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Forget $3B In Revenue: Things "Don't Look Good" For Facebook

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Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#41

Post by tatsuke95 »

pg wrote: post #37
tatsuke95 wrote: post #22

Earlier quoted context omitted.

> "You could scrape together at least this much about any public company" Point to another public company that has a P/E ratio as high Facebook that is missing earnings estimates. Nobody is claiming the company is going to fall apart tomorrow, but if growth is slowing already then they certainly aren't worth $100BB, or anywhere close. I don't know how bad this really is, and we are still in a shaky economic climate.…

Facebook hasn't missed any earnings estimates. This is just a rumor, reported by a company I've never heard of, that they might. You can presumably find rumors of that type about almost any company.

And that's exactly what we're discussing: a rumour. You're right that this may prove to be completely out to lunch. If so, I'll eat my hat.

That said, Facebook is, for better or worse, the biggest thing this industry has seen in a while. So that fact these rumours are being discussed in earnest, rather than "Facebook is still on such an insane revenue growth path that anyone who claims otherwise is an idiot" is substantial.

Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#42

Post by cbr »

rhizome wrote: post #40
ryanwaggoner wrote: post #38

Earlier quoted context omitted.

I downvoted you, because: 1. You didn't provide any source for this (and I can't find anything online to back it up; granted I only searched for a few minutes). Facebook isn't listed in their portfolio, for example: http://www.carlyle.com/Portfolio/Alphabetically/item8774.htm... . And I couldn't find any mention of the Carlyle Group in the Facebook S-1 filing, either. You could be right, but I'd like to see the evide…

Thanks for the reply. I'll try to look up connections, but for right now it seems to be impossible with Google SERPs including Facebook mentions of Carlyles the world over. That is, search for anything "facebook" on Google and you'll get a million FB pages due to the word "Facebook" in every page title. Sigh, Google.

Why not exclude facebook.com from the results? "facebook carlyle -facebook.com"

Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#43

Post by doctoboggan »

mmaunder wrote: post #35
pg wrote: post #12

If the worst news you can find about Facebook is a few rumors that they might miss a revenue projection, a prediction that their ad revenue growth rate will decrease from its current 60% (note: ads are not the only way FB can make money), and a random class action lawsuit, then Facebook's prospects look about as good as any company's ever get. This amount of badness is background radiation. You could scrape together…

It does raise the question "What is Facebook's Killer business model?". They have defaulted into ads because that's what Google did and that's what works for many other businesses. But I've never clicked on a Facebook ad and I don't know anyone who has unless it was research. I'm seeing highly targeted ads based on my interests and demographic and I just don't click because I'm too busy social networking. Whereas wit…

I know I am just one example but I am the opposite of you. I have never clicked a google ad (purposefully at least) while I have clicked many facebook ads. Facebook's ads just seem more relevant.

Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#44

Post by koalaman »

cs702 wrote: post #28

Some advertisers are getting much better results with Facebook ads than with Google AdWords -- for instance, see http://jeffmatthewsisnotmakingthisup.blogspot.com/2012/01/is... (Money quote from that link: "...according to a friend in retailing, the average Facebook woman updates her relationship status to 'Engaged' within two hours of the guy actually proposing…so Facebook sells that relationship status information…

http://www.facebook.com/legal/terms

"We do not give your content or information to advertisers without your consent."

Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#45

Post by pron »

pg wrote: post #12

If the worst news you can find about Facebook is a few rumors that they might miss a revenue projection, a prediction that their ad revenue growth rate will decrease from its current 60% (note: ads are not the only way FB can make money), and a random class action lawsuit, then Facebook's prospects look about as good as any company's ever get. This amount of badness is background radiation. You could scrape together…

But the story here isn't about Facebook's success; it's about their valuation. And valuations matter a lot. The entire US economy collapsed when house prices simply failed to meet growth expectations. Banks loan money backed by (overvalued) equity, and so the entire economy is in effect backed by predictions of future earnings.

I've said it here before, but I think many of the tech and app companies are grossly overvalued simply because the market can be so easily upset. If newcomers can get such positive projections, then surely they must be perceived as a viable risk to the big companies.

Facebook specifically is grossly overvalued because as long as they are making all their money from ads, their revenue comes from the amount of time people spend staring at a Facebook page, and this might be at its peak. True, there are more ways to make money, but there are more risks as well. Please, let's spare ourselves another bubble.

Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#46

Post by netcan »

mmaunder wrote: post #35
pg wrote: post #12

If the worst news you can find about Facebook is a few rumors that they might miss a revenue projection, a prediction that their ad revenue growth rate will decrease from its current 60% (note: ads are not the only way FB can make money), and a random class action lawsuit, then Facebook's prospects look about as good as any company's ever get. This amount of badness is background radiation. You could scrape together…

It does raise the question "What is Facebook's Killer business model?". They have defaulted into ads because that's what Google did and that's what works for many other businesses. But I've never clicked on a Facebook ad and I don't know anyone who has unless it was research. I'm seeing highly targeted ads based on my interests and demographic and I just don't click because I'm too busy social networking. Whereas wit…

I work in online advertising and I would agree if it weren't for the number. But, Facebook are selling ads. They probably still have a lot of low hanging fruit to pick. Advertisers have probably been getting a decent bang for their buck because it hasn't been the kind of economic climate that's very friendly to frivolous ad spending.

The only "theory" I can think of that would explain Facebook ad revenue as a temporary phenomenon is businesses trying it out or trying to get in early in anticipation of the ad platform improving. I don't buy that though, not at this point. I wish I understand the economics of it better.

Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#47

Post by seancoughlin »

AznHisoka wrote: post #9

FB will always be able to monetize their users. It's just a question of what premium. Since most people on FB have no intent on buying anything, the amount they can net per user is very very small compared to Google. In a sense, it's just like a glorified TribalFusion, where eyeballs are worth .01 each.

This seems right. Users are much less valuable for companies on Facebook b/c of user intent. What Facebook needs to figure out is how to channel higher value users to ads. One fix might be to create a separate search tool that focuses on "stuff" since the main search navigation is useless for finding anything except your friends.

Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#48

Post by ohashi »

orthecreedence wrote: post #14
VikingCoder wrote: post #10

Earlier quoted context omitted.

Let me give you a sneak peek into an investor's mind: "Slow, sustainable growth? SELL!"

You're thinking of a trader.

To be fair, even if I were an investor looking at the long term, the time to buy wouldn't be now with a PE that high and expecting slow and steady growth.

Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#49

Post by mckilljoy »

Facebook's PE ratio is around 100 last time I checked. If a 'good' valuation is in the 10-15 range (e.g. Microsoft, Apple, Google), then either Facebook's profits earned needs to increase by 10x, or it's share price needs to fall by 10x.

If Facebook's percentage revenue increase is 'only' double-digits, and shrinking, it will take years and years of earnings growth before it becomes a 'good value'. It will take 5 years at a sustained 60% yearly earnings growth rate to reach the same PE ratio Apple has today.

Re: Forget $3B In Revenue: Things "Don't Look Good" For Facebook

#50

Post by dchuk »

mmaunder wrote: post #35
pg wrote: post #12

If the worst news you can find about Facebook is a few rumors that they might miss a revenue projection, a prediction that their ad revenue growth rate will decrease from its current 60% (note: ads are not the only way FB can make money), and a random class action lawsuit, then Facebook's prospects look about as good as any company's ever get. This amount of badness is background radiation. You could scrape together…

It does raise the question "What is Facebook's Killer business model?". They have defaulted into ads because that's what Google did and that's what works for many other businesses. But I've never clicked on a Facebook ad and I don't know anyone who has unless it was research. I'm seeing highly targeted ads based on my interests and demographic and I just don't click because I'm too busy social networking. Whereas wit…

Their killer business model hasn't been released yet, but it will ultimately be a competitor to Google's Content Network Ads. Facebook is the ULTIMATE retargeting machine (hence why Google created Google+, it's not because they want everyone to be more social, they want your social data for ad targeting).

I bet within the next 24 months, Facebook launches their content network ad platform and it will be the first true competitor Google will need to deal with simply because of Facebook's massive scale.

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