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Facebook Notes Although More Mobile Users - Fewer Advertising Click Throughs

May 31, 2012 | Comments: 0 | Views: 168

Okay so, I'm not here to badmouth Facebook, and although I am not a participant, I think I understand why many in the younger generation are. I can comprehend the psychological challenges of our young people today with their low self-esteem, and their need for self-validation from their peers, even if their peers are only pictures on a screen, or potentially avatars of people who don't even exist. Still, I will save all those points for a future article. Today, I'd like to talk a little bit about Facebook's potential future earnings.

Now then, we hear a lot about sustainability these days, and I don't feel that the current stock price of Facebook is sustainable using their current business model based on advertising on their website. Perhaps if they get into the mobile phone market, or rich data mining of private information from their users, they may in fact make more money, or perhaps be sued into oblivion for violating privacy laws after their FTC settlement to be monitored for the next 20 years.

Of course, most of the Facebook users are not in the United States, they happen to be people all over the world. In fact, while Facebook CEO "The Zuck" Mark Zuckerberg was on his honeymoon in Rome a week after the company's IPO, he had his marketing department announce that they were opening a new office in Dubai. Facebook is a global company, and although a good many of the large corporate advertiser are in the United States, their market is much bigger than that.

Not long ago an industry analyst noted that a good price for Facebook stock would be $13.80 based on its advertising revenue, provided that they had 10% year-over-year growth. Interestingly enough, it seems that Morgan Stanley, and Facebook had downplayed their future revenue potential just prior to the IPO, some people say that caused the stock price to tank, which even pulled Mark Zuckerbeg off the Forbes 40 wealthiest billionaires list.

The company noted that although it has more mobile users, fewer ads can be displayed, therefore there are fewer click through's, and there are fewer people buying things online through their mobile devices, because they are out and about in the real world perhaps shopping at brick-and-mortar retailers. That is to say; as more people are enabled with their portable personal tech mobile devices online advertisers are not so thrilled. Why you ask?

Mobile users do not buy from online stores while they are out and about, thus, the real winners are brick and mortar businesses who cater to these mobile users via geo-positioning ads. All this must be taken into consideration if we are to properly evaluate the stock price for Facebook when we make our stock purchasing decisions, and a social network should not be trading at multiples of 100, more like multiples of 10 perhaps, and in my opinion that's pushing it. Indeed I hope you will please consider all this and think on.

Lance Winslow has launched a new provocative eBooks on Stock Picking Concepts. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank; http://www.worldthinktank.net

Source: EzineArticles
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