Why I'm not buying Facebook

It's harder than it appears...

http://www.fastcompany.com/node/47593/print

"The gallon jar reshaped Vlasic's pickle business: It chewed up the profit margin of the business with Wal-Mart, and of pickles generally. Procurement had to scramble to find enough pickles to fill the gallons, but the volume gave Vlasic strong sales numbers, strong growth numbers, and a powerful place in the world of pickles at Wal-Mart. Which accounted for 30% of Vlasic's business. But the company's profits from pickles had shriveled 25% or more, Young says--millions of dollars.

Young remembers begging Wal-Mart for relief. "They said, 'No way,' " says Young. "We said we'll increase the price"--even $3.49 would have helped tremendously--"and they said, 'If you do that, all the other products of yours we buy, we'll stop buying.' It was a clear threat." Hunn recalls things a little differently, if just as ominously: "They said, 'We want the $2.97 gallon of pickles. If you don't do it, we'll see if someone else might.' I knew our competitors were saying to Wal-Mart, 'We'll do the $2.97 gallons if you give us your other business.' " Wal-Mart's business was so indispensable to Vlasic, and the gallon so central to the Wal-Mart relationship, that decisions about the future of the gallon were made at the CEO level.

Finally, Wal-Mart let Vlasic up for air. "The Wal-Mart guy's response was classic," Young recalls. "He said, 'Well, we've done to pickles what we did to orange juice. We've killed it. We can back off.' " Vlasic got to take it down to just over half a gallon of pickles, for $2.79. Not long after that, in January 2001, Vlasic filed for bankruptcy--although the gallon jar of pickles, everyone agrees, wasn't a critical factor."

(Fascinating article over all, well worth the full read.)

Then they should do many round-trips:

  1. Long $FCBK
  2. Unblock facebook.com
  3. Sell $FCBK 
  4. Short $FCBK
  5. Block facebook.com
  6. Cover $FCBK
  7. go to #1

Wait, let me get this straight. $2B in revenue is not 'sizeable' ?

Myspace hasn't released revenue information for 2010 yet. It's likely that the ratio will change substantially in facebook's favor as their revenue has grown considerably (assuming facebook's revenue reporting is trustworthy).

Nevertheless, Facebook's valuation is still shockingly inflated. Compared to Apple they have 1/6th the valuation at 1/30th the revenue, 1/4th the valuation at 1/12th the revenue of Google. It seems likely that Facebook is overvalued by at least a factor of 3, perhaps more (since both Google and Apple are bound by stringent revenue reporting rules).

At 1/6th the valuation of Apple (which is widely considered to be a bit overvalued today as well) but with one 30th of the revenue (

Bernanke -> Goldman -> Facebubble