Facebook stock a smart buy?

[swerb]

I am torn on this one. Rumored to open at like $45 a share.

An insanely large audience (845 million people) that they have just scratched the surface of beginning to monetize. Made a billion dollars last year in profits on 3.7 billion in revenues. 85% of revenues on ads, which they aren't really selling to many large companies. 12% on the crap people buy for the online games they host.

Facing massive competition from Google, Apple, Twitter, and Amazon though. By FB's own admission, they have nothing to spend the money on that they generate from the IPO. And no one clicks on their ads - which to this point they haven't been great at selling.

This one's a tough call. With that massive audience, my guess is that Facebook credits and FarmVille props can only get em so far, the super competitive online ad environment prevents ad sales from continuing to climb at their current rate ... and the stock suffers.

Then a year or two from now FB jumps into bed with a major retailer and starts selling everything and anything Amazon.com style.

[skatingtripods]

I think the hardest part in buying Facebook stock is trying to decide what they can honestly do next. From a creative standpoint, there isn't a whole lot that they can do. How much growth can you expect that generates more revenue or is good enough to get people to pay for a product/service?

The only people who don't have Facebooks right now are people with zero disposable income (less than 13/over 80).

Have to question the timing. I get that it's because ad revenues suck and they're constantly having to have more server capacity as new accounts are formed. But, it still seems a little questionable.

There's an oversaturated market already for photograph-related goods (Snapfish, which is owned by HP, Shutterfly, Mixbook & more), but they could still expand to something like that, since everyone posts their pictures to Facebook already anyway.

That being said, it's not a stock that will fall off the face of the Earth. It's a matter of wondering how long you want your money tied up in something that could remain stagnant for a long period of time.

Had they charged companies in the beginning to set up Facebooks, I wonder how that would have changed things. Business premium accounts.


Personally, I would think you're better off taking the Facebook money and investing in Apple. Much pricier endeavor, but there could be a much higher payoff when Apple Skynet takes over the planet. Less shares for the money, but the sky's the limit for Apple. Not sure how close Facebook already is to its limit.

[Jumbo]

IMO, Facebook is a reasonable purchase among a portfolio of large-cap tech, provided that you have enough cash to make a risky bet. 800 million pairs of eyeballs, with at least half of that as regular users, is an audience that you just can't argue with. Even when Facebook does something to cause its users to complain, they (including me, I admit) keep coming back. I'm also not so concerned with immediate monetization on its user base. The thing that Facebook has going for them is that, with such a large base, they can latch onto whatever happens to be the next "in" thing online and cash in if that thing happens to make money. For example, I see that H&R Block online (which I use to do my taxes) allows you to log in through Facebook. That's insane: I'd never use my *Facebook* account to log in to a site that holds my personal financial information. But, just the fact that Facebook is finding ways to leech onto every business under the sun is something to take note of. Also, a number of companies seem to even be forgoing building their own websites and just using Facebook business pages; the more that happens, the more that Facebook is able to create its own "closed Internet."

(Which makes me wonder if anyone at AOL brought up the idea of converting their customer base into a social-like outlet 10 years ago, and then got laughed off by suits who thought that $20 per month dial-up was a business to last.)

All that said, you have to put up real money to get in... and I see too much of a premium from people who want to get in on Facebook (kind of like that Goldman Sachs debacle a little while ago). It looks like their $5B IPO only represents ~5% of the outstanding shares, which might attract billions more on the open market. For a retail investor, I just see it costing too much in the short term. YMMV.

[Orenthal]

Anyone got a number on shares?

[Commodore Perry]

Purchasing facebook is purchasing a share of online ad revenue. If that's what you want, I think a better argument can be made for buying google. Google's ads are highly targeted, facebooks much less so. On google people are searching for things they need, a perfect environment for advertising. On facebook, much, though not all, of the advertising is forced.

Facebook has stuck around longer then I thought it would, and has had a much wider appeal then I thought it would. I have no idea how long they will be so dominant in social media. But that industry can change quickly. Look how fast myspace died. I doubt facebook will suffer the same fate, but at some point its popularity is going to crest, and what is their revenue going to do then? My wife is a hardcore facebook user, however I've noticed lately she's been spending much more time on pinterest, all at the expense of facebook.

I wouldn't want to be in facebook for the long run.

[Orenthal]

HAL baby!