Forget $3B In Revenue: Things "Don't Look Good" For Facebook

If the worst news you can find about Facebook is a few rumors that they might miss a revenue projection, a prediction that their ad revenue growth rate will decrease from its current 60% (note: ads are not the only way FB can make money), and a random class action lawsuit, then Facebook's prospects look about as good as any company's ever get.<p>This amount of badness is background radiation. You could scrape together at least this much about any public company.

I'm kind of smelling some negative press push here about the IPO. A lot of the stuff doesn't seem to add up - despite supposedly solid leaks about documents, etc.<p>What this might be an indicator of is a dedicated effort to push the stock price post-IPO lower so that various traders/funds can make a nice chunk of change off a rebound post-earnings.<p>I'm fairly skeptical of this sort of conclusion - especially about supposed ad revenue or other issues - due to my personal experience using the platform. I have spent a small fortune (of my own money) on online advertising as an affiliate for several years. Out of all the various ad networks and venues, the most consistently profitable has been Facebook, bar none.<p>On a typical campaign, I'll net a 200-300% profit on my ad spend. Compare this with 60-100% on Google AdWords and 50-65% on Bing. Don't even get me started on buying display ads. I'll spend any free ad budget on FB before any other network, simply because I _know_ I'll profit from it - the risk is far lower and the margin far higher.<p>I guess my point is, like when Google started, people just don't get the power that FB holds when it comes to advertising. Storefronts in FB were never the point - what is far more important is engagement and interest.<p>Facebook is king when it comes to that.

Some advertisers are getting <i>much better</i> results with Facebook ads than with Google AdWords -- for instance, see <a href="http://jeffmatthewsisnotmakingthisup.blogspot.com/2012/01/is-facebook-killing-google-no-but.html" rel="nofollow">http://jeffmatthewsisnotmakingthisup.blogspot.com/2012/01/is...</a><p>(Money quote from that link: "...according to a friend in retailing, the average Facebook woman updates her relationship status to 'Engaged' within two hours of the guy actually proposing…so Facebook sells that relationship status information to retailers who have bridal registries. As my pal told me, 'We’ve been looking for this for fifty years.'")

Doesn't sound too bad at all, frankly. Someone is just trying to add a little drama to what is otherwise a big success story.<p>It is certainly true that usage of Facebook is rapidly shifting towards mobile, and that currently Facebook doesn't have any ads on mobile. That has got to impact revenue growth somewhat. But ads coming to Facebook mobile sometime soon is about as obvious as can be - and I'd bet on them doing it in a way that takes advantage of that platform's strengths and makes their company even stronger.

Facebook's PE ratio is around 100 last time I checked. If a 'good' valuation is in the 10-15 range (e.g. Microsoft, Apple, Google), then either Facebook's profits earned needs to increase by 10x, or it's share price needs to fall by 10x.<p>If Facebook's percentage revenue increase is 'only' double-digits, and shrinking, it will take years and years of earnings growth before it becomes a 'good value'. It will take 5 years at a sustained 60% yearly earnings growth rate to reach the same PE ratio Apple has today.

Anybody who puts a column graph showing billions and overlays a downwards trend in red showing slowing growth is essentially lying.<p>It's irrelevant that they have a point with regards to high P/E ratiom slowing growth and missing targets. Anyone who makes a graph shaped and coloured like that is belittling their readers.

&#62;<i>"Expect more ads as Facebook tries to meet revenue projections."</i><p>As I've commented here before, I access Facebook in its own VM. The past couple of days, I have noticed a significant uptick in the number of ads displayed. However, the odds of my clicking one is no higher - just because I accepted a friend request this week from a politically conservative person who I went to high school with decades ago; it doesn't mean I want to buy a USS Ronald Regan hat.

I agree with PG that this is "fake news" What few people realize is that Facebook does $3B in revenues while not monetizing two "real estates" that could add $3B each (or more) in the future: - Mobile is still not monetized at all and we are talking about 400M MAU!!!! - Facebook does not leverage the huge breadth of data it has garnered about users through their "like" actions on other publisher's website to create a much need competitor to AdSense. These two opportunities are $B opportunities easily...<p>My only concern for Facebook would be that they focus too much on their short term earnings to justify their very bullish P/E multiple... and lost sight on consumer satisfaction. On the other hand, by doing so (like Google has in the past 4-5 years) would open the door to new startups that could start gaining some great momentum!

FB will always be able to monetize their users. It's just a question of what premium. Since most people on FB have no intent on buying anything, the amount they can net per user is very very small compared to Google. In a sense, it's just like a glorified TribalFusion, where eyeballs are worth .01 each.

The graph in this article shows revenues continuing to go up over the next 3 years... Just at a slower rate. That doesn't sound like "things don't look good" but more like "things don't look as amazing as they did, but still look pretty good." Of course, I have no idea about the validity of the underlying data in that graph... But still, it totally doesn't match up with the analysis of the numbers presented in the text.<p>Not that I'm a facebook investor or anything... On the contrary... :)

I would not be surprised if the government directly began to subsidize facebook, just for the incredible amount of personal information they could mine. Another scary thought is a company like equifax, buying into facebook.

It's always amazed me that a company's outlook can look bad even though they're profit/revenue is growing, just because said growth isn't as big as it was in the past.<p>I can sort of see why from an economics perspective, the stock price is based on profit growth projections and if those projections don't hold up the price will naturally drop.<p>But it still seems crazy that we continually expect and pressure our public companies into growing their profit at a rate higher than it was previously growing, otherwise they aren't hitting performance expectations. I'm sure someone with more economics knowledge can explain it in a way that makes sense, but to me that seems like a logical fallacy. We expect what amounts to continual exponential growth.<p>Edit: Typos

"predicting Facebook's advertising revenue growth will slow"<p>They are talking about second derivation here, right?

This is exactly why Facebook should not do an IPO. Regardless of whether or not these rumors are true, hungry public investors will demand <i>significant</i> revenue and profit growth regardless of long term plans and prospects.<p>I'm afraid that this IPO is going to be a mess.<p>This might be where we see Zuckerburg get in over his head.

Things look amazing for FB. Seriously. So many opportunities for growth.<p>Imagine FB credits at local merchants... Imagine FB Social Ads for content publishers... Imagine FB running their own mobile ad network...<p>Sure, FB is kind of AOL all over again, but this time around FB (unlike AOL) has no intentions of cashing out to some media conglomerate.<p>Facebook is more like this decade's Google like Google was last decade's Microsoft.