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Facebook IPOverhyped....

May 18, 2012 - Steve Schulwitz
Professional investors and people who are just common users of the popular networking website Facebook have been speculating about how the newly anointed public company's stock will fare over the course of the next year. The demand for the stock lifted its Initial Public Offering price to $38 a share to begin and ended up only 23 cents higher at the close of the trading day.

Personally I really don't know what the attraction to the stock is. I have been known to do a little trading in the past and had done well, even though it was hard not to, considering I invested only a month after the market collapsed. If I were able to invest in Facebook however, I think I would take a pass. It's revenue streams are limited to advertising and some merchandise royalties, but other than that it is pretty one dimensional.

It is too late for Facebook to seriously challenge the mobile electronics sector dominated my Apple and Google, so it is doubtful a substantial amount of revenue could be generated from it. Sure it would sell some phones and tablets to faithful users who don't know the difference between hardware and software, but in the end Facebook would be too late to the ball game to have an impact on market share. Not to mention the investment it would take to design, build and construct these products. Ask Microsoft and RIMM how things are working for them in the smart phone and tablet market because they entered the fray late, not well. I believe the company will try this, and fail, increasing the pressure to find revenue.

So, if Facebook intends to meet its sure-to-be-high expectations during earning reports, advertising revenue needs to dominate the revenue side of the ledger, if it doesn't what comes next will surely be a blow to the stock and possible the company.

If margins are small and earning expectations aren't in line with the new owners (investors), the day may come where a pay-to-use platform is instituted. Most people on Facebook believe this will never be the case, but there is a huge difference between a private and public company.

The original creators of Facebook have surrendered their power, for the most part, and when push comes to shove shareholders usually win by banding together to demolish a stock, or even bankrupting a company.

Make no mistake about it. At some point down the road, we will be charged for Facebook's services in some form. It is also a possibility that Facebook is nothing more than a fad. It has been common place for some time, but my gut tells me the next big thing is just around the corner and Facebook will be nothing more than what MySpace and other multi-media sites are today. Maybe Mark Zuckerberg knows fears this point and that is why he chose to take the company public and claim his huge cash bounty. Currently there are several investing forms which already have a "sell" label on the stock. To us that should signify "don't even think about buying", which I won't.

Also. What if a fee is demanded of me to be able to access the site? I'll spend even more time on Twitter while being less agitated by the constant complaining about things like Facebook's timeline and privacy settings.

 
 

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