Facebook

Facebook is a powerhouse.

I don't see any reason why they couldn't consume other services and make it their own (linkedin, careerbuilder, etc). I don't know if the people who doubt them have a good grasp on just how many people use facebook on a daily basis. I don't think they understand how structured young people's lives are around facebook.

I laugh now at the doubters the same way I laughed at those 4 or 5 yrs ago who said 'how the hell can you monetize facebook'.

I'm just concerned about how big Facebook can realistically get, and if they can follow Google's footsteps and leverage the brand to do more than just the social media network.

I do think that we have only seen the tip of the iceberg as far as advertising revenue goes. However, I don't even look at Facebook ads. Seriously, ads on ESPN get more of my attention than anything on Facebook.

I'm not doubting FB one bit. I think it's a behemoth. But it will be interesting to see how the next 5 years go for the company.

I won't be investing, mainly because its too much of a gamble in an industry i know very little about. Tech companies have a habit of going nuts one year and becoming obsolete the next, in the same voice as the other social networks, which rose, and died. Noone predicted that on a large scale. What happens if a legal bill gets passed that bans sharing of information? Value does down. What happens if, like email, it becomes virtually unusuable because of all the spam we get? Tech companies, by definition, must stay cutting edge. Once they go big, founders sell out, they start to lose their hunger and drive, thats when the competition cut in and take over.

Personally, I dont see all the major computer related companies surviving the next 20 years. Either the manufacturers, the software, or the search engines is going to go. Theyre all treading on each others toes as it is, and it will only get worse.

I can certainly see an adblocking feature appearing on a computer product very soon, which would completely revamp the internet business model.

Currently I only buy super safe canadian dividend stock... but i've drank the koolaid... im not missing this one when it hits the market

If Facebook's smart, they'll eventually monetize their service further by FORCING people to pay attention to ads by, say, requiring users to watch a 30-second video spot for every hour of free use.

tyrets:

I'm really curious about everyone's OBJECTIVE opinion on facebook. Yes, we all know the hype and bullshit and this, that and the other. Every financial website is flooded with news since the announcement yesterday and it looks as though many reporters are jumping on the "stay away" bandwagon. I figure that point of view is no risk for them. If they say things that are positive and "buy" then they are just going along with the crowd. If they are negative on facebook they're probably just being contrary and if things were to go haywire they have the luxury of saying "they" were "right".

What is your opinion? 90% of their income is derived from advertising. I feel that advertising hasn't even taken off on fb yet and that the true value of the company is the data mining and narrow focus of marketing that the site can provide. It also may have opportunities that we don't even know about yet as we become more and more social-networked comfortable, etc.

Wall Street is, and always will be focused on the numbers and income generation, but I think they may miss the boat on this one. I'm a trader, by nature, but I think this may be a long-termer. I remember in August of 2004 when people just wanted to be contrary on Google and said it was "garbage". IPO was at $85, it opened at $100 and didn't move from there all day. At the height, it hit $750+ I believe. Yeah, "garbage"

The intrinsic value of facebook is its data, scope and innovation - NOT the advertising revenue is has or will get. Of course, the advertising is a function of the data, but I believe the data is far more valuable than its ROI. Also, as we've seen with Twitter, it is no longer a parlor joke that these social networking sites literally can topple governments. There is value there that cannot even be monetized. Not to mention its power.

What do you think? I'd love to hear constructive opinions and criticisms of my views.

Completely agree. I'd buy and hold this one.

The valuation is a joke. 27x LTM revenue? To put this in perspective, Google IPO'd at a revenue multiple of 10x. I believe that is a rational valuation for a company that is essentially the same thing - an advertising company representing the best platform at the time.

People are paying this much because of growth. I don't think FB's growth prospects support anything close to $100bn valuation. Look at subscriber data. FB has 800mm users and generates $1bn in earnings (we're talking equity valuation so eventually this thing will need to trade on its earnings). That means it makes a little over a $1 per year on each member. That's incredibly low. So growth will need to come from a) more subscribers or b) higher earnings per subscriber. What's the maximum addressable market for subscribers? 1.5bn MAX? It's clear that earnings growth will probably not come from subscriber growth but from revenue per subscriber growth. That's a shit ton more ad revenue they will need to generate with a subscriber base that's pretty saturated already in my opinion. Of course to support the current valuation this will need to come quickly without jeopardizing the FB experience. You keep flooding it with ads, diluting the user experience, and this thing will turn into myspace which crashed and burned and was sold to an investor group led by Justin Timberlake for $35 million last year. Think that example is far fetched? Myspace was valued at $12 billion during its attempted acquisition by Yahoo in 2007. Not saying Facebook is the next Myspace, but I think the example is poignant.

It's a bubble. This thing is all phantom equity. It's going to struggle to generate cash over the long run and all you're left with is a stock backed not by cash generating operations but by exorbitant "growth prospects" that will keep some people along for the ride long enough to keep buying it until the musical chairs stop and it comes crashing down just like every other bullshit bubble before it. It happens every time.

As Jim Rogers recently said: "[I wouldn't touch Facebook.] It's been demonstrated many, many times before that sellers are usually smarter than buyers, and they usually know when the best time to sell is, and Facebook is doing it."

I sold all of my MYSPC stock yesterday to get a piece of this FB action.

Facebook has peaked and the age group that first embraced FB has moved on to Twitter/Instagram and then they will move on from Twitter to the next new social media machine.

Think about it when your Aunt and Uncle are on FB how much more room could it possibly grow??

The best play for FB is ZNGA, it accounts for 12% of FB's revenue and people are more addicted to those games then they are the ads next to their ex gf's profile.

Very interesting arguments. Thanks guys. Personally, I think this thing jumps out of the gates because everyone, both retail (especially) and institutional, PSYCHOLOGICALLY are saying to themselves, "I'm not missing another Google". Whether or not there are any congruencies or parallels to Google are irrelevant. People PERCEIVE facebook and Google to be parallel. If we've learned ANYTHING form trading it is study the crowds more than any single other factor.

I'm not an expert of equity analysis and numbers as some of you guys are and have talked about above, but I do believe that what I said in the original post still holds water. The intrinsic value of fb is not it's advertising revenue, or buying of other companies, or even growth - it is the value of the data it collects and its membership. 800 million users is an enormous amount of data. Rivaled probably only by the CIA. Seriously.

unsure of LT growth prospects but this should be a whale of a ride for at least a week or so. Get on board for a 100% flip!

Sure it's a lot of data. 800mm users is incredible. At some point they will need to turn that into a profitable way to make cash. It's a public company so it's got to grow its earnings. Just saying "it collects so much data" is why it's worth $100bn? It's an advertising company, just like Google was and still is. But you can't just throw ads everywhere because then it changes what the entire product was about in the first place. Don't buy into the hype.

Also regarding its massive collection of data - what exactly is this data? Sounds cool but is it really? Sketchball dude creeped on cute girl 10x today. Said girl posts 10 meaningless posts about a movie. Put a movie advertisement on that guys screen?

Does anyone actually purchase anything on FB besides Farmville? Is it a budding commerce platform that people use to find things to buy ala Google? When you want to learn more about buying a product or service do you go to Facebook? Does the majority of people do anything but post status updates and check out photos? I'm not trying to sound obnoxious, it's just I keep hearing all this stuff about "data collection" but my simple mind has yet to see how that supports tangible cash generation over the long-term to the tune of a $100bn valuation. Would love to hear some examples though, honestly, since I think its a fascinating subject.

I like Facebook, think it was a brilliant idea. It's impact was huge - along with Twitter, it had a tangible hand in overthrowing multiple governments in the Middle East last spring. Incredible. But a $100bn enterprise that's purpose is to generate earnings for its shareholders?

I think that Facebook is riding its profit on fashion or trend. Few years ago, it was MySpace, now its facebook and few years later, it could be something else. Many years ago, people used to communicate by email, then came instant messengers (AOL, YIM etc), now people use GTalk and Facebook chat and SMS. I think the way people socialize, communicate and interact with each other keeps changing. Nothing can remain cool and sexy forever. New thing comes along and everybody starts talking about it like it was shown in one South Park episode. For short term (another 1-2 years), Facebook is definitely cool. After that, I am not sure.

You know, people have a good point about shifting social media trends... but did your grandmother have a Myspace? I would argue FB has won the social media competition. Twitter is complementary and serves a different purpose than FB, so I don't see them much as competition.

10x revenue club for sure

Bill Gurley:

http://abovethecrowd.com/2012/02/01/why-facebook-clearly-belongs-in-the…

We should set up a Facebook group, requiring each member to buy a stake in the IPO and then approach Facebook and get a slice of the IPO for our special purpose vehicle. That way, if thousands of users get together, we could act as an institutional investor and Facebook could show the power of its network.