The Facebook IPO

[JerryK]

No thread yet? I'll start it.

I wouldn't have predicted it happening, but seeing their stock tank has given me encouragement about how the market works. I don't harbor any ill-will towards Zuckerberg & Co. I was just glad to see two things play out:

• My belief that the company doesn't provide anything to GDP. It's nice to have connections to old friends. It's nice to know that the girls in high school who dumped me are now fat and divorced. But that doesn't add to our productivity as a nation; It doesn't provide the gains in individual productivity like we saw from the PC/Spreadsheets and the WWW's information access.
  
• Discovering that even the dumb money in the market realizes the previous point.
  

[ZachEY]

No one clicks the ads. That's the crux of it.

[slats]

Mark Zuckerberg used this IPO to cash out. Facebook doesn't make money, and -worse- it's just not cool anymore (if it ever was). MZ is a smart guy. He grabbed the money when the money was good.

[CTM]

i haven't followed closely, but wasn't the market cap at $40 share price one of the biggest companies in the world.

Maybe they just sold too many shares to support the price tag?

Either way, FB is ridiculous, the rates they charge for ads don't take into account nobody clicking on them..

[JohnnyHector]

It will be interesting when the lock-up period ends for the pre-IPO shareholders after 90 days, when the market could potentially be flooded with a billion Facebook shares. What's more telling is that they amended the initial S-1 filing to reduce the lock-up from the standard 180 days, which strongly suggests that a sell-off is in store.

If you ever wanted to short the stock, that would seemingly be a prime opportunity.

I agree that this was a cash-out situation rather than an effort to raise capital, but it had to happen sometime and I think the company has passed its peak. The venture capitalists and angel investors want to see the return on their investment as much as Zuckerberg. I think the problem was the arrogance in wanting and/or thinking that a $100 billion valuation was a reality and the subsequent actions of increasing the number of offered shares by ~100 million and upping the IPO price from $34 to $38 supports that. Once the hype died down and the price didn't jump, the shine was off and people actually started looking at the underlying financials, which aren't exactly stellar.

[RutgersJetFan]

Too many shares issued and the valuation was insanely too high. That's really the crux of it.

[JetsFanInDenver]

Great company. Just needs a business model that can generate enough organic revenues and profits to match the price of the stock.

Till then this stock is destined for single digits!

[Larz]

morgan stanley shorted them via their own ******* IPO essentially and made boats loads of cash

lol

[Maxman]

Too many shares issued and the valuation was insanely too high. That's really the crux of it.

This.

This isn't a typical tech company. Facebook knows how to make money. A lot of people saying they don't have a monetization strategy, that is not the case. Facebook ads are effective, they price them out so that they are affordable. The long term viability of Facebook ads are fine.

You start a business tomorrow. What do you do first, start a website and pay a designer a few thousand dollars or put up a Facebook Page for your business? FB Pages for businesses and their ad network are bringing in plenty of money for Zuck and company. Off topic but compare that to Twitter and FB is even more impressive. How easy is it for a small business pay Twitter money? Exactly.

Anyhow the problem for FB right now is that they aren't making quite as much money off of Mobile users. Call it a hunch, but I think they will figure that out somehow.

[RutgersJetFan]

Anyhow the problem for FB right now is that they aren't making quite as much money off of Mobile users. Call it a hunch, but I think they will figure that out somehow.

Had this exact convo a few months back actually. They've been completely incompetent when it comes to mobile, hell, it took them until this year to finally issue the iPad app. They issued a whole separate app just for the messenger, which people don't want from a practical standpoint. It's a mess. Zuck just shelled out a cool bill for Instagram. That's an insane amount to overpay by, but they did it because they needed the engineers, software, and overall formulas for how fast their apps are; kind of conceding that they don't know what they're doing. It's actually an underlying story with Facebook that the masses haven't caught on to; they've done a horrible job transitioning into being a mobile company, which is bad. We're coming up on an era where traditional desktop programs and desktop companies are going to be rendered prehistoric, and Facebook has had a really difficult time transitioning out of being a desktop company. Google on the other hand seems to have gotten this right, they're operating as a mobile-first company now. Ditto for Apple.

Maybe the problem is Zuckerberg to be honest. He's never really done anything other than write code. I'm probably biased in saying this, but to my knowledge Facebook doesn't employ any social scientists. So they're pretty much just blindly assuming what people may or may not want. Tech companies don't do that anymore. Intel doesn't, and Google sure as sh*t doesn't. The ideas for the Droid platform didn't just come from Eric Schmidt sitting in a room thinking of stuff. There's also the fact that they don't have any competition, which economically would stifle the need to cater to users at the same degree that other companies would. But it would be a huge, huge mistake IMO if that attitude was permeating throughout their offices. Nothing, even a social networking program completely engrained in culture, is immune to someone coming along with something better. Hence my point about social scientists.

[JetsFanInDenver]

This.

This isn't a typical tech company. Facebook knows how to make money. A lot of people saying they don't have a monetization strategy, that is not the case. Facebook ads are effective, they price them out so that they are affordable. The long term viability of Facebook ads are fine.

You start a business tomorrow. What do you do first, start a website and pay a designer a few thousand dollars or put up a Facebook Page for your business? FB Pages for businesses and their ad network are bringing in plenty of money for Zuck and company. Off topic but compare that to Twitter and FB is even more impressive. How easy is it for a small business pay Twitter money? Exactly.

Anyhow the problem for FB right now is that they aren't making quite as much money off of Mobile users. Call it a hunch, but I think they will figure that out somehow.

They are not making as much money of ads as say someone like Google. GM for one dropped their ads from FB because they were not so effective. And a lot of businesses complain about that.

I agree with the penetration in the mobile users market.

End of the day to justify an overnight 100 bill market cap a company needs revenue growth and profit growth at a certain pace. And right now things are not looking so bright for FB and its stock price. They need a more lucrative business model.

Now its not unusual for a company to struggle to find a business model that can be lucrative even if they have the right technology and markey penetration. Google went through that phase as well. Only difference being they entered the market only after they had found their lucrative business model.

[Bugg]

No one clicks the ads. That's the crux of it.

And the second they try to changr for content people will move on to the next thing. Not sure longterm how you generate income because NOBODY bothers to look at 30 second web ads.

[Maxman]

Had this exact convo a few months back actually. They've been completely incompetent when it comes to mobile, hell, it took them until this year to finally issue the iPad app. They issued a whole separate app just for the messenger, which people don't want from a practical standpoint. It's a mess. Zuck just shelled out a cool bill for Instagram. That's an insane amount to overpay by, but they did it because they needed the engineers, software, and overall formulas for how fast their apps are; kind of conceding that they don't know what they're doing. It's actually an underlying story with Facebook that the masses haven't caught on to; they've done a horrible job transitioning into being a mobile company, which is bad. We're coming up on an era where traditional desktop programs and desktop companies are going to be rendered prehistoric, and Facebook has had a really difficult time transitioning out of being a desktop company. Google on the other hand seems to have gotten this right, they're operating as a mobile-first company now. Ditto for Apple.

Maybe the problem is Zuckerberg to be honest. He's never really done anything other than write code. I'm probably biased in saying this, but to my knowledge Facebook doesn't employ any social scientists. So they're pretty much just blindly assuming what people may or may not want. Tech companies don't do that anymore. Intel doesn't, and Google sure as sh*t doesn't. The ideas for the Droid platform didn't just come from Eric Schmidt sitting in a room thinking of stuff. There's also the fact that they don't have any competition, which economically would stifle the need to cater to users at the same degree that other companies would. But it would be a huge, huge mistake IMO if that attitude was permeating throughout their offices. Nothing, even a social networking program completely engrained in culture, is immune to someone coming along with something better. Hence my point about social scientists.

I have no idea about who they employ but the messenger thing they tried was interesting. I have messenger off all together in Facebook. For me personally I just view FB as a fun thing and never wanted the real time chat aspect.

Facebook did have competition though. But MYSpace sold to News Corp and News Corp took care of that. Think about that when you are looking at FB stock. MYSpace sold once for 580 million. Then they were sold again for 35 million.

That is scary.

[Maxman]

They are not making as much money of ads as say someone like Google. GM for one dropped their ads from FB because they were not so effective. And a lot of businesses complain about that.

I agree with the penetration in the mobile users market.

End of the day to justify an overnight 100 bill market cap a company needs revenue growth and profit growth at a certain pace. And right now things are not looking so bright for FB and its stock price. They need a more lucrative business model.

Now its not unusual for a company to struggle to find a business model that can be lucrative even if they have the right technology and markey penetration. Google went through that phase as well. Only difference being they entered the market only after they had found their lucrative business model.

The stock valuation pre-IPO was clearly proven to be too high. But I do think FB will do okay long-term when it comes to ad revenues. Once people start realizing what they store about you though, then that will be another issue all together.

[Maxman]

And the second they try to changr for content people will move on to the next thing. Not sure longterm how you generate income because NOBODY bothers to look at 30 second web ads.

They will never charge for content. People know that as a business model on the web it is the exception and not the rule. Well most people know that anyway.

[RutgersJetFan]

I have no idea about who they employ but the messenger thing they tried was interesting. I have messenger off all together in Facebook. For me personally I just view FB as a fun thing and never wanted the real time chat aspect.

It's not so much how you view it as how they can get you to view it another way. For some reason they thought they could develop themselves as some sort of surrogate text messaging service by asking their users to install an entirely different app. The last thing your average smartphone user wants is additional apps to support an already existing app. Again, this goes back to Facebook operating as a desktop company and not a mobile company; and more importantly not even knowing how to go about making the transition. Now instead of one poorly designed and slow app, they have two.

Ask yourself this, do you honestly think Instagram was worth $1 billion? Of course not. That was a panic buy. And a smart one. Their mobile programmers are brilliant.

Facebook did have competition though. But MYSpace sold to News Corp and News Corp took care of that. Think about that when you are looking at FB stock. MYSpace sold once for 580 million. Then they were sold again for 35 million.

That is scary.

Well yeah, that's kind of the point. Facebook's been the lone wolf now for several years. Big difference between had and having.

It's apples and oranges anyways. That was way, way back at the beginning and it was short-lived. Before social networking (and Facebook especially) was completely engrained in American culture. That makes all the difference. There's a reason Google+ hasn't been a smash hit.

There's also the fact that Myspace was really, really terrible software and they couldn't keep up with Zuckerberg's innovations with simplicity and coding. They never stood a chance.

[Bugg]

They will never charge for content. People know that as a business model on the web it is the exception and not the rule. Well most people know that anyway.

Except the ESPN, Times, WSJ and Newsday. The Times, ESPN and Journal knew their paywall would cut numbers and did it anyway, thinking they could make it up with superior content somebody might pay for.Especially true that many of their columnists are syndicated and if you wait a day or 2 the conent is then free anyway. Remains to be seen if they can sustain that business model.

Newsday is a special case of stupid all it's own. Cablevision/MSG/Dolan owns Newsday, and still labors under the delusion anyone would pay 10 cents to view any of it's content. At one point Newsday had 12 paid on line susbcribers. May be it's jumped to 13 or 14 if somebody hit the wrong key.

[RutgersJetFan]

[Maxman]

So when Facebook added the Promote this Post for Pages, apparently they started limiting the amount that normal posts would go out on peoples timelines. This is exactly the kind of thing they can do to F themselves over.

Let's say a company ran an ad campaign with Facebook to get likes. They get to 100k likes. Not when they post, Facebook is going to limit how many of their own likes (users) see their post? But if they pay for promote this post, then it will be seen? So you have to pay twice to get it seen?

I haven't confirmed this, our average views on FB are way down, so it seems to be what they are doing. Unreal that you would have to pay money to get someone to see your post, when you already paid money to have them like your page.

Dumb move Facebook.

[Bugg]

So when Facebook added the Promote this Post for Pages, apparently they started limiting the amount that normal posts would go out on peoples timelines. This is exactly the kind of thing they can do to F themselves over.

Let's say a company ran an ad campaign with Facebook to get likes. They get to 100k likes. Not when they post, Facebook is going to limit how many of their own likes (users) see their post? But if they pay for promote this post, then it will be seen? So you have to pay twice to get it seen?

I haven't confirmed this, our average views on FB are way down, so it seems to be what they are doing. Unreal that you would have to pay money to get someone to see your post, when you already paid money to have them like your page.

Dumb move Facebook.

Seems really odd because the expense to allow unlimited likes cannot be much. Keeps coming back to FB has a real uphill fight to generate ad revenues. And a paywall is a no go.

[RutgersJetFan]

Skynet is aware.

http://news.cnet.com/8301-1023_3-57464415-93/facebook-e-mail-mess-address-books-altered-e-mail-lost/

[Maxman]

Skynet is aware.

http://news.cnet.com...ed-e-mail-lost/

I thought the IPO would slow them down from treating the world like a QA lab. I would love to know what their procedure is to get these changes implemented.

[RutgersJetFan]

I thought the IPO would slow them down from treating the world like a QA lab. I would love to know what their procedure is to get these changes implemented.

They've been completely incompetent when it comes to mobile, hell, it took them until this year to finally issue the iPad app. They issued a whole separate app just for the messenger, which people don't want from a practical standpoint. It's a mess. Zuck just shelled out a cool bill for Instagram. That's an insane amount to overpay by, but they did it because they needed the engineers, software, and overall formulas for how fast their apps are; kind of conceding that they don't know what they're doing. It's actually an underlying story with Facebook that the masses haven't caught on to; they've done a horrible job transitioning into being a mobile company, which is bad. We're coming up on an era where traditional desktop programs and desktop companies are going to be rendered prehistoric, and Facebook has had a really difficult time transitioning out of being a desktop company. Google on the other hand seems to have gotten this right, they're operating as a mobile-first company now. Ditto for Apple.

Told ya.

The biggest mistake this company can make is to assume they're so much a part of the status quo now that the general public won't go elsewhere in the presence of a better product. You can only **** with people's phones for so long.

Lot of programs now are just skipping the whole "register for an account" process and letting people just register with their Facebook accounts. My prediction is that if this keeps up for a long enough period of time, somebody is going to come up with software that beats Facebook while actually utilizing Facebook to do it.

Facebook is a tech company whether Zuckerberg wants to face it or not. He better start acting like it. Put out crap for long enough and people will go elsewhere. Just ask Microsoft and Blackberry.

[Maxman]

Just ask Microsoft and Blackberry.

I think Microsoft is figuring some things out, I am not going to feel too bad for them but did you see what happened to RIM?

[RutgersJetFan]

I think Microsoft is figuring some things out, I am not going to feel too bad for them but did you see what happened to RIM?

44% loss in revenue? Unreal. 5,000 jobs gone and they're completely abandoning making hardware. That's what happens when you become complacent in a field where your products can be yesterday's news in a day. Innovate or die.

Microsoft will always be around, but once upon a time they were the most feared player in the game and they're never getting that position back.

[Maxman]

44% loss in revenue? Unreal. 5,000 jobs gone and they're completely abandoning making hardware. That's what happens when you become complacent in a field where your products can be yesterday's news in a day. Innovate or die.

Microsoft will always be around, but once upon a time they were the most feared player in the game and they're never getting that position back.

On Microsoft, all I am saying is they will slop and lose some market share in their various endeavours but they are still strong. Windows 8 seems interesting and although they will probably hurt Google more than Apple, they stand to gain a lot more market share in the mobile phone market.

But yes, RIM...5,000 layoffs and it sounds like they will be out of business before their next mobile O\S is released. Good times.

[RutgersJetFan]

On Microsoft, all I am saying is they will slop and lose some market share in their various endeavours but they are still strong. Windows 8 seems interesting and although they will probably hurt Google more than Apple, they stand to gain a lot more market share in the mobile phone market.

But yes, RIM...5,000 layoffs and it sounds like they will be out of business before their next mobile O\S is released. Good times.

Maybe, they're hanging a lot on how Surface does. Never said Microsoft wouldn't remain strong, just that they aren't the standard anymore and probably won't be so long as Google keeps doing what it does. Again, that's all I'm saying. The problem is they came to the party way too late. Know anyone with a Windows powered phone? I sure as hell don't. Where can you even go to check out a Surface? One of the 50 more Best Buys that are closing or the CompUSA's that don't even exist anymore? MS opened up a store in Kansas City recently and supposedly it's done quite well, so I'm guessing that's a test run for them with opening up more stores, but they're still way too late and by the time they can even get the infrastructure up to make a serious push out of the distant 3rd place they're in, IMO mobile devices and platforms will already be on to the next big thing. And I'm sorry to say, but Microsoft hasn't been the torch bearer on that tip since Gates stepped down. I even have my reserves about how they're eventually going to do with the PC field, because apps certainly look like they're taking over and their next venture is probably going to be home computing with them; and again, Google and Apple rule that world.

sh*t, I probably just should have typed Nokia. Max and his god damn need for clarification lol.

[Maxman]

Maybe, they're hanging a lot on how Surface does. Never said Microsoft wouldn't remain strong, just that they aren't the standard anymore and probably won't be so long as Google keeps doing what it does. Again, that's all I'm saying. The problem is they came to the party way too late. Know anyone with a Windows powered phone? I sure as hell don't. Where can you even go to check out a Surface? One of the 50 more Best Buys that are closing or the CompUSA's that don't even exist anymore? MS opened up a store in Kansas City recently and supposedly it's done quite well, so I'm guessing that's a test run for them with opening up more stores, but they're still way too late and by the time they can even get the infrastructure up to make a serious push out of the distant 3rd place they're in, IMO mobile devices and platforms will already be on to the next big thing. And I'm sorry to say, but Microsoft hasn't been the torch bearer on that tip since Gates stepped down. I even have my reserves about how they're eventually going to do with the PC field, because apps certainly look like they're taking over and their next venture is probably going to be home computing with them; and again, Google and Apple rule that world.

sh*t, I probably just should have typed Nokia. Max and his god damn need for clarification lol.

Is it a need for clarification or am I just really a bot that milks more posts out of otherwise dead topics?

I think we are saying the same thing about Microsoft. But their forecast for Windows 8 is looking better, that's all I am saying. I was reading about it last week and people seem to be genuinely excited about that, and how it will cut into google's android share. I think (think) last month was the first month that google didn't gain more of a share in the mobile phone market. I could be off on the timing actually but I believe they fell slightly or stayed the same market wise (google).

Although I could be getting it confused with flat screen TV sales. I read last week that a month ago flat screen TV sales fell for the first time ever. Everyone has two now apparently.

Its time to find the next big thing I guess.

[RutgersJetFan]

Is it a need for clarification or am I just really a bot that milks more posts out of otherwise dead topics?

I think we are saying the same thing about Microsoft. But their forecast for Windows 8 is looking better, that's all I am saying. I was reading about it last week and people seem to be genuinely excited about that, and how it will cut into google's android share. I think (think) last month was the first month that google didn't gain more of a share in the mobile phone market. I could be off on the timing actually but I believe they fell slightly or stayed the same market wise (google).

Although I could be getting it confused with flat screen TV sales. I read last week that a month ago flat screen TV sales fell for the first time ever. Everyone has two now apparently.

Its time to find the next big thing I guess.

I think the problem is that the next big thing probably isn't going to be hardware, it's going to be better integration of products that already exist in concept or that people already have. (See: Apple discontinuing MobileMe and going all in on iCloud this week, or Google's Nexus), for the time being Microsoft is just too far on the outside in that aspect to make its way in. I just don't see how someone with an AirBook and iPhone is going to pass up an iPad and go with a Surface. Ditto for someone already with a Droid powered phone attached to their hip going with a Surface over a Nexus. Why bother?

Then again, who knows? Google's Glass is one of the most insane things I've ever seen. I caught some of The Matrix on AMC earlier today, and truth be told when I watch a movie like that, products like Glass scare the everloving crap out of me.

[Bergen Jet]

I think the problem is that the next big thing probably isn't going to be hardware, it's going to be better integration of products that already exist in concept or that people already have. (See: Apple discontinuing MobileMe and going all in on iCloud this week, or Google's Nexus), for the time being Microsoft is just too far on the outside in that aspect to make its way in. I just don't see how someone with an AirBook and iPhone is going to pass up an iPad and go with a Surface. Ditto for someone already with a Droid powered phone attached to their hip going with a Surface over a Nexus. Why bother?

Then again, who knows? Google's Glass is one of the most insane things I've ever seen. I caught some of The Matrix on AMC earlier today, and truth be told when I watch a movie like that, products like Glass scare the everloving crap out of me.

Product families and interconnectivity will rule the roost from this point forward (unless there is a major advantage of some sort to a competing product). The big players have their user bases already hooked in one way or another, its just getting them to adapt to other members of the product family that all seem to play together nicely. That is an advantage that will be hard to overcome for any new entrants. In addition, the barrier of entry is way too high at this point to justify going after the scraps being left behind by the big players.

[RutgersJetFan]

Product families and interconnectivity will rule the roost from this point forward (unless there is a major advantage of some sort to a competing product). The big players have their user bases already hooked in one way or another, its just getting them to adapt to other members of the product family that all seem to play together nicely. That is an advantage that will be hard to overcome for any new entrants. In addition, the barrier of entry is way too high at this point to justify going after the scraps being left behind by the big players.

Yeah pretty much. That's why I don't think it's possible in the near future for Microsoft to climb out of 3rd place. Between Apple and Google, they're holding all the patents right now for almost everything, (see: Apple just blocking Samsung's new phone AND tablet). Meaning to even make headway, you're going to have to produce something truly innovating or simply concede to their position and work from there. You can't just make another smartphone, or another tablet, it's not going to do the trick, (Google obviously being the exception with their tablet because of Droid). Simply put, Droid/Apple mobile already have their customer infrastructure set up. It's going to take a lot of patience and a series of miracles for anyone to make headway into that. What can you really invent at this point to create a drastic shift in anything like Android or the iPad? Especially with the fluidity that both provide for evolution within the product itself? I don't see it. Holograms or some sh*t? Come on.

Going back to the main topic, that's my beef with Zuck. He thinks Facebook is a indestructible force like Apple and Google, it isn't. It's just a piece of software, and as we all know, software is perfectly replaceable. And even Apple and Google are continuously operating with respect to mobile demands. Facebook isn't. Which is sad, because it's historically been remarkable software.

[HessStation]

Great company. Just needs a business model that can generate enough organic revenues and profits to match the price of the stock.

Till then this stock is destined for single digits!

How does an Internet website do that? Generate revenue? Other than the ads no one clicks?

[CTM]

How does an Internet website do that? Generate revenue? Other than the ads no one clicks?

If I was Facebook I'd charge companies for thier pages...

Plus the make money on the games

[Bergen Jet]

If I was Facebook I'd charge companies for thier pages...

Plus the make money on the games

Even just a token amount would generate a ridiculous windfall.

[CTM]

Even just a token amount would generate a ridiculous windfall.

ANd there's no way companies would say no. The company i work for has about 10 FB sites for our different brands, we'd pay an awful lot of money to keep our presence there... In fact. we spent 6k last year integrating with a company that allowed us to post products on 4 of our sites

It's essentially why LinkedIn ia profitable.. They charge recruiters big bucks for access to thier DB.. I'm certain FB is learning from them