MONTGOMERY VILLAGE, Md., May 8, 2012 — Facebook’s IPO is scheduled for launch on May 18 after the price is set on May 17. Already the media is full of speculation as to how rich Mark Zuckerberg, the billionaire computer programmer, Internet entrepreneur, and Facebook co-founder and CEO, will become after it goes public.
The more optimistic estimates indicate a sum as high as $96 BILLION. He will control about 57.3% of the stock and make the decisions of the soon to be public corporation. Assuming that one has the funds, how safe would it be to invest in this new darling of the financial world?
On January 18, 2011, I published an article on this same subject. At that time a limited offer of stock had gone out to millionaires. I failed to see why those with millions of dollars to invest would do so in Facebook. The bottom line of my article was that I couldn’t see sustainability for a company that didn’t offer a concrete product or that had real, tangible assets as its main source of value. I made a comparison of Facebook with the dot.com companies of the 1990s and asked how Facebook would avoid the same destiny.
First of all, I am not an economist, financier, investor or even an MBA. When I had the choice of going to graduate school, a friend suggested I get an MBA to complement my engineering degree. My glib answer then was “No way. I would have to forget everything I know.” However, I made safe and rational decisions during my more productive years to retire with a generous pension and able to enjoy a modest life without worrying about money. Does this qualify me to give advice on something as important to so many as is the investment on stock? Definitely not.
But that is not the point. I think that for those of us that are not overly optimistic and who may not be in tune to the complexity (volatility?) of the market, investment in a company that does not make a physical product and that doesn’t have substantial holdings in real estate or other companies that make things or do have holdings in real estate is risky.
I have read about a dozen articles about the new IPO and find that one of the points that are emphasized the most is the ability of Zuckerberg to guide the company to continued success and his ability to innovate. The articles stresses how he has been able to position Facebook as a platform for “applications” and other useful concepts.
Who Are Facbook Fans?
True, the Facebook platform is very attractive. While simple, it offers some fairly interesting options. One of these options is a whole section called Apps. I scrolled through these and found that it contained a large number of games, causes to join, Poke (whatever that is), photos, etc. Of these, “games” is a very large category. The others appear to be customized ways to expand on the Facebook experience. If these are the apps that the articles point to as the innovations brought upon by Zuckenberg’s leadership, I am not impressed. Many of us, while fairly knowledgeable in technology, have never had the time or the inclination to engage in games or other apps like Facebook offers.
You can say that these apps can enhance the Facebook experience by presenting one’s particular product in ways that would make it more marketable. I use Facebook to disseminate my articles and put them in front of my targeted public. I could have done the same by maintaining a very large database and sending a link to my articles to all the people in it. Facebook also makes it less awkward.
I also have an app in my smart phone called “Cardio Training” that monitors my workouts and then sends a notification to Facebook documenting what I did in that workout and publishing it. All this is done transparently from my phone. What appears obvious is that developers see the success of Facebook as a way to give additional functionality to their applications.
Not being able to find enough valuable content in Facebook, my next step was to ask someone who is addicted to Facebook what she finds so fascinating. Her answer was that it is a way to easily and immediately take part in the lives of dear ones that are also in Facebook. It is a lot easier, and more conducive to do so, to post content that ALL your friends and family will see than have to send the same material to each on an email. It also decreases the self-consciousness that a person could experience when boasting to others.
Can Facebook Grow Beyond A Billion?
Ultimately the value of Facebook will depend on the advertising that it can generate. So far, making it easier for people to meet, reunite, disseminate information, and play games has been the key to attracting almost 1 billion members. Will these capabilities keep the Facebook community happy and growing? More importantly, will the profits continue to increase and to keep investors happy?
I see my computer as an extension of my capabilities and like to use it as a tool. That is why when I want to find information, I go to Google or other search engine; to find a program to manipulate graphics or music, I go to Google; to keep track of my computer and jewelry books, I bought a hand scanner on eBay and signed in for My Library in Google; to learn how to program for the Droid, I went to Google to get information and downloaded the Integrated Development Environment and libraries. (Starting to see a trend?)
Common sense guides me into believing that a company like Google with actual useful content would have sustainability, and if I had money I would try to invest in it. For all the success of Facebook, I see it only as a social exchange site. This same model has been copied by others. Google +, Pinterest, Tweeter, StumbleUpon, LinkedIn, etc., have tried to take some market share from Facebook, which may account for its smaller growth rate in recent months.
As my original article concluded, the main advantage of Facebook, I believe, is not a secret formula that only two people in the world know. It is merely the ability to use information that we the users provide so that the company can relate it and find matches. The very large database that they have gotten from us gives Facebook an advantage that while enormous, is not definite. In my relatively intense use of Facebook I have not seen anything new that would make me change my mind that continuous growth is not sustainable.
On the other hand, I always remember the words of a close relative after having a discussion: “If you are so smart, how come you are not rich?”
Mario Salazar, the 21st Century Pacifist, is a bleeding heart liberal, agnostic, exercise fanatic, Redskin fan, technophile, civil engineer, combat infantry veteran, jewelry maker, amateur computer programmer, Environmental engineer, Colombian-born, free thinker, and, not surprisingly, pacifist. You can find his articles - ranging from politics to cooking a mean brisket - in 21st Century Pacifist <http://communities.washingtontimes.com/neighborhood/21st-century-pacifist/> at The Washington Times Communities. Follow Mario on Twitter @chibcharus #TWTC and Facebook at Mario Salazar.
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