So 2 bombshells hit facebook recently, first was the fact that a lot of the adverts it generates are not real people, casting significant doubt over the value of facebook advertising.
The second is the "83m" fake accounts that are on it, about 8% of its user base.
The internet has been speculating about why this has happened, and to what benefit, who's behind it and how big it actually is.
I'll address the second point first, as it has an impact on the first. I have first hand knowledge of the shadier side of the internet advertising, having been shown what can be done and the consequences of it.
The 83m fake accounts are notably in the middle and far east, and the indian subcontinent. This is because it's possible to buy 5000 likes on facebook for $100. (numbers arbitrary). A company will email around its members who have made these accounts to like a page, or a botnet will do the same automatically. This has gone hand in hand with the app rankings, which has far more money involved. Want your app to become the top X on facebook? $5000 and 100,000 bots/fake accounts will use it and up the rankings you go, to internet publicity and riches.
How does this link to the first point? Tin foil hats off, I dont believe its an internal facebook conspiracy, but these fake accounts need to look legit. They have to like stuff, click on adds to appear natural. Making artificial traffic look natural is almost an art in itself. It so happens that this small business managed to profile its adverts to a particular group that fitted a botnets profile, and discovered it.
The other impact this has on facebook, is that these 83m fake accounts are not 83m out of its total population, they are way way more than that.
They are 83m out of its ad clicking population. Facebook loves to throw around this $1 per user metric, but as all of you know, its not. Half of facebook users access it via the as yet unmonetised mobile application, and this doubles this 8% to 16%. Factor in the value given is the lowest of the range, and i'd push this up to 20 without blinking, possibly 25%. Factor in the disproportionate ad clickers, and this starts to look really uncomfortable.
Given how much future potential was priced into facebooks IPO, this stock is going down faster than a thai hooker on a sky dive.
T
Take with a grain of salt, but a hedge fund manager who apparently nailed the Zynga collapse is calling for a $4 valuation on facebook stock due to the "reverse network" effect. That's right, a share of FB is potentially worth about as much as a Big Mac (and probably less if you get fries and soda).
Yeah, but at least with a Big Mac, you get something tangible and good to eat. With FB, there's no there there.
Wonder who this guy is.
Not sure if you're serious but it's John Pulliam at Vela Capital. Very small fund btw.
I think that is closer to the true value of FB than todays close price. When the FB IPO was launched, I said I would not pay more than $8, and that was taking into account the FB growth I expected. I could not understand how people where paying $40 for this company. If I were Mark Z., I would have sold at least 40% of my stake at those prices (assuming he could). Facebook is a very risky investment, social networks come and go, particularly when you try to make money out of them. You end up pissing off users who have a nice free option in Google+ to go to.
whats wrong with bots, if some one wants to pay see no problem
Brilliant post.
you got zucked
How many people here use Facebook? How often? Do you ever click on ads? What's your age?
I'll start: I have never used it and I'm 35.
Never clicked on ads.
Still in college so kinda peer pressured into it.
Don't have one. Even the college kids I know are starting to get rid of them.
Disclosure: I am short FB (and not having a great day)
+1 High rollers don't need the commodities of commonality
Bro, take notes from blastoise. Not all his posts are troll posts. Gotta pepper some useful shit in there so you keep people guessing.
i'm 19 and i've pretty much stopped using facebook. most people i know don't use it all that much (mainly the chat function only).
i lol at people who use the phrase "he/she is the next Mark Zuckerberg"
I always have it on in the background. I've probably had it going on in the background pretty much every waking hour since I was 18. I'm fairly certain I've never clicked an ad. I also don't really use it that much. Wierd
I have a college buddy who creates fake facebook profiles to spam people and make money off ads. Lol.
I think we can draw an interesting parallel between Facebook's false advertising and the false advertising of bitches with too much makeup in their glam-shot profile pics. They're both much worse than they seem.
20, fake profile that ive used for 2 hours cumulatively
FB has $4 / share in cash and equivalents. This genius hedge fund manager who you cite seems to think FB should be valued at cash, implying facebook's operations should be valued at $0. Get real.
The company is generating $4B in sales at the same time as it grows earnings by 35%. With high operating margin. This is worth more than $0.
Happy to have a discussion about valuation but kind of annoying to just hear people throw out numbers without having a clue about how to actually value a company.
Morgan Stanley?
For what it's worth, we have this thing pegged at $8.50
lol
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