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)
I like this..
ReplyDeleteI think FB is overvalued, currently -- however following your logic Google should be bankrupt. They were, in 2003 or 2004 or whenever they went public solely a search engine and email service with ads. Since then they've obviously launched things like the android operating system (which is losing money, but eventually will be fine) things like Google play, Google plus, bought youtube (for billions when youtube was making no money at all), Google voice, Google earth all happened post IPO.
ReplyDeleteWhen you have as many eyes on your product as facebook does you can make money. Probably not through solely ads, but I wouldn't be so quick to dismiss Facebook as a bad investment. No clue what they plan on doing with instagram, they are already in the works looking into creating an app marketplace. They could crush Spotify right now if they wanted to move into the music streaming area (however I don't know if they have a deal with spotify since you have to have a facebook account to even use spotify), they've already joined forces with skype (again not sure what plans they have for that) but FB is heavily integrated into pretty much every up and coming online service.
I have no clue what facebook is planning but I think its a bit unfair to compare where facebook is now to where google is now instead of where facebook is now at their IPO to where google was at its IPO
i am not completely discharging fb as a bad investment but what concerns me most is the fact that they haven't tap their resources 'at all'. and like you, most of the other people/ investors also have 'no clue' about how they are going to handle their financial future (which is not a good sign). google as a search engine was more scientific concept than facebook. google search was a serious utility rather than entertainment. it is a vital tool used even by professionals - doctors, engineers, lawyers, artists, researchers.... but facebook is just a data collector. and now they are sitting on a ginormous database that contains the most sensitive information of 900 million people without a clear cut plan.
DeleteIm no economist but I knew this was going to happen. You see as a software developer I believe facebook is not just a bad investment, but a bad company.. 1) Makes sweeping changes pissing off a majority of its users. 2) Users feel trapped into using it 3) Things that worked yesterday are suddenly changed without notice, reason, or sense. (Imaging google maps suddenly not working the way it was designed severely hurting businesses) 4) They routinely disable features, buttons, pages, and accounts without notice so most developers will not develop on that platform. 5) All of their social plugins are being either replaced with their site-owned counterparts, or given a choice between Google, Yahoo, etc. So they can just as easily be eliminated (I am reverting my site to normal comments instead of facebook comments) .. and finally 6) They have no product or service. At the end of the day you have to ask yourself what are you trading tangible dollars for? You are trading real money for a company with no products or services
ReplyDeletecompletely agree with you!
DeleteNice and quite informative post. I really look forward to your other posts.
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This is very nice men. You post good posts on you're blog .. I read many Internet blogs.. I will create my own blog in the future.
ReplyDeleteFB
FB stock is now at $128. Do you feel foolish yet? I know I feel INCREDIBLY foolish for reading articles like this, listening to my foolish friends, and ignoring my gut instinct to buy it at public IPO. I could have paid for my kid's college twice over :(
ReplyDeleteNow I am buying FB shares at $128 a pop. I hate myself.
ReplyDelete