Facebook IPO - my thoughts
As Facebook relies on advertising for its revenue, there are a number of risks involved. The first is that the internet is still an evolving platform. The chances of Facebook being the number one website in the world in 2020 is highly unlikely (anyone remember MySpace, Geocities or any other "big thing" of the last decade?).
Secondly the growth of mobile technology limits the number of ads that can be shown on mobile devices.
Thirdly, GM, a major advertiser has just stopped using Facebook as a marketing platform. I expect other "big boys" to follow suit over time. There aren't really enough "big boys" to replace the ones that leave.
Fourthly, given the current ructions in the Eurozone, the IPO could not have been more badly timed.
Fifthly, the market demands that revenue grows from year to year. There are only three ways that I can see that Facebook can do this:
1) Increase the amount of advertising. This is a sure fire way to p1ss their users off. Especially those that use FB via mobile devices.
2) Increase the number of users. As Facebook is banned in China, growth in this way is limited.
3) Charge users to use the site. A sure fire recipe for losing users and destroying its worth.
Current shareholders may be able to "stag" a profit, however over the medium and longer terms, I believe that a lot of people will lose money if they jump in early and pay a high(er) price for shares.
As I said, I'm not a financial adviser, and am quite happy if I'm proven wrong on any or all of the points listed above.
By proven wrong, I mean by the market and FB's own performance in terms of share price and earnings growth.
There are probably plenty of people on this forum who will disagree with my assessment, however their opinion does not constitute proof I'm wrong.
Only the company and the market will do this, and over a longer time frame than FB's first day as a listed security.
All that aside, other people's assessments are welcomed.
What do you think?
DHV Delivery Systems FAILING at online dating???
Read A Post.
Subscribe to a Newsletter
KimWinfrey.Com