Facebook shares hit again as valuation doubts rise • Hacker News Board

Re: Facebook shares hit again as valuation doubts rise

#31

Post by bri3d » Tue, May 22, 2012, 7:32 PM UTC

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…

Your approach to estimating Facebook growth by languages supported is interesting but I suspect fundamentally flawed. There's an incredible long tail when it comes to languages spoken, especially when multilingual individuals who speak both an obscure regional language and a more common one are taken into account.

http://en.wikipedia.org/wiki/List_of_languages_by_number_of_... gives a great overview of this long tail - with 70 languages, Facebook probably cover all but a few hundred million people. Simply by comparing the top 25 languages spoken with the languages Facebook support, you can see that several billion people should be able to access Facebook based on language numbers, but yet they only have 900 million users.

I strongly suspect that "working internet-enabled device available frequently" is a much better way to estimate potential Facebook adoption than language support. Having never run the numbers, though, I neither support nor refute that Facebook is running out of potential account-holders.

Re: Facebook shares hit again as valuation doubts rise

#32

Post by IsaacL » Tue, May 22, 2012, 7:33 PM UTC

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'm cautiously bullish too. Been planning to write a blog post about this, but I'm in the middle of finals right now. Anyway, summarised:

- They still have lots of growth potential in Asia, and other places as more and more of the planet comes online.

- Zuckerberg is a Gates-style evil genius. Being grey hat is bad for PR, but good for figuring out monetisation. (cf Twitter, loved by the Valley and make no money). He is also able to make painful changes that are widely mocked but turn out to be right (news feed etc).

- Facebook has lasted longer than the previous "hype cycle" for social networks. So it won't fall like MySpace, Friendster. (My theory: early SNs were mostly used by early adopters who get bored quickly. Facebook has crossed the chasm and the mainstream users aren't so keen to switch).

- Think of all the people who've said they're going to quit. How many have? Have you? FB has made a really, really sticky product; which again, goes back to the "grey hat" streak in the company.

- Finally monetisation. Display ads suck. But companies spend a ton on FB marketing (for pages and so on), and FB doesn't yet capture that value.

Ex 1: Facebook likes are now sold on the grey market. Ex 2: In Malaysia I saw graffiti promoting someone's FB fan page. Ex 3: Have you noticed how your local cafe/pub/restaurant now asks you to "like" them? I had a friend who got paid £500 to set up a Facebook page for a small business; sure, the business owner overpaid, but the point is that FB marketing is worth a lot to such companies. If Facebook can capture that value, they're set.

- There's also "black swan" revenue streams. A few years ago, who would have predicted virtual vegetables would have accounted for over 10% of FB's revenues? There might be more unknown opportunities like that in the future.

I still think the stock is risky, as there's every chance this won't happen. But, say Facebook does succeed as planned; I think one FB employee said they've only done 5% of what they set out to do. Imagine 10 years time: a guy in Kazakhstan buys his first smartphone. Activating the phone requires a FB account. His contact list is his FB friends list. Instead of SMS, it's FB chat. That's the scale I imagine Zuck is thinking at.

Admittedly, that's an unlikely scenario. But if it happens, Facebook could be worth two, three hundred billion, or more. Do a simple multiplication, probability times upside, and suddenly $70 billion might not seem like so much.

PS I'm glad Sebastian Marshall agrees with me ;)

Re: Facebook shares hit again as valuation doubts rise

#33

Post by vibrunazo » Tue, May 22, 2012, 7:36 PM UTC

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'm yet to see a single solid and empirical evidence that they have actual potential for growth. Other than the very foggy, subjective and certainly doubtful argument of "but Zuck is smart, he'll figure something out".

Which is a logical fallacy called argument from ignorance. Betting the future of your money on a logical fallacy, is sure not smart.

Facebook needs to figure how to make an extremely high profit from mobile. Which is just another mobile messaging app like thousands of others. No messaging app in the history of humanity has ever figured out a genius revenue model. Facebook needs to find an innovation that thousands of others have failed to. Name one single innovation Facebook has ever come up with, that is as big as this one they need. That would justify your confidence on their growth potential.

I haven't seen a single solid reason yet.

Other companies have IPO'ed when there was a very clear path for growth. When they had just a small share of a potentially huge market, or when there were clear monetization strategies they just didn't implement yet for lack of time. Facebook fails both these checks, there aren't many more users for them to acquire and it seems they've already tried everything in their repertoire to milk each user. Coming out of these spot thinking "oh whatever, they'll figure something out" isn't a good reason to be bullish.

Re: Facebook shares hit again as valuation doubts rise

#34

Post by pnathan » Tue, May 22, 2012, 7:39 PM UTC

nollidge wrote: post #24

simonsarris wrote: post #17

Earlier quoted context omitted.

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...

The big win I see right now is that Google has a stable of brilliant researches in Google Research, and that is something that could be producing high quality industrial research for decades (Microsoft has a similar department). I actually think that Research departments are the long-term investment a company does, they will produce new and interesting concepts.

I have never heard of a similar group for Facebook. I am sure they could put one together, but it takes years and years to get the right people and environment.

Re: Facebook shares hit again as valuation doubts rise

#35

Post by freehunter » Tue, May 22, 2012, 7:43 PM UTC

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…

How many people on Earth are there who don't speak one of the 70 languages, though? Imagine if they didn't support German. How many Germans speak English, or French, or even Russian? A lot. So while they might not support Tagalog, how many Tagalog speakers don't also know how to speak Filipino?

Going on basis of language support is ridiculous at best without weighting how many exclusive speakers there are in that language. I might buy that Facebook is running out of people who don't have fresh water, paved roads, electricity, or high speed Internet connections.

Re: Facebook shares hit again as valuation doubts rise

#36

Post by Retric » Tue, May 22, 2012, 8:11 PM UTC

nollidge wrote: post #24

simonsarris wrote: post #17

Earlier quoted context omitted.

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...

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

Re: Facebook shares hit again as valuation doubts rise

#37

Post by j_baker » Tue, May 22, 2012, 8:14 PM UTC

bri3d wrote: post #31

j_baker wrote: post #28

Earlier quoted context omitted.

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…

Your approach to estimating Facebook growth by languages supported is interesting but I suspect fundamentally flawed. There's an incredible long tail when it comes to languages spoken, especially when multilingual individuals who speak both an obscure regional language and a more common one are taken into account. http://en.wikipedia.org/wiki/List_of_languages_by_number_of_... gives a great overview of this long tail…

Two things:

1. I wasn't trying to estimate Facebook's growth. I was merely trying to refute the notion that Facebook is running out of people to use their service. My method is arguably quick and dirty, but it makes for a good heuristic, doesn't it? It's enough to tell me that it's probably not worth my time to try and dig up better data.

2. Fine. The number I gave of 6910 probably was too high, but 70 is still less than half of the languages mentioned in your link. If they have 900 million users, that's less than half of the people in the world who have internet access[1]. Thus, it would seem that although there are certainly a number of problems with my approach, the evidence we have so far would seem to indicate that it did the job I intended it to do, doesn't it?

[1] http://www.internetworldstats.com/stats.htm

Re: Facebook shares hit again as valuation doubts rise

#38

Post by ddet » Tue, May 22, 2012, 8:17 PM UTC

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…

My condolence on your losses :)

Re: Facebook shares hit again as valuation doubts rise

#39

Post by SagelyGuru » Tue, May 22, 2012, 8:22 PM UTC

I think the FB price will settle before too long at a more realistic However, they ought to be thanked because it is them that keep the markets functioning. Every time someone makes a profit by buying cheap and selling dear, there is someone else who pays for that profit by buying dear and selling cheap.

Re: Facebook shares hit again as valuation doubts rise

#40

Post by j_baker » Tue, May 22, 2012, 8:23 PM UTC

freehunter wrote: post #35

j_baker wrote: post #28

Earlier quoted context omitted.

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…

How many people on Earth are there who don't speak one of the 70 languages, though? Imagine if they didn't support German. How many Germans speak English, or French, or even Russian? A lot. So while they might not support Tagalog, how many Tagalog speakers don't also know how to speak Filipino? Going on basis of language support is ridiculous at best without weighting how many exclusive speakers there are in that lan…

Of course it's a flawed approach. I was responding to a comment on HN, not writing a paper in an academic journal. Yes, if I really wanted get proper data, I would do the things you mention.

But please give me some credit. The comment I responded to offered no data points whatsoever. If I offered one piece of data that showed someone something, isn't that a net positive?