

Facebook shares hit again as valuation doubts rise - liuwei6
http://www.reuters.com/article/2012/05/22/us-usa-markets-facebook-idUSBRE84L0PE20120522

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lionheart
I'm not really sure why everybody here is so bearish on FB.

Sure, its an unproven company with a high P/E ratio, but so are most tech
startups when they go IPO.

I think Zuckerberg has shown that he knows how to innovate, grow the company,
and even make painful changes that eventually lead to more growth and profit.

There is at least a decent chance that FB will refine their business model and
turn into a large, stable technology company with good returns.

Is this some kind of HN Schadenfreude?

~~~
krschultz
I think the big stumbling block is that Facebook's growth is getting
population limited. That is remarkable to even think about, but they're
running out people left on Earth that don't have a Facebook account.

So your opinion on Facebook's (financial) value really comes down to how much
money you think they can make per user. Their current system seems to be 'show
the user ads based on the users hobbies, interests, likes, etc'. That isn't
massively effective for them, at least compared to a Google ad that has more
'intent' to it.

Now, if they start actually going through posts and pictures similar to how
Gmail scans your email to contextualize the ads, that might bump up the ad
relevancy and increase their margins. But a lot of people will complain about
privacy (as was seen when Gmail started doing that).

Alternatively, Facebook could figure out some way to really monetize your
social graph. Something more than just showing you personally ads. Maybe a
recommendation engine or something like that, but whatever it is needs to be
an order of magnitude greater revenue than what they have now.

I think if you don't believe they are going to make some kind of revolutionary
change, then you end up being bearish on Facebook.

And then some people just simply don't like Facebook. Whether because it looks
too much like something the popular kids like, or because most hackers are
contrarians by nature, or because Facebook plays fast and loose with privacy
at times, or because some people don't like PHP (I don't know, some of the
haters have random reasons), people just hate on Facebook.

~~~
j_baker
Facebook works in "over 70" languages:
<https://developers.facebook.com/docs/internationalization/>

One estimate says there are 6,910 languages in the world:
[http://www.science20.com/science_20/blog/rarity_koro_brand_n...](http://www.science20.com/science_20/blog/rarity_koro_brand_new_language_discovered)

In other words, you're simply wrong that Facebook is running out of people who
don't have a Facebook account. I _might_ buy that Facebook is running out of
people that don't speak the languages it supports though.

~~~
bri3d
Your approach to estimating Facebook growth by languages supported is
interesting but I suspect fundamentally flawed. There's an _incredible_ long
tail when it comes to languages spoken, especially when multilingual
individuals who speak both an obscure regional language and a more common one
are taken into account.

[http://en.wikipedia.org/wiki/List_of_languages_by_number_of_...](http://en.wikipedia.org/wiki/List_of_languages_by_number_of_native_speakers)
gives a great overview of this long tail - with 70 languages, Facebook
probably cover all but a few hundred million people. Simply by comparing the
top 25 languages spoken with the languages Facebook support, you can see that
several _billion_ people should be able to access Facebook based on language
numbers, but yet they only have 900 _million_ users.

I strongly suspect that "working internet-enabled device available frequently"
is a much better way to estimate potential Facebook adoption than language
support. Having never run the numbers, though, I neither support nor refute
that Facebook is running out of potential account-holders.

~~~
j_baker
Two things:

1\. I wasn't trying to estimate Facebook's growth. I was merely trying to
refute the notion that Facebook is running out of people to use their service.
My method is arguably quick and dirty, but it makes for a good heuristic,
doesn't it? It's enough to tell me that it's probably not worth my time to try
and dig up better data.

2\. Fine. The number I gave of 6910 probably was too high, but 70 is still
less than half of the languages mentioned in your link. If they have 900
million users, that's less than half of the people in the world who have
internet access[1]. Thus, it would seem that although there are certainly a
number of problems with my approach, the evidence we have so far would seem to
indicate that it did the job I intended it to do, doesn't it?

[1] <http://www.internetworldstats.com/stats.htm>

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damoncali
Suppose you expect Facebook to grow at 50% per year. How long until you run
out of internet users?

50% for the next several years is not an outrageous expectation given their
25x sales multiple. I haven't done the math because I'm both busy and lazy,
but I suspect it is actually a good bit lower than what is implied by such
massive multiples.

They are indeed running out of people to sign up. On the planet. That is
amazing. So amazing, I would argue, that one could imagine governments getting
nervous. When's the last time you saw _that_ in a prospectus?

~~~
j_baker
I certainly will grant that such a thing is possible. But I will believe what
you're saying when I see it.

~~~
damoncali
They won't actually run out of course, but I expect their user growth rate to
rapidly approach the low single digits. Which leaves an awful lot of
innovating money extraction to provide the absurdly high valuations they've
asked for and gotten. Time will tell.

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papaver
This is one of the most genius moves ever. Bloat the value of the stock to a
point where all the current investors can get out and make their money back on
the IPO. Once they have their money back it no longer matters weather the
truth comes out that actually hitting numbers like 25% growth for 10 years is
almost an impossible feat, especially for a company that isn't diverse.

~~~
nikcub
hate to say it but i'm sorta cheering facebook on this time. get one over the
street.

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snorkel
Stock prices rise and fall based on the popularity of the brand. Sure earnings
and other announcements nudge a stock up or down for a week or two, but it's
really the reputation of the brand that keeps the price up. In this regard
FB's biggest risk is people will get bored of FB. This is a risk Google hasn't
had to face yet, as everyone still relies on Google for search, but FB is
mostly for entertainment, and people will eventually get bored of it. Remember
yahoo?

~~~
tomkarlo
Ultimately, it's profits that drive the value of a stock, not the brand. Yes,
Apple is a popular brand. But you can't really say the same for Chevron, Exxon
or Merck, all of which are top 20 stocks.

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SagelyGuru
I think the FB price will settle before too long at a more realistic <$10.
People who paid $38+ are fools who were taken for a ride.

However, they ought to be thanked because it is them that keep the markets
functioning. Every time someone makes a profit by buying cheap and selling
dear, there is someone else who pays for that profit by buying dear and
selling cheap.

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vikas5678
I think the negative comments which came out recently regarding possible
threats to earnings from the mobile platform, GM pulling their ads from
Facebook and the increase in the offering size all contributed towards this
downfall. I think when Facebook comes out with their earnings next quarter,
people will have a better idea where the company is headed and the shares
might get a higher bid.

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Kilimanjaro
40B blown up the nose in just a couple of days, that's how wall street rolls.

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matthodan
I'm long and strong $FB via the IPO, but I think we're going to have a year of
pain before we're in the clear. Facebook needs to prove that they can continue
grow-- not an easy feat for a company with huge market share. I want to see
Facebook redefine the market by developing better ways to monetize the social
graph (duh!). I think mobile has potential, particularly outside of the US,
but success will require great execution. It will be interesting to see if
Facebook can retain talent with options priced off the public valuation and a
stock that is stagnating (or worse, declining).

~~~
gfosco
Sadly, you're going to lose a lot of money. Facebook cannot possibly bring in
the required revenue for growth. Their base will erode far faster than new
business will come on board. The IPO was the bubble bursting, making the
insiders rich, and laying the ruin for everyone who jumped in.

~~~
stonemetal
But they "only" sold 18 billion, that leaves insiders still holding 92 billion
of FB. If this were really a bubble bursting wouldn't the rich insiders be
holding a much smaller chunk of the fool's gold.

~~~
stonemetal
Never mind I appear to be mistaken, the company only sold 18 billion dollars
in stock, the insiders sold off 57%.
<http://news.ycombinator.com/item?id=4023751>

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recoiledsnake
Most of the IPO purchasers would've shed their shares on Friday and
yesterday(volume was crazy on both days) and now the regular joes are left
holding the bag. In fact, some of the big sharks have sold off their shares on
Friday and went short on the stock, so they're making bank on this.

~~~
dacilselig
Can you tell me which big sharks you are referring to? I know Morgan Stanley
is in big, however I don't know much of the other large players.

~~~
recoiledsnake
I would classify Morgan Stanley as a whale, not a shark. Can't find the
article right now, but I read yesterday about big client of one of the
underwriters saying he went through with the purchase of the IPO but dumped
shares early and went short. These are the smart guys.

