Facebook is worth over USD 100 billion, according to analysts who are forecasting the results of the IPO.
I do not find the business model of Facebook to be sustainable. I expect that their value will fall sharply over the next few years. I do not see how they can find a revenue stream that can sustain the high cost of their operations.
Many Internet stocks have high valuation as their shareholders, who are the venture capital funds, have the skill and financial power to support the share price after the IPO for a certain period of time. If the business model is not sustainable, they have abandon the shares. This has happened to Groupon. It will also happen to Facebook, in my view.
I do not find the business model of Facebook to be sustainable. I expect that their value will fall sharply over the next few years. I do not see how they can find a revenue stream that can sustain the high cost of their operations.
Many Internet stocks have high valuation as their shareholders, who are the venture capital funds, have the skill and financial power to support the share price after the IPO for a certain period of time. If the business model is not sustainable, they have abandon the shares. This has happened to Groupon. It will also happen to Facebook, in my view.
9 comments:
The world economy is facing this same kind of problem where no real value been created, no real products or consumables are created. Many of the IT company such as Facebook has no real value, the most it only offer a link to consumers to be connected. But if many of the facebook users are youngsters who has spent much of their times connected with friends through Facebook but this group of users did not create any real products. They are just wasting their times on Facebook.
I believe Facebook will collapse soon.
Such IT stock like FACEBOOK is just a hype, it appeared from nowhere, it could just disappear into nowhere too.
Maybe the owners know the ending is imminent, and coming soon, that's why they wan to cash out some of the stock onto "rose tinted" investors, who could not see beyond.
People who trade in Domains would understand this concept of a Virtual Commodity created out of nothingness in the air. If some people could hype investors' interest, then this nothingness is worth money and could be traded for money, once investors lose interest, this nothingness i.e. the Domain, is not worth a single cent. The same "sama sama" concept with FACEBOOK.
Warren Buffet would never touch this virtual stock, unless he has suddenly gone crazy.
Well I think mark zuckerberg definitely knows something that we dont, that is why he was youngest billionare in the world at the age of 26.
Facebook has its values but the problem is how to determine these values. We have to wait to see Facebook earnings and give it a reasonable multiples.
Now I understand why Facebook keep sending reminders to me to log into facebook in the last few months because they want to boost active user number.
Younger people in their 20s & 30s are very inclined to use social media like facebbok.
Although it does not produce any tangible "hard" product, it serves to connect. This is what the younger generation want: To connect, stay connected digitically.
This is part of their values.
The chanllenge is that the younger generation ( as I was before ) treat many things very casually.
With a Facebbok account, they begin to release information that they think is worth sharing.. or better still, not thinking at all!
Being older, and (hopefully) wiser, the older generation share information on a face to face basis... an art that is hard to beat!
This casual attitude will be a problem for many of them further down the road in their lives... its a process. Let it be.
Business people know about this attitude & behaviour and they try to capture it and use it to their advantage. After all, its the young that has more earthly desires than you, me and mr Tan!
@11:49 am
Facebook is valuable but it is not worth $100 billion. I only want to give this view, so that other people do not invest at this price.
Facebook members should be given shares. Otherwise, we close our accounts and without any members, Facebook will be worth nothing since there will be no traffic, ;-)
You guys are commenting like experts when you don't even understand the business model of facebook.
Facebook generates revenues via targeted advertising.
By keying in your profile details it builds up a customer database of your lifestyle preferences, and allows for marketers to send the right ads to the right people (on the right hand bar). This optimises the transmission of information because most ads don't find their intended audience.
The next biggest money generator for facebook is from licensing as a plotform to online games created by third parties such as Zynga.
The third largest revenue generator is from their sales of virtual gifts.
These have combined to provide large revenues, and I continue to believe that their business model is sustainable if they can add more users and add more capabilities to their platform, its a modular design and hence flexible.
In conclusion it may be overpriced yes, but please don't call everthing a bubble when you dont understand how it works. Jeff Bozos was loosing money for 5 years but Amazon eventually became one of the biggest online companies. Not all web startups are duds please educate yourselves better.
Kevin
Hi Kelvin,
Your observations are useful. However, you should avoid this statement, which is unnecessary, "You guys are commenting like experts "
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