With Facebook’s filing last night, there were few positive comments on the outlook for the social media company. Its valuation is too high. The click through rates for ads too low. If the company prices at $100bn market cap, how fast can the $1bn in earnings grow to support, or, more importantly, increase its valuation. Young folks are using twitter and other platforms. Games have already penetrated the Facebook market and may not offer much growth.
On the hyper-valuation side, there are news reports that Facebook is best positioned to monopolize gambling when legislation goes its way. One report said net income could equal $100bn.
An impressive stat is Facebook’s share of the display business is 3x that of Yahoo’s. I know Yahoo is Yahoo but that is a pretty good number.
Also, while users have failed to garner a massive number of ad click throughs, what Facebook is all about is having you click through its site – click to post comments, click through to look at pictures, click through to find friends from grammar school, high school, college, work, clubs, etc, etc. The point is is that Facebook knows how to get you to click through.
Last week, Andrew Ross Sorkin asked Russian investor Yuri Milner if we are in a technology bubble. Milner responded negatively, noting that many of the recent tech IPOs are selling below their initial offering price. For this to be a tech bubble, I think one IPO needs to appreciate. My hunch is that it may be Facebook.
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