wed, 05/16/2012 - 10:15 | 2431288 EFNuttin
EFNuttin's picture

Facebook == Social Networking   They have successfully about cornered that niche of the Internet.  Remember, there used to be MySpace and some other stuff I forget too?  Facebook's problem will be somehow turning a "virtual neighborhood" into a center for commerce online.  I don't see it.  I don't log into Facebook to go shopping, I login so I can look at funny pictures of cats with humorous captions.  Come to think of it, I only login once a week now because it's such a complete waste of time.  Besides, for social networking, I prefer grumpy, libertarian economics hobbyists.  I about never make a buck from a tip on FB, but I do from ZH.

Wed, 05/16/2012 - 10:36 | 2431368 ParaZite
ParaZite's picture

Eh, First there was Myspace, and it was good. 

Then I got distracted by this Facebook thing, and forgot all about myspace. 

Then Justin Timberlake thought he could bring the sexy back to myspace, but myspace was never that sexy to begin with. 

Oh look, shiny! It's google +. 

What was facebook again?

 

^ Give it 2 years...

Wed, 05/16/2012 - 10:07 | 2431244 BeetleBailey
BeetleBailey's picture

Hey Reg...sorry to thread jack, but just watched an awesome video on the Space Shuttle booster rocket ride.

Done in HD and Surround Sound!

http://kottke.org/12/03/what-the-space-shuttle-booster-saw

Spectacular...and something FB could never do!

Enjoy!

Wed, 05/16/2012 - 09:45 | 2431194 smb12321
smb12321's picture

With social media exploding have we entered a new age where the products of our labor cannot be defined?  I mean, we can see, touch and/or use tools, machines, medical systems, computers and clothes but it appears that as a product, social media is still searching for a definition.   Prediction:  Enormous IPO then either (1) slow sinkage or (2) Facebook will branch out to real things.

Wed, 05/16/2012 - 09:55 | 2431226 Morrotzo
Morrotzo's picture

I think the "branching out to real things" would be some sort of Facebook shop where you could buy things from it, like Amazon.com

The thing is when people were asked if they'd feel safe buying from Facebook and confident that the order would be fulfilled 57 percent said

"AW HELL NO!" and another 10 percent didn't know. It will never, ever be Baby Amazon but it is going to try. And fail. Hard.

 

 

Wed, 05/16/2012 - 10:49 | 2431433 crawldaddy
crawldaddy's picture

yeah could see that now.  Hey your facebook friend Ziggy just bought adult diapers, would you like to buy adult pampers too?

Wed, 05/16/2012 - 09:42 | 2431184 Morrotzo
Morrotzo's picture

Did anybody read that article that stated about 20 to 25 percent of California's revenue growth is supposed to come from this Facebook swindle?

All the pension plans and things like that have gone FULL RETARD on this Facebook IPO.

This stock losing half its value could be a death blow for California.

Wed, 05/16/2012 - 09:46 | 2431202 smb12321
smb12321's picture

That's why CA officials were furious when the Facebook owner (of 4%) renounced his citizenship.  They were expecting an incredible payout.  Now why CA thinks it should have the wealth of those who thought up, implemented and ran the company is another thing, particularly when CA is obviously unable to run a lemonade stand.

Wed, 05/16/2012 - 09:34 | 2431166 ihedgemyhedges
ihedgemyhedges's picture

FB IPO will be to 2012 what AOL/Time Warner merger was to 2000.....................

Wed, 05/16/2012 - 09:31 | 2431157 ParaZite
ParaZite's picture

Another IPO that starts HIGH and ends up plummeting down to half it's initial selling price... seems to be the current IPO trend. I don't play the market, but even I have seen what's happened over the past year with IPO's. 

Wed, 05/16/2012 - 10:40 | 2431392 AlaricBalth
AlaricBalth's picture

 

 

MYSPACE - Bought by NewsCorp. $580 Million  2005

MYSPACE - Sold by NewsCorp. $35 Million  2011

Facebook Valuation - $104 Billion - 2012

Facebook Valuation - ??? - 2018

The next Zuckerberg will come along and begin to supplant Facebook in a year or two.  The initial barriers to entry are minimal. Also, Google+ is taking market share and has a cleaner interface. The 'Cool Factor" of Facebook is gone.  Not many users click the ads. Zuckerberg too immature to run a public company. GM just decided to discontinue paying for advertising on FB, saying it just doesn't work. If Grandma has a FB account, what does that tell you?

After the hype, this is the mother of all shorts!!!

 

Wed, 05/16/2012 - 10:46 | 2431415 crawldaddy
crawldaddy's picture

yep,  imean how easy would it be to make a site that basically does everything that facebook, linked in and groupon does all at once?  and make it user friendly and clean looking?  Not hard to do, the only hard part is to get people to notice and use it.  These websites are NOTHING special.

Wed, 05/16/2012 - 12:03 | 2431705 bank guy in Brussels
bank guy in Brussels's picture

The reason Facebook got 'noticed', and popular and dominant, is because it is a CIA company pumped up to the top of search results, by another CIA-seeded company, Google Inc.

CIA-Google pumped CIA-Facebook just like they spent several years pumping CIA-Wikipedia which would have been otherwise regarded as a site of lies and rubbish. CIA-Google censors and blocks websites that criticise CIA-Wikipedia, and there is no doubt they will continue to manipulate search results to protect CIA-Facebook.

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 fellow arch-Zionist and internet hoaxter, the criminal Jimmy 'Jimbo' Wales, posing as the 'founder' of the CIA's Wikipedia - they let 90% of Wikimedia appear 'neutral' so the other 5-10% can be US regime lies for specific purposes, like attacking Muslims, or dissidents to the US or Israel.

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

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/

'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, censoring sites exposing CIA-Wikipedia - 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

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