Facebook IPO, I just don't "get it"

Discussions about the psychology of the markets and the masses as it relates to trading.
DPH
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Facebook IPO, I just don't "get it"

Post by DPH » Wed Feb 01, 2012 9:51 pm

Is it just me, or does anyone else not fully understand the Facebook phenomenon either? Am I just sour grapes, jealous of another’s success??

Comparisons are often made between Facebook and Google and the David and Goliath battle they are in for Internet dominance, but from my perspective Facebook is not even in Google’s league (not yet anyway).

Why do I say this?

I ask two simple questions

1. How does Facebook alter my life?
2. How does Google alter my life?

First, Facebook……

Facebook has helped create some small social impacts in my life. The most significant was that I re-connected with a sister whom I had not spoken to in let’s just say a “long timeâ€
Last edited by DPH on Thu Feb 02, 2012 3:16 am, edited 1 time in total.

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Post by cliffg » Thu Feb 02, 2012 12:32 am

Facebook provides Marketers access to 'Customers'
Google provides 'Customers' access to Markets

Hence,
Facebook is a Marketers dream
Google is a 'Customers' dream

Like the old saying goes
How much is two plus two?
Depends whether you're buying or selling.

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Post by Chris67 » Thu Feb 02, 2012 12:50 am

neither of them are worth 10% of their market cap
its a bubble and like every bubble before them they will pop
the market learned nothing from 1999
facebook in particular is soooooo suspetible to legal action I personally would pay 50 cents for a share

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Post by DPH » Thu Feb 02, 2012 1:41 am

Chris67 wrote:neither of them are worth 10% of their market cap
its a bubble and like every bubble before them they will pop
the market learned nothing from 1999
HUH?

10% of Google's market cap would make it worth roughly 18 billion..They had nearly 40 billion in revenue last year....

[img]http://node_charts_production.s3.amazonaws.com/65afae1ac58fb2eb98db570c65543d97.png[/img]

[img]http://node_charts_production.s3.amazonaws.com/9f99bc16d7b994d5c877c8ec2e3f3655.png[/img]

Facebook is another story!!

There are estimates of 100 billion market cap for a firm with 3.7 billion in revenue! (verses Google's 180 billion market cap w/ 40 billion in revenue)

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Post by Moto moto » Thu Feb 02, 2012 3:03 am

Apart from other ideas given....
Facebook might be used by the next generation far more than by some of us fogeys
If you lived in the middle East and through the Spring uprisings you might view Facebook as something that helped change society.....given they are one of the few rapidly expanding demographically areas of the world....
- maybe its a growth stock.

Personally I cant stand Farcebook - who cares if my mate just had a Pizza, but I also understand the popularity. When it enters into the popular lexicon - eg; "just facebook me" then who is to complain.
Do you think banks with their continual boom busts have every actually made money over the long term ????? :? - Lets ask Chelonia

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Post by trackstar » Thu Feb 02, 2012 1:37 pm

totally agree with you Dean, I closed my FB account years ago.....

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Post by mojojojo » Thu Feb 02, 2012 1:50 pm

cliffg wrote:Facebook provides Marketers access to 'Customers'
Google provides 'Customers' access to Markets

Hence,
Facebook is a Marketers dream
Google is a 'Customers' dream
+1 with the exception ...

Facebook provides Marketers access to "Information"
Google provides "Information" to customers and marketers

It's all about information. That's what your missing Dean. Your not a "marketer" and don't get to see the vast amount of information that FB has. Google will do the exact same with their google+ service, except they will be able to tie in your search,browsing,email,etc habits.

With the number of customers/users that FB has, there is a ton of oppurtinity for them to milk ... I mean make money from that base, I'm jsut not conviced that they could pull it off.

Bottom line ... FB is NOT worth the $75 - $100 B, that they are currently valued at .. it's just a market feeding freenzy.

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Post by BuyHigh SellLow » Thu Feb 02, 2012 4:05 pm

I'm not so sure they're overvalued...

They're approaching 1 billion users. If we assume that Facebook can extract $100 of PV out of each user (and that they don't add any more users), then I think a $100 billion value is pretty fair.

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Post by MarkS » Thu Feb 02, 2012 8:06 pm

A common psychological mistake people make is to think that since X doesn't appeal or apply to them, it must not have much merit.

While someone may not use FB, there are 800M accounts, many of which are active. Look at the stats on how long people spend on Facebook when they do use their accounts... In an era where the consumer is more and more fragmented [e.g.: look how much companies are willing to pay for a Superbowl ad -- it is because it is one of the last remaining times you can mass market to a huge audience] FB is going to be the "go-to" place for advertisers.

My venture capital firm specializes in media and healthcare. From the media side, think about how you would begin to advertise a new product. Well, on Facebook, you can get enormous granularity due to how much personal info they have on everyone. If I want to advertise to females, ages 25-30, who live in Boston, who have an MBA, who are single, who "Like" wine, and exclude those who have been divorced? I can do that on FB, and at cheaper cost than any alternative.

The potential value is there; don't forget advertising is a $500 billion global business ANNUALLY. A lot of that can transition to FB, and hence the enormous valuation. Obviously, at these valuations, there is little room for error. But that in a nutshell is what is going on, IMO.

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Post by sluggo » Thu Feb 02, 2012 8:40 pm

MarkS wrote: ... you can get enormous granularity ...
I wanted to preserve this little howler lest it disappear via editing or deletion.

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Post by MarkS » Thu Feb 02, 2012 10:07 pm

sluggo wrote:
MarkS wrote: ... you can get enormous granularity ...
I wanted to preserve this little howler lest it disappear via editing or deletion.
Sluggo a common internet grammar bully? 2 c that yur post adds nothin' 2 da conversation at hand is....not surprising.

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Post by LeviF » Thu Feb 02, 2012 10:51 pm

MarkS wrote:A common psychological mistake people make is to think that since X doesn't appeal or apply to them, it must not have much merit.
Image

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Post by cliffg » Thu Feb 02, 2012 11:18 pm

sluggo wrote:
MarkS wrote: ... you can get enormous granularity ...
I wanted to preserve this little howler lest it disappear via editing or deletion.

MarkS,
I think that sluggo was just pointing out a paradox / oxymoron similar to the following:
dark light
the living dead
an open secret
an original copy
enormous granularity is a rather unique oxymoron -- good job even though I'm pretty sure it wasn't intentional -- it did tickle my funny bone as well

http://en.wikipedia.org/wiki/Oxymoron

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Post by Chris67 » Fri Feb 03, 2012 1:28 am

AND WHAT HAPPENS when someone else comes along and steels their market share or the Chinese LAUNCH THEIR OWN or xy z happens

All Im saying is that all weve heard for centuries - is its different this time

On average the public lose a whopping amount of money buying Internet based IPO's
Im sure facebook is a good concept if your that way inclined

That reminds me I must dump teh shares I hold in that valve based radio company !

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Post by DPH » Fri Feb 03, 2012 3:58 am

MarkS wrote:A common psychological mistake people make is to think that since X doesn't appeal or apply to them, it must not have much merit.

While someone may not use FB, there are 800M accounts, many of which are active. Look at the stats on how long people spend on Facebook when they do use their accounts... In an era where the consumer is more and more fragmented [e.g.: look how much companies are willing to pay for a Superbowl ad -- it is because it is one of the last remaining times you can mass market to a huge audience] FB is going to be the "go-to" place for advertisers.

My venture capital firm specializes in media and healthcare. From the media side, think about how you would begin to advertise a new product. Well, on Facebook, you can get enormous granularity due to how much personal info they have on everyone. If I want to advertise to females, ages 25-30, who live in Boston, who have an MBA, who are single, who "Like" wine, and exclude those who have been divorced? I can do that on FB, and at cheaper cost than any alternative.

The potential value is there; don't forget advertising is a $500 billion global business ANNUALLY. A lot of that can transition to FB, and hence the enormous valuation. Obviously, at these valuations, there is little room for error. But that in a nutshell is what is going on, IMO.

Perfectly logical argument, and from an academic standpoint I agree, but something about this does not jibe with my intuition. I’ll try to explain:

1. I’ve tried Facebook marketing for my own business and it’s been pathetic IE: No new customer generation (despite using it “enormous granularityâ€

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Post by Moto moto » Fri Feb 03, 2012 4:27 am

Just my objective opinion....
advertising and marketing - what a wonderful example of science fiction.

I am absolutely unsure that it is much like managed futures - some are better at marketing and advertising their systems than others and hence get the money as assets under management.....or is it all down to performance.
? :)

and just to throw this priceless junk into the mix....

http://www.techweekeurope.co.uk/news/fa ... rces-51908

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Post by DPH » Fri Feb 03, 2012 6:34 am

And another recent survey found that most Brits are drunk in their Facebook photos.
LOL! Whats that all about??? :P

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Post by LeviF » Fri Feb 03, 2012 8:51 am

[quote="DPH"]
1. I’ve tried Facebook marketing for my own business and it’s been pathetic IE: No new customer generation (despite using it “enormous granularityâ€

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Post by MarkS » Fri Feb 03, 2012 9:35 am

Few points:

1. Great article on page B1 of the US edition of the Wall Street Journal on the battle over what FB is worth. Very similar to our discussion.

2. Chris -- When something new comes along, and it always does, then a company either adjusts or dies. That's capitalism. With FB, the one big advantage it will have is that after this IPO they are going to have a huge war chest of cash to keep hiring the best people in every discipline and be able to move into new areas (ie, Google's turf).

3. DPF -- You make great points, and I'm not going to argue them because in the end, I have the same personal experience as you with FB, and my LinkedIn experience mirrors yours as well. But enough people believe in the model that FB made $3.1 billion in ad revenue in 2011. If FB can make itself the gatekeeper to 800M+ consumers, like iTunes is to app developers and the music industry, it may work. But as for the advertising piece, I think you hit the nail on the head with your line: "Ultimately, advertisers don’t care how many eyeballs they are catching, they only care about how many wallets they are opening." I believe that the ability to target ads so precisely will cut both ways as an advertiser will be able to see exactly how effective (or not effective!) those ads end up being for their business. Perhaps similar to what Groupon is now facing, with stats starting to show that those offers really do not increase sales nor bring in new users for the businesses who use them.

Finally, an observation: it appears most people on this discussion are of a value/growth-at-reasonable-price (GARP) orientation with equities. I am as well. So anyone else see irony that as LTTFs, are we are most likely long frozen OJ at all-time highs, long the Eurodollar near zero interest rates, and long gold at prices in excess of $1,700/ounce? :D

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Post by mojojojo » Fri Feb 03, 2012 10:00 am

MarkS wrote: 3. DPF -- You make great points, and I'm not going to argue them because in the end, I have the same personal experience as you with FB, and my LinkedIn experience mirrors yours as well. But enough people believe in the model that FB made $3.1 billion in ad revenue in 2011. If FB can make itself the gatekeeper to 800M+ consumers, like iTunes is to app developers and the music industry, it may work. But as for the advertising piece, I think you hit the nail on the head with your line: "Ultimately, advertisers don’t care how many eyeballs they are catching, they only care about how many wallets they are opening." I believe that the ability to target ads so precisely will cut both ways as an advertiser will be able to see exactly how effective (or not effective!) those ads end up being for their business. Perhaps similar to what Groupon is now facing, with stats starting to show that those offers really do not increase sales nor bring in new users for the businesses who use them.
This ^^^ ... doesn't matter if they have every world citizen as users for advertisers, having 1M "likes" doesn't mean anything if they aren't able to convert those "friends" to customers. (would be good for the game developers though).

MarkS .. do you have any good data on this?

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