As facebook announces its IPO begining May 18th 2012 everyone seems to be excited and eager to own facebook stocks. If facebook turns out to be like google who does not want to become an overnight millionaire? However, before you jump in to trade facebook stocks know few important things about facebook before investing your entire fortune in it.
Here are 3 reasons I personally won't buy facebook stocks, at least until they resolve some serious issues their company is facing.
1. Dwindling ad revenue: Whether you know it or not, believe it or not, agree with me or not, facebook's major source of revenue is ads. So what is happening to its ads? Well, first of all let me ask you, how many of you have even cared about them? All of us are so busy with our virtual socialization that most of us do not pay any attention to those silly commercial messages. But the most damaging effect to the ad revenue seems to have been caused by the use of mobile devices, including iPhones and iPads. Most of the mobile devices do not display facebook ads. For users, on the other hand, Mobile platforms have become the most preferred and convenient platform. Therefore facebook cannot even dare to think of moving away from them. It's really a catch 22 situation for facebook, rather, a vicious circle that is rapidly eroding its existence.
2. Lack of any solid use other than 'chit chatting'. I personally think that facebook wasted enough time and oppertunities to establish themselves outsides the confinements of cyberspace. May be launching a mobile device or an operating system might have rescued them out of this crises, or may be never put them in this situation to begin with. But its all due to lack of experienced leadership, farsightedness and a laid-back kind of attitude that has led them in to a potentially dangerous position. Now, compare facebook with google, google has offered countless reasons for its users to use it than just entertaining them. and their stepping outside of the cyber world by launching android OS and countless softwares and maps has made google an inevitable and integral part of people's lives. People can easily live without facebook but life without google will be nearly impossible.
3. Overvaluation: facebook has significantly overvalued itself therefore their shares will be overpriced from day one. I am skeptical about the sustainability of any bullish trend once their stocks rolled out.
Do not forget to read my next blog 'Top 3 Reasons Why You Should Sell Your Facebook Stocks ASAP'
(DISCLAIMER: The views expressed in this article are solely my own. I am neither a financial expert nor affiliated to any financial company, whatsoever. Please use your own judgment in deciding about the financial products you want to buy. This material is copyright protected. Please avoid plagiarism)