What is there to say about Facebook?
Why would anyone buy a company’s stock when they have no real profit pedigree? When their advertising profit in 2011 came to just over $1 billion, and their book value is the region of $100 billion, how can that really make any sense other than to the kind of nutcase zombie trader who takes Jim Cramer seriously? The sad truth is that people are just not clicking the ads; Facebook ads receive far fewer clicks than competitors such as Google’s AdSense.
If Facebook was floating with a book value of $5-10 billion (or around $2-4 per share) we would be talking about a serious business proposition, albeit one which is already rather saturated (given that there are 2.3 billion internet users, and Facebook already has its claws into 900 million of them). But at these levels? What are people paying for?
Some say the name recognition and momentum (but that’s just paying for hype) as well as the infrastructure and data that Facebook owns. Certainly five or six years of a big chunk of humanity’s likes and dislikes is a valuable database. But how do they monetise that? Does Zuckerberg have any credible plan?
The most under-reported piece of news of the day is surely that Zuckerberg does seem to have a plan. But it’s not very credible.
From the BBC:
Facebook has started testing a system that lets users pay to highlight or promote posts.
By paying a small fee users can ensure that information they post on the social network is more visible to friends, family and colleagues.
The tests are being carried out among the social network’s users in New Zealand.
Facebook said the goal was to see if users were interested in paying to flag up their information.
That’s their plan? That’s Zuckerberg’s big idea? Get users to pay to post premium content!? Did the well-circulated hoax that Facebook planned to get users to pay for use just turn out to be true? If they proceed with this (unlikely) it seems fairly obvious the world would say goodbye Facebook, hello free alternatives.
The truth is that Facebook is a toy, a dreamworld, a figment of the imagination. Zuckerberg wanted to make the world a more connected place (and build a huge database of personal preferences), and he succeeded thanks to a huge slathering of venture capital. That’s an accomplishment, but it’s not a business. While the angel investors and college-dorm engineers will feel gratified at paper gains, it is becoming hard to ignore that there is no great profit engine under the venture. In fact, the big money coming into Facebook just seems to be money from new investors — they raised eighteen times as much in their flotation yesterday as they did in a whole year of advertising revenue. For an established company with such huge market penetration, they’re veering dangerously close to Bernie Madoff’s business model.
On the other hand, they have plenty of time and money to try out various profit-making schemes. Eventually, they may hit on something big; Apple didn’t start out producing huge cashflow or sales, they got there the hard way. But it all seems like a big gamble on an outfit with big dreams but little moneymaking pedigree. I’d consider buying Facebook at $2-4 a share. But current valuations are a joke — and I don’t think the market is falling for it.
Even the NYT notes:
The company’s bankers had to buy shares to keep the stock from falling below its offering price, raising questions about how the stock will fare next week.



The end of the world is near ...The ten plagues of Pharaoh “have been brought upon” the USA.
http://eamb-ydrohoos.blogspot.com/2010/02/ten-plagues-of-pharaoh.html
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World War III - The first private war in history
Those who won all battles shall lose the war.
http://eamb-ydrohoos.blogspot.com/2012/02/world-war-iii.html
Does anybody still use Digg?
Worth re-posting this excellent article by Heidi Moore in yesterday's Guardian about this clusterfuck of an IPO:
Facebook IPO: an anatomy of Wall Street overreach
Before trading, Facebook's bankers were ready to count their profits in billions. By close, they'd had to bale out their own IPO:
The day of Facebook's first day of trading as a public company brought with it a strange perspective: the highest manifestation of a social media bubble and its ugly aftermath, all in the span of a few hours. Who would have thought that Facebook's much-hyped IPO – in its bold $16bn size, the apotheosis of uncontrolled, frothy, capitalist ambition – may have been just the thing needed to bring Silicon Valley high spirits back down to earth and send ambitious techies snuggling back into their hoodies?
The day opened with crowds awaiting Facebook's debut in New York's Times Square, waving at cameras. Gleeful Facebook employees, with sugar-plum dreams of newly-minted fortunes, crowded with smiles behind CEO Mark Zuckerberg at the company's Menlo Park headquarters. The Wall Street Journal created a Zuckerberg Wealth-O-Meter ($20bn at the latest count) and the New York Times revealed the subtle-wealth secrets of 1,000 new millionaires created by the IPO.
Just to play a concise version of the parlor game that went around the stock markets, Facebook's market value at $104bn – with $3.7bn of profits – would have made Facebook worth more than: internet megastore Amazon.com; global beverage behemoth PepsiCo; petro-giant Total; BHP Billiton; and McDonald's. It was not far off the valuation of JP Morgan Chase, an international bank with $1tn in assets. Over the previous weeks, one brief glimpse of Mark Zuckerberg in a hoodie, heading to an investor meeting, launched the kind of press coverage we've hardly seen since the Beatles. JP Morgan itself, one of the company's banks, flew the Facebook company flag next to the stars and stripes of the United States, and papered its headquarters with Facebook signs.
One was tempted to caption many of the pictures, media packages and general euphoria with a single sentence: "On the sixth day, He created Facebook." It was a vision of capitalist paradise, all the richer because Zuckerberg openly disdained the money-waving bankers and investors of Wall Street. What could possibly go wrong?
The popping of this culturally focused Facebook bubble – if not the financial one – was decisive. A few hours later, the scene was decidedly more morose.
The IPO was delayed three times on the Nasdaq exchange because of technical difficulties. Facebook's stock price began a determined move downward – until its 33 banks rushed to buy up shares to avoid embarrassing the company. Zynga, the publicly traded company that makes Farmville and contributes 12% of Facebook revenues, took the aftershocks from Facebook's struggle strongly: its stock fell so fast that its trading was halted. Financial television pundits turned tail and suddenly cautioned against putting faith in an irrational frenzy about Facebook.
The bubble giveth, and the bubble taketh away. What brought Facebook's prospects down – at least, on its first day of trading – was the simple fact that the relationship between a company's stock price and its true value has always been an uneasy one. It is more so for this strange breed of social media leaders – Facebook, LinkedIn, Groupon, Zynga – which appear in front of millions of people but have relatively little in revenue to show for it.
Facebook, as the leading social media company of our time, tested the limits of whether investors are willing to pay anything to participate in the popularity of social media – the way they filed like lemmings to invest in hapless dotcoms like Pets.com in the late 1990s. With Facebook as their avatar, other social media companies have sought high valuations: Instagram recently sold for $1bn, and the most recent estimate on the scrapbooking site Pinterest was $1.5bn.
What happened was a decisive statement. Wall Street is trying to capitalize on the financial hype by sending out companies like Facebook, LinkedIn, Zynga and Groupon public before they are mature enough to sustain the pressure of being publicly-owned companies. But what Wall Street wants and what Wall Street gets, these days, are two very different things.
Regular investors – just normal Americans – bought 20% of the Facebook IPO. They are usually known derisively as the "dumb money". They have wised up a bit, perhaps, in the decade since the dotcom bubble. Most of the hype, and the expectation of vast riches, came from Wall Street bankers and professional investors – another sign, perhaps, that the finance industry is trapped in its own bubble, out of touch with American sentiment.
For Facebook, the first day of trading was mildly embarrassing – no big "pop". It closed on the day moving down: the stock closed at $38, the exact prior price set by the underwriters. As a metaphor, this was irresistible: after all the excitement, talk, euphoria and disappointment, Facebook ended the day right where it started.
"But current valuations are a joke — and I don’t think the market is falling for it."
No Greater Fools showed up on Friday, anyway.
So far the money only exists on paper. Remember, the money you lost in 2008 (or didn't lose if you aren't a complete idiot) didn't actually exist. Facebook doesn't actually exist neither does it market valuation. Tha money can be erased as fast as you can say Zynga Bubble 2.0.
My thinking is that this marks a top.
Market dies next week...
If this is what they are planning on doing as some think then it isn't the wave of the future, it's more fake bs. The world is sick and tired of fake bs, so if their business model is to add more fake bs to screw with their members, then this is something that helps push the snowball down the mountain. Even organic fads have their flaws and people are becoming wise to this. It was allowed because it was online and slightly different take of the same fad. Non-organic ones? I've never seen that ever work.
Apple had actual products, and when the Apple II faded, so did the company. The one thing that probably kept them afloat was their absolute hammer down on the schools. But with windows 95, that started going away. The ipod reinvigorated it, but that was over twenty years after the Apple II was introduced. The iPhone kept it up, but even these products are becoming redundant and easily copied. Any cell phone can be an ipod.
Notice their big advantage recently was with Siri, which is just software and will be copied. The point is, Apple made money when it was ahead of the competition with real products. I've yet to see Facebook have a real product. It just has a relatively pointless service, and one they didn't invent, and can easily be copied with few barriers of entry. You could say they are already saturated or damn close. People already don't trust Facebook, this just piles more onto that.
Now that they've gone public and are officially in the Wall Street game, squeezing every nickel becomes more important than your customers, and it looks like they're hitting the ground running on destroying whatever goodwill they have with them.
Google got big because it was the first search engine that actually worked, and they've been smart not to drown it down with useless crap on the homepage like everyone else did (which was really important before multicores and broadband). The blowback has been their links to intelligence and law enforcement alongside the map vans/satellites and the wifi snooping.) I still feel the jury is out and the blowback will increase.
Sure with facebook some companies might be 'liked' by someone, but this too is overdone and not sustainable. How many start 'liking' because it's part of some promotion? Get 10 percent off or some crap. It's not that the friend actually likes them, they just got something and sold out. People know this, and those that haven't figured it out, eventually will.
Google adsense links with what a person is actually searching, and thus is tailored to that person, not trying to push it's way in based on what some friend sold out for cheap and linked them in. Neither are great, but Google's version is far superior. Not to mention the time and place are right for such introductions. This setup is far more favorable for clicks. Searching for something is active. Facebook's version would be passive.
While a few big companies might be liked, it's the smaller ones that will tend to be liked over the big ones going forward. The rare, obscure or new stuff. Like a small game developer. Unique clothing brand. Up and coming something or other. Something someone feels deserves the praise and wants to succeed. These companies are going to have a lot less in the advertising budget to pay for this kind of thing, and have a greater chance not to be on facebook to begin with.
Again though, if no one is clicking, then who wants to spend on premium placing? It's far more limited than what Google does, because it's separated from what someone is actually caring about, and pretending that someone they know actually cares about that product, at a poor time because it reaches the passive user not the active.
This will barely move the numbers and with Facebook's decreasing reputation, it amounts to picking up pennies on the highway that may be Canadian. Sure it's possible they may shift some numbers around, but that too won't be organic. For a time they might get some people to shift some of their ad buys into it, but that's just cannibalization, not real growth. They can add it as a bonus to retain high dollar ad buyers to maintain their ad buys, but that too is about minimizing attrition. If it's their plan to package it to raise overall prices, that too doesn't add much value.
As for the end user, I don't see many taking advantage of it. It'll be seen as sad, and the unintended consequences as those insecure to use it to increase visibility might actually push marginal friends away. I can already see the juvenile jokes about faking their way to the top.
Again adsense is more natural, Facebook's plan feels fake, forced, and out of place.
This is really just hilarious.
BBut we have 900 million captive users and can cram anything we wnat down their throats!
Yea, but they are only there cus it's free and there's a bunch of people on it. Every single time you change shit people get pissed about it
Ad revenue!
Adblock and mobiles!
NEW great idea! let people BUY update highlighting!
Seriously? Who the hell is gonna be doing this other than spammers? Anyone I see who pulls that crap gets defriended instantly. I honestly can't think of any real, legitimate reason for pulling that crap.
GAMES!
You mean zynga? the thing you rely on for 12% of your revenue, which wants to cut you out of the picture? the thing that was only pulling in cash because their model was one of installing spyware, conning users into scams and frauds and other blackhat bullshit? fraudbook?
There are services that sell "likes" to boost some fake appeal. Offering a coupon or whatever for a "like"? They did it for the coupon, not because they give a shit. There are literally millions of 100% fake accounts and millions more pointless accounts, business accounts, marketing accounts, etc. These will never generate any revenue ever from ads. The only revenue will be from their shitty highlighting thing, and that'll die the second it starts.
The only value that facebook has is either trying to become an online payment gateway (seriously though, any business knows having their own merchant account is cheaper, and what idiot would share bank details with this site?) or selling off all the data to marketing departments. The data thing is kind of a bust already. Social media monitoring platforms already exist, but they are full-scope and include many more services and systems. So selling your data outright I guess. From a marketing perspective this could be interesting. Linked with products and filtering out bullshit "friends" it would be possible to identify the leaders in product acceptance and whatnot, seeing how it spreads, conducting viral marketing by pushing hard on specific users. But that only works if the data is sold. Everyone will be after the same shit, same people, so it fails.
Data privacy is the next big thing once people get fed up with the bullshit. Ads are either ignored or blocked. The CTR on them is low enough to be mostly accidental clicks and the only conversions that ever work is when they are offering free shit for a "like". CPM might have a subconscious impact, but again, we're talking display ads and the internet. Most people have long since figured out how to ignore it all.
Other ways to move forward.
Facebook Search! Finally making stalking even easier!
Limited number of friends unless you pay! Hello multiple accounts!
Charging for business sites. Not free anymore? Screw that, and what exactly defines a "business" site as oppossed to any group site? Gonna start charging for those as well?
Try to make the universal login thing profitable? How exactly without resulting in everyone dropping it?
Just because everyone uses a thing doesn't mean that they are willing to pay for it or that it has actual monetization capabilities. Has twitter ever turned an actual profit? For all the hype? Youtube was just pissing away money to stay in operation, even now it's a loss leader, same goes with Android. Even in China, where ad buys are huge, social sites packed, they all lose money or make negligible profits in the end. The current revenue models are much more developed than facebook despite being called "clones" or "copies", which is also telling.
GM was smart enough to figure it out. The ad buys on FB are a waste of money, no one cares. There are some niche sectors that do ok, but that's basically it. Once marketing departments catch onto the game, it's all over and done. Now that it's been IPO'd that profitability will all be open to critical analysis. Figure out what the loss leader markets are, where is the money coming from, profitable markets will probably have stagnant growth or already be over-saturated. Click-to-buy conversions are kept industry secret (because they are crap) with the only conversion rates make public being "likes" counting as "conversions". Not making money? You must be doing something wrong!
I see this stock cratering, followed with some drastic changes to the service in an attempt to boost revenue. Profits will be reported as increasing for the first quarter or two followed with lots of hype and bullshit. Then it will crater again once those models are proven to have failed.
Keep on the look out for sites like Diaspora. What made FB "cool" in the first place was college students and it started off rather small. As soon as the implications of making all your info public are in the public conscience, services like this will take off and be unstoppable. I have seen naysayers claiming that it's too geeky and hard to understand. Yea, torrents were too, obviously no one uses them. Bandwidth going up means that decentralized networks will be the future as latency drops. No ads, no downtime, no changes or updates unless you want them, no corporate controls, no censorship, nowhere to serve a subpeona, be as private or as public as you want. Ironically, facebook has created an ideal platform for spreading awareness of the service and any attempt to censor it will only boost credibility.
In the end, here's what facebook is. It's twitter with commenting ability, oh and they added in chatting as well along with a bunch of time-killing games. There, that's it.
I plussed ya. Good info and spot on! Mirrors sentiment to challenge and provoke. Analysis +1.
Ah, and don't forget that class action lawsuit. Big no-no in countries with strict data privacy laws. Looking at some nasty shit in the future coming up as a result.
I tend to go with the 'girl in the office' approach. That's telling me facebook is doomed. There was a point where the conversation from women in the morning was all about who did what on facebook over the weekend. For the last few months (year?) nobody seems to give s*** Too many mums, grannies and wasters on this now, although admittedly I don't have or ever will have an account. I saw enough on my friend's account to think, "nahhhhhhhh"
Banks ended up owning 86pc of a website! Wasting Your Hard-Earned Money through inflation is our motto.Short the fucking lot.
FB has not invented anything, they just did what was already there slightly better than Myspace and others. Social networking produces nothing, that's why the companies never last forever, and they probably never will. FB got lucky because of the media attention, but what the media gives it can take away just as quickly. Wait for FB to make mistakes and for a new better player to take over. It could be Google or even Apple. FB could very easily be pushed away by these big players. But really any new and fresh idea with a better business model will do it. This stock is not just overvalued, it simply has NO value, since it offers nothing new or unique.
facebook was the best the TBTF could come up with?..this is ring the bell time for the top..QE here we come ala G8 ..
more debt please sir..I want more. barry s obumalammadingdong
"On the other hand, they (FB) have plenty of time and money to try out various profit-making schemes. Eventually, they may hit on something big."
Perhaps not "plenty of time" (see "MySpace") and anyone paying the initial 110 P/E ratio (now 85) on the HOPE that they MAY come up with something unique, patentable/copyrightable, AND profitable, someday, someway, is the modern version of the dot.bomb "investor." They have the same hopium addiction that enabled Pets.com (for a short while).
Check this out. $11.76B of the $16B in FB shares sold Friday were bought to keep the price above $38. 580M shares sold Friday, 2.16B more to go. Good luck! The Facebook IPO probably really fizzles dramatically next week.:
http://www.telegraph.co.uk/technology/facebook/9276699/Facebook-IPO-figh...
Excerpt:
"Company filings after the market closed on Friday night however revealed the extent to which the banks who led Facebook’s initial public offering - in which $16bn of shares were sold to new investors - were forced to move in to the market and buy shares in order to keep the price above the $38 level. Morgan Stanley, Facebook’s lead financial adviser, ended the day with 162m shares, worth $6.16bn. Other banks including JP Morgan and Goldman Sachs also bought shares, ending the day with $3.2bn and $2.4bn holdings respectively"
I just created a groupon - 10,000 facebook likes from 5000 unique accounts for half off. The deal is on! And in the event any of you guys play zynga games, we're running a15% discount on all our hacks and bots through the end of the month. Check out our twitter stream for more information.
pretty typical model for any wall street corp i guess
people with faces .. like to talk .. just ask AT&T
r
I have a Fakebook page.
http://www.youtube.com/watch?v=KrkH_WQxxEA
I say its just a time suck where only fb wins, its like a transference of wealth from corporate productivity lost when slaves fuck around at work. like the Microsoft game solitaire- ever wonder how much that game has cost in terms of lost revenue and productivity?
I would wager the most expensive game in mankind's history.
KILL FACEBOOK
HFT Tractor Beam in Facebook (FB) http://www.traddr.com/video/hft-tractor-beam-in-facebook-fb
well, that was not an epic fail for facebook, they cashed in epic money, it was an epic fail for the underwriters and soon the 'investors' of this new pet.com ;-)