Zuckerberg Bombshell: Did Facebook Bankers Quietly Slash Forecasts Before IPO? – The Daily Beast
May 22, 2012 § Leave a comment
I’ve been bearish on Facebook since it first announced going public, questioning whether or not the company will and can actually monetize their business model. At 78 times its earnings – six times greater than Apple and four times higher than Google – does this really make any sense? Are they really that good? Yeah, I don’t think so.
So let’s think about this for a minute. Apple who is undoubtedly the most innovative company on the planet, Google who has deep pockets and top talent and Microsoft (well, okay let’s forget Microsoft) cannot make a go of social media. Why? It’s simple, they are in the business of making money and neither of them have been able to crack the code and figure out how to make some serious coin. Google keeps on trying, determined as they are, Wall Street is not counting on anything big – they don’t even count social media in their projections. As for Apple, feeble (Ping) attempt at best, but you can’t help but wonder why they just gave up. It all comes down to monetization.
Now if this story has any basis and the SEC uncovers something (anything) it’s going to have investors running for the hills. The Social Media companies that precede Facebook will have a rough time going public. After all this blows over, investors will be whole lot more cautious before sinking any money into a Social Media company.
Social Media has changed the very fabric of our lives – from sharing personal interests to uncovering social injustices – social media certainly has solidified its place in our culture. It was born as a means to seamlessly connect people and a tool that is largely accessible to anyone, anywhere – hence the complexity of trying to monetize a largely ‘free’ platform.
Simple investing advice. If you understand the business model and you are shown the money – then by all means invest. But if you don’t have clarity around the business model and the means to monetize is too complex – then stay away. Don’t get caught up in the hype – wait and see how this all this shakes out.
I could be wrong – but I don’t think so. Only time will prove me right or wrong. Until then…