Facebook listed itself on Nasdaq as FB with the list price of $38 per
share valuing the social networking site over $100 Bn. The stock saw a
pop of around 11% after listing and touched $45 which could well be the
52 Week high for the stock as from whatever little knowledge I have
regarding stocks and markets, I find FB over-priced. The excitement
fizzled out by the time Nasdaq closed and the stock settled at $38.23.
When I say that FB is over priced then it's based on few datas.
FB's major source of income is, like Google, Advertisements. FB has agreements with application developers too who give it a small amount of their revenues as fees. However, if FB has to keep on adding value for its investors, it has to earn superlative revenues through its Online Ad business. However, a look at the data says that this might not be easy.
Google made $40 Bn in revenues in the year ending Mar'2012 which shows that apart from revenues from online Ads, over the years Google has made itself less and less dependent on the Ad business and has diversified its sources of income. This is reflected in its prices. Google gets a valuation of 66.67 (40,000 M/$600) taking Sales/Price ratio whereas FB at $38 gets a valuation of around 67.89 (2,580 M/$38) and thus is already expensive than Google. FB is relatively new and somehow its revenue model is yet not matured. It has to keep on acquiring companies (like the recent Instagram which it purchased at a hefty bill of $1 Bn) to avoid and overtake competitors, and stay relevant to the dynamic domain of social networking. Thus clearly, in case of a constrained income and visibly higher expenditures, the stock is not going to make any money for the retail investors (primarily).
However, at some point of time, FB management will face the ire of investors to justify its too rich valuations and that is where my portend resides! What are the possible ways for FB to increase its revenues going forward.
For starters, it has to come up with a model to promote online advertisements on the mobile format.
Next, it has to make sure that it does not lose out big companies such as General Motors who think that FB is not potent for a brand buildup.
Third and the one most important from a regular FB user's point of view is the segregation of the services i.e. creation of different levels of social networking facilities! There can be two types of profiles and one of them being a paid one. The free one would be lacking in features such as the depth of customizations you can do to your profile and may be few of the security features too. The free account may also have increased Ad showing on the page and you may not be able to play the most happening games on the FB if you are not in the paid league! There can be a small amount charged for creating private groups/pages and the number of apps can be capped for free accounts.
All in all, a free FB can very soon be a segregated country where Biharis might not be allowed in Mumbai!
Will this be beneficial for the company in the long run?
I think 'Yes'. Since now it has gone public and is responsible to its shareholders/stakeholders, it has to tread this path sooner or later.
Will this be beneficial for the users of Facebook? Moreover, will it give a chance to Google+ and ilk to storm into the social networking scenario in a big way? Need your comments for this.
When I say that FB is over priced then it's based on few datas.
FB's major source of income is, like Google, Advertisements. FB has agreements with application developers too who give it a small amount of their revenues as fees. However, if FB has to keep on adding value for its investors, it has to earn superlative revenues through its Online Ad business. However, a look at the data says that this might not be easy.
Google made $40 Bn in revenues in the year ending Mar'2012 which shows that apart from revenues from online Ads, over the years Google has made itself less and less dependent on the Ad business and has diversified its sources of income. This is reflected in its prices. Google gets a valuation of 66.67 (40,000 M/$600) taking Sales/Price ratio whereas FB at $38 gets a valuation of around 67.89 (2,580 M/$38) and thus is already expensive than Google. FB is relatively new and somehow its revenue model is yet not matured. It has to keep on acquiring companies (like the recent Instagram which it purchased at a hefty bill of $1 Bn) to avoid and overtake competitors, and stay relevant to the dynamic domain of social networking. Thus clearly, in case of a constrained income and visibly higher expenditures, the stock is not going to make any money for the retail investors (primarily).
However, at some point of time, FB management will face the ire of investors to justify its too rich valuations and that is where my portend resides! What are the possible ways for FB to increase its revenues going forward.
For starters, it has to come up with a model to promote online advertisements on the mobile format.
Next, it has to make sure that it does not lose out big companies such as General Motors who think that FB is not potent for a brand buildup.
Third and the one most important from a regular FB user's point of view is the segregation of the services i.e. creation of different levels of social networking facilities! There can be two types of profiles and one of them being a paid one. The free one would be lacking in features such as the depth of customizations you can do to your profile and may be few of the security features too. The free account may also have increased Ad showing on the page and you may not be able to play the most happening games on the FB if you are not in the paid league! There can be a small amount charged for creating private groups/pages and the number of apps can be capped for free accounts.
All in all, a free FB can very soon be a segregated country where Biharis might not be allowed in Mumbai!
Will this be beneficial for the company in the long run?
I think 'Yes'. Since now it has gone public and is responsible to its shareholders/stakeholders, it has to tread this path sooner or later.
Will this be beneficial for the users of Facebook? Moreover, will it give a chance to Google+ and ilk to storm into the social networking scenario in a big way? Need your comments for this.
