Why Facebook is a house of cards

Image representing Facebook as depicted in Cru...

Image via CrunchBase

“Rich Karlgaard writing Monday at Forbes.com on Facebook’s disappointing IPO:

1. Too late. Facebook’s shares have been dead in the water for the last 12 months. Private investors had already bid up Facebook to a $100 billion value a year ago.

2. Mark Zuckerberg’s disdain for investors. He never wanted to be a public company. This became all too obvious during the IPO road show’s crucial stop in New York when (a) Zuck hid out in the bathroom and forced the audience to wait, and (2) he took the stage wearing his hoodie. Zuckerberg’s view of shareholders is like President Obama’s view of blue collar workers. He needs them but secretly laughs at them.

3. Facebook left nothing for the common investor. The insider pig pile of PE firms and celebrity Silicon Valley angels took it all. This is a rather new, post-Sarbanes-Oxley fact and it should make Americans very, very angry. When Microsoft went public in 1986, its market value was $780 million. Microsoft’s market value would rise more than 700 times in the next 13 years. Bill Gates made millionaires of thousands of ordinary public investors. When Google went public in 2004 at a $23 billion valuation, it left less on the table for you and me. Still, if you had invested in Google then and held your stock, you would be sitting atop a 9x return. Zuckerberg and his Facebook friends took it all. . . .

4. Europe and May. Facebook’s shares debuted in a cloudy market. Beyond Europe in 2012, May is a bad time to go public. For the past several decades, nearly all of the stock market’s gains have occurred between October and May. The canard “Sell in May and go away” turns out to be true.

5. Facebook boredom, particularly among professionals. The company says it is zeroing in on a billion members. Good for Facebook, but what I would like to know is how many Facebook users have grown bored. I have not visited my Facebook page in two months. Almost every professional person I talk to who is over 25 years old has grown bored with Facebook.

6. Facebook is not necessary. Investing in tech companies is never easy. The great Warren Buffett eschews it. The key question about tech companies is not P/E values, but necessity. I like Google, Intel, Cisco, IBM, Oracle, EMC and SAP because the world’s economy depends on them. Sure, we could live without them, but not without major disruption. . . . Facebook is not integral to the global economy and its cool brand is rapidly fading.

7. Mass social media is a crock. It is an inherent contradiction. This is why I like LinkedIn more than Facebook. It has a special purpose and therefore doesn’t feel like a time waster. FWIW, I predict the next huge win in social media will be in health care.

A version of this article appeared May 22, 2012, on page A17 in the U.S. edition of The Wall Street Journal, with the headline: Notable & Quotable.”

Well said IMO.  People express concern about identity theft and government intrusion in privacy (read the article in the April 2012 WIRED Magazine on the ginormous NSA data center) but share every tidbit of their lives on Facebook.  I find using FB informative in some respects, most notably keeping in touch with a WWII veterans group, but can FB on the whole be productive, revenue producing, and relevant?  Time will tell (probably rather quickly in this information age).

[This is my Positive Outlook journal for today.  Despite the negative tone this is communication and sharing, for which I am grateful.

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About JohnRH

Retired, avid winter skier, avid reader, traveler (avidly). :)
Gallery | This entry was posted in Business, Computers and Internet, economics, News, Opinion, wealth and tagged , , , , , . Bookmark the permalink.

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