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Facebook shares hit again as valuation doubts rise

reuters.com

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Re: Facebook shares hit again as valuation doubts rise

#21

Post by stonemetal »

gfosco wrote: post #7
matthodan wrote: post #6

I'm long and strong $FB via the IPO, but I think we're going to have a year of pain before we're in the clear. Facebook needs to prove that they can continue grow-- not an easy feat for a company with huge market share. I want to see Facebook redefine the market by developing better ways to monetize the social graph (duh!). I think mobile has potential, particularly outside of the US, but success will require great e…

Sadly, you're going to lose a lot of money. Facebook cannot possibly bring in the required revenue for growth. Their base will erode far faster than new business will come on board. The IPO was the bubble bursting, making the insiders rich, and laying the ruin for everyone who jumped in.

But they "only" sold 18 billion, that leaves insiders still holding 92 billion of FB. If this were really a bubble bursting wouldn't the rich insiders be holding a much smaller chunk of the fool's gold.

Re: Facebook shares hit again as valuation doubts rise

#22

Post by krschultz »

lionheart wrote: post #10

I'm not really sure why everybody here is so bearish on FB. Sure, its an unproven company with a high P/E ratio, but so are most tech startups when they go IPO. I think Zuckerberg has shown that he knows how to innovate, grow the company, and even make painful changes that eventually lead to more growth and profit. There is at least a decent chance that FB will refine their business model and turn into a large, stabl…

I think the big stumbling block is that Facebook's growth is getting population limited. That is remarkable to even think about, but they're running out people left on Earth that don't have a Facebook account.

So your opinion on Facebook's (financial) value really comes down to how much money you think they can make per user. Their current system seems to be 'show the user ads based on the users hobbies, interests, likes, etc'. That isn't massively effective for them, at least compared to a Google ad that has more 'intent' to it.

Now, if they start actually going through posts and pictures similar to how Gmail scans your email to contextualize the ads, that might bump up the ad relevancy and increase their margins. But a lot of people will complain about privacy (as was seen when Gmail started doing that).

Alternatively, Facebook could figure out some way to really monetize your social graph. Something more than just showing you personally ads. Maybe a recommendation engine or something like that, but whatever it is needs to be an order of magnitude greater revenue than what they have now.

I think if you don't believe they are going to make some kind of revolutionary change, then you end up being bearish on Facebook.

And then some people just simply don't like Facebook. Whether because it looks too much like something the popular kids like, or because most hackers are contrarians by nature, or because Facebook plays fast and loose with privacy at times, or because some people don't like PHP (I don't know, some of the haters have random reasons), people just hate on Facebook.

Re: Facebook shares hit again as valuation doubts rise

#23

Post by potatolicious »

WillyF wrote: post #13
gfosco wrote: post #12

Earlier quoted context omitted.

How is there a decent chance of that? Have they refined anything in the past and grown beyond a simple "get users, show ads" model?

Isn't that Google's model? It's worked out pretty well for them.

Google isn't strictly in the "get eyeballs, show ads" business - their meteoric success has been due to ad brokering, not the showing of the ads themselves. In short, they show ads to other people's eyeballs - being the broker is a much, much stronger position than being the one who has to collect all the pageviews.

Re: Facebook shares hit again as valuation doubts rise

#24

Post by nollidge »

simonsarris wrote: post #17
WillyF wrote: post #13

Earlier quoted context omitted.

Isn't that Google's model? It's worked out pretty well for them.

Well, when I look at companies that I might legitimately invest in, arguably the most important question is "what kind of room for growth is there?" Without getting too deep, its not hard to see Google become more than an ads company in the near future. Google Research. Google (self-driving) cars. Google ISP. Google Space Mining. Google the hardware manufacturer (hello moto). It's very difficult from my little point…

There's nothing stopping Facebook from diversifying, too...

Re: Facebook shares hit again as valuation doubts rise

#25

Post by nickfromseattle »

gfosco wrote: post #7
matthodan wrote: post #6

I'm long and strong $FB via the IPO, but I think we're going to have a year of pain before we're in the clear. Facebook needs to prove that they can continue grow-- not an easy feat for a company with huge market share. I want to see Facebook redefine the market by developing better ways to monetize the social graph (duh!). I think mobile has potential, particularly outside of the US, but success will require great e…

Sadly, you're going to lose a lot of money. Facebook cannot possibly bring in the required revenue for growth. Their base will erode far faster than new business will come on board. The IPO was the bubble bursting, making the insiders rich, and laying the ruin for everyone who jumped in.

Zuckerberg is extremely intelligent, he must have had concerns about this pre-IPO. Why would he allow this to happen?

Re: Facebook shares hit again as valuation doubts rise

#26

Post by debacle »

lionheart wrote: post #15
gfosco wrote: post #12

Earlier quoted context omitted.

How is there a decent chance of that? Have they refined anything in the past and grown beyond a simple "get users, show ads" model?

They've done several major redesigns that initially the users rebelled against but then came to like. I can tell you that's not easy to do.

No one I know likes Timeline. They all just put up with it.

Re: Facebook shares hit again as valuation doubts rise

#27

Post by gfosco »

nickfromseattle wrote: post #25
gfosco wrote: post #7

Earlier quoted context omitted.

Sadly, you're going to lose a lot of money. Facebook cannot possibly bring in the required revenue for growth. Their base will erode far faster than new business will come on board. The IPO was the bubble bursting, making the insiders rich, and laying the ruin for everyone who jumped in.

Zuckerberg is extremely intelligent, he must have had concerns about this pre-IPO. Why would he allow this to happen?

He made billions on the IPO... I think that he is less concerned with the future of Facebook than you think. They'll no doubt attempt to provide shareholder value, but will likely find it impossible without truly turning to the dark side. In the end, it can be sold off, and he'll still be set for life.

Re: Facebook shares hit again as valuation doubts rise

#28

Post by j_baker »

krschultz wrote: post #22
lionheart wrote: post #10

I'm not really sure why everybody here is so bearish on FB. Sure, its an unproven company with a high P/E ratio, but so are most tech startups when they go IPO. I think Zuckerberg has shown that he knows how to innovate, grow the company, and even make painful changes that eventually lead to more growth and profit. There is at least a decent chance that FB will refine their business model and turn into a large, stabl…

I think the big stumbling block is that Facebook's growth is getting population limited. That is remarkable to even think about, but they're running out people left on Earth that don't have a Facebook account. So your opinion on Facebook's (financial) value really comes down to how much money you think they can make per user. Their current system seems to be 'show the user ads based on the users hobbies, interests, l…

Facebook works in "over 70" languages: https://developers.facebook.com/docs/internationalization/

One estimate says there are 6,910 languages in the world: http://www.science20.com/science_20/blog/rarity_koro_brand_n...

In other words, you're simply wrong that Facebook is running out of people who don't have a Facebook account. I might buy that Facebook is running out of people that don't speak the languages it supports though.

Re: Facebook shares hit again as valuation doubts rise

#29

Post by snorkel »

Stock prices rise and fall based on the popularity of the brand. Sure earnings and other announcements nudge a stock up or down for a week or two, but it's really the reputation of the brand that keeps the price up. In this regard FB's biggest risk is people will get bored of FB. This is a risk Google hasn't had to face yet, as everyone still relies on Google for search, but FB is mostly for entertainment, and people will eventually get bored of it. Remember yahoo?

Re: Facebook shares hit again as valuation doubts rise

#30

Post by carbocation »

j_baker wrote: post #28
krschultz wrote: post #22

Earlier quoted context omitted.

I think the big stumbling block is that Facebook's growth is getting population limited. That is remarkable to even think about, but they're running out people left on Earth that don't have a Facebook account. So your opinion on Facebook's (financial) value really comes down to how much money you think they can make per user. Their current system seems to be 'show the user ads based on the users hobbies, interests, l…

Facebook works in "over 70" languages: https://developers.facebook.com/docs/internationalization/ One estimate says there are 6,910 languages in the world: http://www.science20.com/science_20/blog/rarity_koro_brand_n... In other words, you're simply wrong that Facebook is running out of people who don't have a Facebook account. I might buy that Facebook is running out of people that don't speak the languages it suppo…

Facebook has 900 million users: http://www.pcmag.com/article2/0,2817,2403410,00.asp

Say we assume that all users have the same economic value to Facebook (an extremely unlikely assumption; it's most likely that the first billion have much more discretionary income than the rest). Assuming Facebook gets the remaining 5.9 billion humans (including all those without Internet), they will only be able to increase their userbase by 7.5X.

Assuming the world 'wants' businesses to have a P/E ratio of around ~15, Facebook either believes in the two above totally fallacious assumptions (they don't), or they anticipate rolling out new revenue strategies to create value.

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