As a frequent FB user, I find it interesting watching how my FB experience is noticeably degrading now that they have IPO'ed and have to 'prove' results.
The sponsored posts that look similar to normal user 'likes/shared' posts, the 'Friend has just accepted an offer' posts when they haven't, the 'Pages you may like' ads that appear in the mobile FB app ... to me, it feels grubby, deceptive and invasive of my user experience.
I know FB has to make a profit somehow, but that's really not my problem - I can only rank a service on my user experience, and FBs is sliding downhill. It's been said by others that Google Adwords has been so successful because it captured intent and context. I also think it was successful because (for the most part) it was non-disruptive to the overall user experience on the page it was displayed. The ads were reasonably discrete and clearly defined.
FB's approach of 'disrupt' or 'trick' the user into clicking on ads seems like a throwback to interstitials, pop-ups and other dubious methods. I can't see this as being a good approach and believe this will only hurt their user base (and stock price) in the future.
I personally haven't noticed any major change that would cause me as much strife as this. The only annoying change has been the one a while back which shows my friends comments and activity on other peoples events whom I'm not friends with and don't care about. I have to unsubscribe from these activities from each friend I see doing it to clean up my feed. Other than this things are the same.
The mantra on HN anymore seems to be to love any and every startup when they are small, but as soon as they start making lots of money they suddenly can't do anything right, should open source every aspect of their company for newer and smaller sartups to use free of charge and are generally evil. See this months threads regarding Craigslist, Facebook, Twitter, Google and Dropbox for more info.
For a coffee chain to go from $1m to 20 they'd need to sell a lot more coffee. There might be quality or indie-ness issues but as a whole, their customers get more coffee.
Investors see a good chance of turning Facebook into a $100b company. Even if it's a poor chance (say 25%) its worth pursuing. For users, this gamble pays nothing. Facebook doesn't have to serve more users or serve them any better to make that move.
Users are not going to like it. They get the downside and none of the upside.
I deleted my account a year ago but just signed up with a new account so I could test results for contract projects.
From account deletion, to clearing out my OS X and installing Lion on a new SSD, and using a fresh email for the new signup a year later, I still have my same friends showing up.
I wasn't trying to lose track of these friends, I'm just surprised that FB was able to figure that out with what I assumed was new information.
How does that even work? Maybe my old Time Machine brought long-living cookies back for Chrome?
It's the email addresses. When you friends share their email contact list with Facebook, Facebook the list to find connections between people and suggest friends you might know. It's VERY intrusive especially when you have 2 online identities, a profession one and a personal one and Facebook keeps trying to tie them together with complete disregard for your privacy.
===== HOW IT WORKS =====
If someone has a Facebook account and shares their gmail or yahoo contacts with Facebook. Facebook will crawl through the email contact info and see if any of its already registered Facebook members' emails match the contact list. It will then put those matches up on the "People you may know" sidebar and suggest that you friend them.
That's what happened to me. I had 2 identities, one for family and relatives and one for my personal life & friends (goofing around, joking with friends). Facebook revealed my other identity to all my family and relatives. Some of them added me to their friends list and asked about my other name. I worked so hard to keep them separate but made the mistake with the emails. As soon as I changed the email the suggested friends recommendations stopped.
That. Really. Pissed. Me. Off.
I will never forget that, nor will I ever forgive Facebook for it. It was creepy and disrespectful.
I think they use IP addresses too. An old colleague once created a fake account to test an app, using totally fake data. Next time I signed up he appeared in the sidebar.
Did you use it before when you were logged into Facebook? Your phone has a unique ID that it could (theoretically) read and store at the time of login on mobile. Logging in with your new account could tie the two together?
Maybe one of your friends innocently grassed you up regarding that new email address. Your name is the same, DOB the same. Would be a fair guess that not many circles of friends have two with the same name and DOB, so the sugestions would be easily done upon that basis perhaps.
Ask facebook as it is somewhat concerning though I'd imagine.
> I know FB has to make a profit somehow, but that's really not my problem
I'm reminded of a few other blog posts I sometimes spot here on HN. They say something along the lines of "please charge me for your service so you'll still be around next year." Facebook's profit margins are a problem for all their users.
I do not agree with their methods for making a profit, but I can see why they have high costs to cover. I've had to build social-network-like features for clients. I can attest to the following about functionality like the news feed or photo sharing. It's:
1. complicated to implement
2. complicated to maintain and expand upon
3. resource intensive
For these reasons, maintaining the status quo requires non-trivial engineering and hardware. Users expect persistent storage of their old photos and content, after all. I could see that by refreshing my news feed a few times, I'm incurring a cost on Facebook that they can't recoup with non-invasive measures like Adwords on the side.
Could someone explain, how the low stock price is bad for Facebook? They are profitable, so they aren't going to go bankrupt. And they made a lot of money on the IPO, arguably more than they should have. Doesn't this mean the joke is on everyone but facebook (the company, not including the stock-owning employees)? Through what mechanism does it come back to bite them? Not defending them, just uneducated on this side of business.
Well in the valley its hard to use stock incentive stock options as a lure if the stock price is going down. That can force you into giving out stock grants and those have their own set of annoyances.
If your stock is going down you are less able to raise capital by doing a private placement (basically a pre-planned sale to fixed investors kind of like Zynga did and is currently being sued for) Anytime a company sells a large amount of stock, and then the stock continues to go down, a number of law firms will file lawsuits.
Perhaps most importantly your 'buying power' is reduced. If you notice there are a lot of 'acquihires' going around. Those can be done 'all stock' when the stock is strong but require 'cash and stock' or worse 'all cash' when the stock is weak. So if Facebook wants to continue to gobble up things like Instagram is can't go into a deal with "Hey, its a billion dollars, uh today, perhaps on Friday it will be 800 million." [1]
[1] Yes, I know its more complicated than that but I simplify for brevity.
At $22, they are just fine. But if it continues to drop, then you will start to see some changes at FB as they have to free up high operational expenses. If it goes sub-$15, then they'll start making some tough decisions.
Edit: So based off the downvote, either someone didn't like my lack of explanation, or it Zuck is lurking on HN. I'm guessing the former, so I'll explain. FB's value is so heavily tied to future growth expectations. Current P/E is 116, and compare that to a peaked out company whose P/E is more typically between 10-20 (see: YHOO, GOOG, APPL, ADBE, ORCL). If FB gets to $15, it's a P/E of 82, $10 = P/E of 55, $5 and you have 27. At $5 and its current earnings, FB is basically toast as an "innovative" company. So, I say a "sub-$15" value above because once it gets to that point this quickly after the IPO, dropping into single digits has to be a possiblity they consider. They won't have billions of dollars at their disposal to do whatever they please and will have to be more judicious in their spending.
P.S. I'm a programmer, not a finance-guy, so please correct me if I'm wrong about something.
I see what you're trying to say; let me try as a programmer and a finance guy.
1. A lower stock valuation affects their ability to raise money and greatly reduces the amount raised,
2. Affects morale because employee stock holdings and options are worth less,
3. Causes investors to put social or board pressure on Facebook to make changes, effectively reducing management's control,
4. Possibly attracts SEC or DoJ attention which could mean time-expensive hearings and possibly fines for misstatements (a.k.a. lies.)
5. Has a psychological effect on users who want to be part of something popular and winning and on app developers uncertain if they want to trust a company on the downs with their livelihoods.
Edit: this doesn't concern Facebook directly, but its investors and its newly created millionaires/billionaires will want the price to stay up so it doesn't affect IPO prospects of their other companies. This is more the case for VC with a steady deal pipeline than the newly rich employees who won't have anything ready for IPO for several years, possibly with an entire cycle between now and then.
As the first part, I think you are confusing between profit and share price.
They have to cut expense if they are making net loss or are in cash flow negative. Which is quite different from share price.
And as of your second part. Why would not FB have billions of dollars at their disposal if their share price tanks? They sold the IPO and already have got that cash in their bank account. They won't gain a single dollar if the share price rises neither won't they lose a single dollar if it tanks.
But is there an indirect relation besides the obvious? That's what the original poster asked. Your answer didn't reply it.
Well, all of those Facebook employees have lost 41% of their value of their options portfolio since the IPO. Imagine how you would feel seeing 41% of your hard earned cash just evaporate because management priced the IPO too high or doesn't care about the stock price.
There's many more reasons, but that's a big one. No one is going to come work for a company for equity that doesn't care about their stock price.
"Imagine how you would feel seeing 41% of your hard earned cash..."
Yeah, superhard way of making millions. Making a web site in your 20s and convincing the pension funds to give their savings from 30 years of real "hard work" while trying them not to notice the scam before you sell all your stock.
Imagine all the employees who were paper 'millionaires' (just over a million) for a short while, but no longer are... that's got to be a bit disheartening.
This situation is far more common than most people may realize, and has been for a long time. Lots of us have been potential future millionaires only to watch stock prices fall before we could, or did, exercise stock options.
Leaving aside the psychology for a moment, and assuming the market prices the stock correctly before employee's are allowed to exercise their options, doesn't that mean they would get the same amount, regardless of whether the IPO was high or low? Am I missing something?
Bringing psychology back in, yes I can see how it would really tear people up to feel like they are "missing out," and the understanding that they are getting the "true value" is probably not much of a substitute. If the money in my bank account fluctuated daily, for reasons beyond my control, it would drive me right up the wall.
Facebook employees apparently work pretty hard. They get huge rewards, when their stock goes up, so they want to company to succeed.
Once the stock stops shooting up, they stop caring about the company. They won't make money from their stock options, they'll make money from getting promotions or a good bonus. Impressing their manager is going to be more important than the company's overall success.
Employees will lose interest, and managers will have to introduce more rules, to "incentivise" the workers (and other managers).
You raise a very interesting point. The aspect were a employee's motivation is two-fold. One were it is stock-option motivated and the other were progress in the company is the motivation. Now they should and you would of thought that they would be one and the same. But from personal experience they are seperate.
Gets down to the classic: it's not what you do but how you are seen to be doing it.
One way it is bad for FB is it makes it harder to make acquisitions. Frequently, when you buy out another company, you offer a mix of cash and stock ... but if your stock is tanking ...
This is not a single-round game. The financial markets represent effectively an infinite game (in game theory jargon), where you assume that the operation isn't closing today. Therefore, you have to consider both the short-term effects and the long-term effects. Short-term this is good for FB but long-term this is terrible (have to give more equity to attract people, you can't borrow as much against your shares, etc.)
Yahoo's been profitable for a long time, but their imminent death has been on the books for years. No growth, so the stock doesn't increase.
Facebook was somehow hyped as being above the middling concerns that every other public company must address. But they are not, and have lost value accordingly.
The perception that they're overvalued, or poorly managed, or what have you, hurts their ability to sell big advertisers on big-ticket advertising deals. These have been their bread and butter all along.
Over the last few years, many Fortune 500 companies signed $20MM+ yearly deals to advertise on Facebook, develop fan pages, etc. Some -- most infamously, GM -- are starting to pull back (or pull out altogether).
In very basic terms, Facebook makes the majority of its money from advertising. It makes the majority of its advertising money from a relatively small handful of very big advertisers. Shaken confidence in Facebook, for whatever reason, shakes the confidence of these advertisers, which jeopardizes Facebook's ability to make money.
All of this is leaving aside the financial damages associated with declining market cap. In a weird way, that's actually less relevant than the effect the busted IPO is having on Facebook's position in the ad sales business.
Well you have to remember that the stock price already takes all of this into account. The problem with Facebook's price is that it's based on expectations far higher than what it seems like Facebook will be able to achieve in the near future.
If it gets low enough, they can just buy the remaining stock, go private again, find new revenue sources, then go IPO again. This may be the plan. Any normal CEO would be out their detailing future plans, like launching in new countries, new revenue initiatives, etc.
Stock price aside, I am not sure how facebook is cool to me. It is a complete blank.
Google is doing exciting and important things like building self-driving AI, google glasses, google fiber and android. However, I don't really consider Google + by itself, "cool".
I don't know if it's cool to you, but it's been amazing for me. My family is from Bangladesh, I grew up in DC, went to college in Atlanta and grad school in Chicago. I have family in Australia, Canada, and Germany. Facebook lets me see the cute pictures my aunt posts of my baby cousins in Australia, and easily share Romney gaffes with my college friends in Atlanta.
It's way cooler for me than, say, a self-driving car (I live in the city and have no need for one).
It's way cooler for me than, say, a self-driving car (I live in the city and have no need for one).
To be fair, a self-driving taxi may revolutionize urban life by making short taxi trips FAR less expensive and at least moderately more convenient. If self-driving cars become commonplace, city life should also be safer for pedestrians and cyclists.
Not to mention reduced carbon emissions if all said cars were, say, electric.
I kept thinking of _The Fifth Element_ while reading your comment. Except instead of flying cars, HOV lanes packed tightly together carrying thousands of passengers traveling safely at 90 MPH. Saving emissions, being efficient. I can see it happening.
I don't really think "revolutionize" is the right word to use here. Lots of people live urban lives while interacting with taxis twice a year, on their birthday and on NYE or similar occasions.
Free energy forever might revolutionize things. Cheaper and easier to find taxis will be a small improvement.
I think you miss the point of 'revolutionising'. It's not about making a couple of trips a year a bit cheaper. It's revolutionary if taxis become cheap enough that lots of people stop owning their own car. Or even if two car families become one car families.
People already do that by moving into the city, esp. NY, SF, and CHI. (People moving to LA buy more cars...)
Taxis are disproportionately located in cities because that is where they make the most money (largest customer base). Making taxi rides cheaper would cut into their earnings, and would result in a corresponding loss of taxis until profit margins are restored.
Well the things you describe as good about Facebook could be replaced with say Email or Google Plus and you would still get to do all those things .... Facebook is just a glorified noticeboard.
What would you replace self-driving AI, google glasses and google fiber with?
Taxis, AR iPhone apps, and DSL? Ridiculous, yes, but no more so than saying Facebook could just be replaced by e-mail.
Heck, you could even claim that e-mail itself is "just a glorified noticeboard" or a fancy version of the Postal Service. You can glibly disparage nearly any innovation this way if you want.
I agree that Google does amazing things, but all 3 things you mentioned are vaporware. I can't buy any of them, even if I lived in Kansas City (fiber is only available if your "fiberhood" meets some adoption level). Promising, interesting vaporware, but vaporware nonetheless.
>if it were so easy to invent Facebook, you would've invented Facebook.
The only problem I have with a comment like this is that there were millions of factors and pieces to the puzzle of creating Facebook, that this is a ridiculous over simplification of how it came to be.
Luck, timing, market condition, state of competition etc...
Zuck is the luckiest person alive to have been in the place he was when he was - its not like he simply invented everything required to make Facebook from zilch. Friendster and MySpace verified the market, zuck had a great twist on that and a million other thing fell into place.
Not to say it was simple and non-trivial, but that comment just has way too much bravado and ego and is just plain stupid.
He did a great job, but there is nobody else who should be using that line in any other context.
Pardon me for not living in the US, and not knowing its culture/social situation completely. That book has given me quite a few historical information where it seems like a chance event turns fortunes of people.
I don't see what the US has to do with this at all. I'd be extremely surprised if the US was the only country in the entire world that wasn't a near-perfect meritocracy. I'm not all that well-acquainted with a ton of foreign cultures, but I feel I can still say with some confidence that luck being a major factor of success is damn-near a universal law.
>zuck had a great twist on that and a million other thing fell into place.
I'm don't even know what the twist is. People seemed to leave Friendster because it was slow, then left Myspace because it made you sick, then joined Facebook which was like Friendster with active development and also initially seeded with smart people.
The only innovation I can see is that the company was run by a developer who showed that he was going to experiment with and build out the platform continuously in order to attract third-parties to invest in it.
I don't think anyone is discounting Facebook as an easy project. It has its own set of challenges to address, but, I saw many social networks before Facebook, and a few sprung up after Facebook in a short period of time, with various degrees of success. I don't see the same happening with driverless cars, so I am assuming it is more difficult to implement driverless cars than Facebook. Because, you know, if it were so easy to implement driverless cars, you would've implemented those.
Thousands of people did invent facebook. The invention is obvious and frankly trivial. Facebook didn't become what it is because of the amazing innovation of "see stupid shit your friends post". Everything about facebook's success has nothing to do with the idea, and everything to do with execution, marketing, timing, etc.
I know this may be a totally foreign concept to people living in the valley, but a driverless car isn't very interesting to people who can just walk onto a regular, punctual bus or subway service on near every corner.
I live in New York, which has one of the best public transit systems in the US, and I think driverless cars are freaking amazing, even (or especially) in the context of a city with effective public transit. For one thing, they could solve the last-mile problem public transit has at its outer limits.
Speaking as an SF resident, we've actually got the slowest major transit system in the country (Muni; BART coverage is far from adequate for travel within the city). While this of course beats all the places with NO major transit system, it's laughable to think that widespread use of driverless cars wouldn't improve transportation significantly. I've never wanted to own a car living in the city, but with a little imagination, one can imagine most of the downsides of doing so (cost, parking, etc) significantly diminishing with widespread adoption of driverless cars. Probably more significantly, one can imagine the massive benefits gained by society at large, including those who still have no interest in getting a driverless car (safety, congestion, hell even driverless public transport).
There are so many ways to describe how wrongheaded this is that I don't even know where to start.
The idea that less efficient transportation is beneficial because it would require people to be more active is absolutely insane. By that logic, we'd be better off with no transportation other than walking; I find it hard to believe that everyone would be better off if they were constrained to working somewhere within a few miles of them (or alternatively, required to spend half their day just getting to work). Rooting for a higher level of car accidents, pollution (the number of cars needed could easily be cut by as much as half), and congestion in order to force people to walk is ridiculous. Throw in the fact that sedentary lifestyles/obesity are pretty strongly correlated with lower income and education level (ignorance of health/nutrition issues, lack of time due to heavy work schedules, there are different reason for different people in this situation), and the economic benefits alone of a significantly more efficient transportation system would likely cancel out whatever possible increase in sedentary living it may cause.
Driverless vehicles have the potential to transform transportation, full stop. This obviously includes public transit (I highly doubt that a driverless bus is much of a technological leap from driverless cars). Whatever benefits public transit provides are included in the changes that driverless vehicles will bring (unless, as it seems, your only in support of inefficient public transit?).
What kind of efficiency are you discussing? What are you comparing? Roaming driverless taxis are not more energy efficient and they are not more space efficient than transit. Being an improvement on human-driven cars is not a particularly difficult achievement.
I have no idea where the car accidents or pollution sentence came from. I'm "rooting" for less cars, not the least because it will reduce pollution, and live my life accordingly. I try to minimize the disease in my life by minimizing my car use - automated or otherwise - rather than addressing the symptoms using a new wundertechnology. I don't control the number of car accidents because I can't control the choices others make.
From all the cities I've been to I can only remember 1 or 2 that approximately fit the description and then again, only at a certain time of the day. In most others, the goal of a public transit service is to get you to destination eventually.
Chicago buses are extremely punctual where I live (+/- 2 minutes) in river north. And of course in Manhattan it takes far longer to get anywhere by car than by subway, or even express bus.
I think the UI is cool but sending pictures around doesn't sound "amazing" to me. Besides the fact that you could have still traded pictures via the web without Facebook, a self-driving car AI is on the fringe and can be applied to society in some pretty cool (at least to me) ways that can still make your life easier even though you live in the city.(better trains for one)
Maybe I'm just starting to get old, and the idea of certain elements from all those cheesy movies about the future I watched as a young kid coming true just isn't as "cool" as it used to be.
I think the point is that dozens of other tools online let you do those things. Name somebody else making a serious go at autocars, AR glasses or cheap fiber.
> Name somebody else making a serious go at autocars
Kinze plans to release their fully autonomous agriculture tractor to the buying public later this year. I realize the field is not quite the highway, but it is still pretty exciting to see this kind of stuff come into production already.
I think Google may have stolen Steve Jobs reality distortion field if you seriously think Google is the only company making a serious go at all three of those.
My mistake in implying there was one company making a go at all three, google may be alone in that category, but there are quite a few companies that have been around longer doing research on each individually.
And just because Google is putting money behind all three doesn't mean it's doing any good. Until they release a product or share their research, it's all vaporware. And I'm not saying that to hate on Google, I actually like that Google is pouring money into these projects, but it doesn't change the fact that Google is getting preferential treatment from the media making it sound like Google is the organization trying to make advancements in these areas, no different than the way the media treats Apple during its product releases.
First, the connection you're talking about is 50/25 Mbps, while Google is a symmetric 1 Gbps. Second, Google includes 1 TB of Google Drive, which Google normally sells at $50/mo.
Granted, it's cheaper for them to give you Google Drive if you're a fiber customer. And, of course, you might not even want it, but it's one hell of an extra if you want even part of it. I wonder if that's one of the things they're testing with Google Fiber: What do people do with a lot of cloud storage they have fast access to (at least at home)?
Even on the TV side, the comparison isn't that bad once you realize Google is throwing in a DVR (with 8-way recording??). They lose some ground because of the bundle savings (unless you count the Nexus 7 / local storage towards that), but the competing high-end plans are so expensive (~$200/mo for FiOS) and still a lot slower (3x download, 15x upload) that it's no contest, assuming you want the speed.
Please. You act as though Google is doing something revolutionary. It isn't.
Everyone from universities to BMW and Mercedes are working on self driving cars, Google Glasses aren't AR and better attempts have been made previously and as for cheap fibre well countless countries have in reality what Google is just talking about.
In many respects Google is like Apple - taking existing ideas and making them more polished.
Perhaps what the parent was getting at is that other companies seem more risk averse. Google isn't afraid to fail in public. I can't remember the last truly exciting thing I heard about from BMW or Mercedes that was being tested in the real marketplace. Rear facing cameras in the bumper? A car that parallel parks itself? A 650 BHP V12? I throw your "please" back at you.
A recent luxury vehicle has so many "assist" systems it could drive itself if only the manufacturer wanted to deal with the liability. Calculating the route? Trivial. Traction while braking, cornering, accelerating? Done. Staying in lane? Sure. Staying a safe distance behind car in front? Yup. Braking when pedestrians enter unsafe zone around car? Covered too. And yep, it'll parallel park at your destination.
Google's real test will be putting their wundermachines on the market and standing behind them when the liability suits inevitably come in. That's not to say the vehicles themselves will malfunction, but that won't stop some people.
- Traction assist in cornering, 1995-1997 (notably retrofitted onto the Mercedes A-class in 1997 after it was beaten by a Trabant in the elk test): http://en.wikipedia.org/wiki/Electronic_stability_control#In.... Early forms of braking traction assist available as ABS starting in 1971.
- Standard roadside traffic sign recognition, currently implemented for speed limit and overtaking restriction signs, 2008, BMW and GM, soon followed by others http://en.wikipedia.org/wiki/Traffic_sign_recognition
Surely the revolutionary act is making something happen, not in having the ability to make it happen but not doing it. There's nothing Che Guevara did that I physically can't do, but I'm not a revolutionary because of what I've chosen to do.
Yeah, absolutely, huge credit to Google if they do put a self-driving car on the customer market. I was just responding to parent's question about the last truly exciting thing that was being tested in the real marketplace, which I felt trivialized existing technology and somewhat implied only Google is working on new automobile technology these days.
"Revolutionary" is such a subjective term. Very, very few ideas are actually novel. In fact, dreaming them up is usually easier than pulling them off, so give Apple & Google some credit. While they aren't inventing the future from scratch, they certainly deserve credit for bringing the future into the present. Multi-touch interfaces and tablets have been around for years and the ideas for them even longer (see: Star Trek), but no one has been able to figure out how to successfully pull it off and popularize it. Apple did. Automated cars have been the future since the Jetsons, and we're going to see it become a reality in the next decade, thanks to Google. We've been talking about "digital libraries" and having the world's knowledge at your fingertips for the last 100 years. Wikipedia figured that one out.
The future is (mostly) already laid out, the roads just need to be paved to get everyone there. That is what Apple & Google are doing, along with some others.
Edit: Just realized we actually used to have (dumb) automated cars. They were called horses.
Does cool matter? For a start, everyone has different definitions of cool- I assure you that plenty of people do not think that Google Glasses are cool, they think they're a nerdy toy. Luckily, us HNers are nerdier than average...
But Facebook isn't cool, no. It's too established now, in the same way that Gmail isn't cool. However, they're both indispensable services for huge, huge numbers of people.
Yes, that type of "cool". Facebook the idea is also pretty cool, but to me, the "coolness" of an AI operated vehicle is simply on another order of magnitude.
Cool or not cool is not the question. The problem is that FB feels like some shady scam to me. It's all about extracting personal information and make you click on pixel cows.
For me, Facebook has become the best example of why investing in stocks that don't pay dividends doesn't make sense. That's not to say that investors can't make fortunes in companies that don't - obviously they, the investors, can.
But otherwise what is non-dividend stock but a ponzi/confidence game? The way shares are classed as well now you don't even really "own" a piece of the company. You have limited to no voting privileges, and don't share in the company's profits. No wonder the banks have to push them onto investors!
Basically you are hoping someone comes along who also doesn't mind buying a stake in a company where the only benefit is that there might be a third person in the future who will pay even more, and so on.
Have I got it wrong? I can understand stock when you are expecting your investment to generate returns based on a company's performance, but most stock these days buys you nothing but the ability to sell it to someone else down the road. Ownership itself has no value.
Financial theory says every stock should have an expectation of generating dividends or resulting in a payout when the company is acquired (the acquirer being able to directly harvest the free cash flow).
Yes, it's a confidence "game" on the company's fortunes when one buys with the expectation of selling before one of these outcomes are realised. But then so is staying in a country a confidence game that it won't blow up, holding cash that it won't be inflated away, holding gold that it won't plummet, etc.
It is not a Ponzi scheme as the shares try to approximate the productive value of the assets they represent ownership to - buying a tractor and putting it in your house is about the same as buying a piece of paper that says you own a tractor in a lot and neither is remotely Ponzi-ensqe for lack of presently producing cash flows. Stock of non-fraudulent companies represent real net assets while Ponzi shares don't.
Yes, you've got it wrong. This is the baseball card view of the stock market, and it is incorrect. When you own shares in a company, you own part of the company - part of the money on the company's bank accounts and part of the company's assets belong to you.
The board, which is chosen by the shareholders, decides how to allocate these resources. Whether the profits are paid out to your bank account or stays in the company is irrelevant with regards to ownership. Part of the assets belong to you regardless.
Of course, the board can make stupid decisions, and the value of the company will fluctuate depending on investors' view of the company's future. But as a shareholder, you do own part of the company and if the board acts against your interests, shareholder laws are there to protect you.
You're right, if it was a certainty that a particular company was never going to return any money to its owners in any shape or form, owning it would be pointless and its market value would go to near zero immediately.
But successful companies do return money to shareholders eventually. The question is when. If you owned Microsoft in 1986, would you have asked for a dividend instead of letting them use the money to build their Windows and Office franchise?
So, no, it's not a ponzi scheme. You're buying future dividends. In the case of Microsoft, every dollar you invested in Microsoft's IPO earns you two dollars in dividends today.
At any moment in time, you have ask: Can the company invest my money better than I can, adjusted for risk? If the answer yes, then any dividend payout is a net loss for you.
You have no voting rights, but if someone wants to buy the company, you do own a piece of it. it's not much different than, say, a 2 person company where one person has the majority vote. The second person's vote is worthless anyhow - but if hte company is sold, they are entitled to their share of the sale.
> It does justify the valuation it has now though.
At $40bn, I dunno. FB's revenue & profits are pretty close to Yahoo's, whose market cap is at $20bn (though much of that is in assets).
So, just guesstimating here, with no growth FB can probably justify a $15bn value. Anything on top of that is a bet that they'll find some other way to grow the company. Certainly possible.
i think they may have waited too long,
facebook in my opinion is more or less a product,
not a company ...
you know how we compare g+ to facebook, now google is company, they made g+ which may or may not be big
but for google its just one more product they made
and products have a life cycles ... and its definitely
not the growth cycle for facebook anymore, i think they are in maturity now ... and i think they should have went for IPO while still in growth
and they definitely need to start making new products ... they need to innovate or die! simple and basic, but i believe correct
Isn't this just the various banks pulling capital back out? They invested lots of money in the days after the IPO to keep the price close to the target (to avoid spooking investors).
The strategy behind the high dollar IPO was to maximize the return to the early investors who wanted to cash out and who were influential in the IPO negotiations.
The investment banks look at the IPO price in terms of the risk that the sell side of the firm will look bad. Once sufficient time has passed nobody assumes the bank had anything to do with propping up the price weeks after the IPO, when in fact it has lots of control over this.
Also, the relationship between share price and marginal supply and demand is by no means likely to be linear.
It should have been a red-flag to everyone when Facebook was trading at (if I recall correctly) over 100x earnings at one point. I mean sure it has a lot of potential and what not, but even for goliath that is Facebook, the valuation was pretty unreasonable.
I bet Zuck is starting to regret spending $1B on Instagram right about now. Still... Facebook has a very strong monopoly on the social graph, and the eyeballs of most computer and smartphone users. There's significant value there if they can look beyond simply optimizing advertisements. How about taking a page out of google's book and getting into search? They could call it Facebook+ :D
It's in Facebook's interest for those shareholders to be long-term investors.
The real damage I suppose is that, if it continues to drop, they'll certainly be a number of newish hires that have their option grants underwater. Not practically a big deal because there's certainly a cliff to their vesting, but underwater options aren't much of a retention tool.
This is hardly supprising at all and anybody who had a serious look at the IPO and facebook could clearly see that its value was based alot on hype. Not like FB would argue there price down and it was certainly not in the interest of the banks helping to launch this IPO. Only people hurt were those who blindly went and brought shares on day one when everybody else knew if they wanted facebook shares that they were better of waiting a bit until the true value was reflected in the share price.
Now sad part is that there now in a position were they have to do knee-jerk responses to maintain the hype and in that as many have said they are diluting there trust with there user base by doing adverts saying such and such a friend got this or liked this when IRL that friend will say they did not and is news to them. That is a level of marketing that is akin to fraud.
I do wonder what the advertising laws are like in comparision to TV adverts and online adverts - laws need to catch up to reality and fast or it will just carry on.
Am I the only one expecting a tighter and tighter Apple-Facebook integration[1], driving the stocks of both upwards? It's a great synergy against Android/G+
It seems to me that facebook has all their eggs in one basket whereas google is extremely diverse (even though many of googles' ventures inevitability feed back into search).
I think facebook haven't used their huge cash reserves wisely which is why faltering in a single area (aka. advertising) puts them in a very precarious position.
What has google done (just off the top of my head)?
android, gmail, google maps, search, self-driving cars, glass, hardware (I know the nexus/q are manu. by asus but google do have their name on it)
Not really. The opportunity cost relative to whatever else the founders could be doing is substantial (especially compared to the typical YC investment they get).
Moreover, no one is seriously questioning the long-term stability of Amazon or its revenue model. A stark contrast with the situation Facebook finds itself in.
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Tweet this: Facebook shares have been pushed down so far, so fast, that they now cost less than J.C. Penney shares. J.C. Penney shares right now are around $22.55, Facebook shares are around $21.75.
Now we know what you’re going to say: look at the valuations, dummy! (There, we saved you the trouble.) J.C. Penney’s PE (forward, one-year) is about 18. Facebook’s is 45 (and it’s trailing PE is 81). Plus, J.C. Penney has about 219 million shares outstanding; Facebook has 2.1 billion.
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This is the WSJ of Rupert Murdoch. After NewsCorp bought the WSJ (and before I knew he had), I noticed that the blogs and opinion sections were suddenly stuffed with sensationalistic nonsense (including gems like this hidden in otherwise okay articles).
> J.C. Penney shares right now are around $22.55, Facebook shares are around $21.75
I find it ok when some online commenter says it [he might be a fifth grader]. But I find it surprising that a leading financial newspaper publishes such statement.
By P/E (admittedly a poor indicator of value) it's a steal compared to Amazon (~285) and SalesForce (historically between 200-400, now in the thousands).
The sponsored posts that look similar to normal user 'likes/shared' posts, the 'Friend has just accepted an offer' posts when they haven't, the 'Pages you may like' ads that appear in the mobile FB app ... to me, it feels grubby, deceptive and invasive of my user experience.
I know FB has to make a profit somehow, but that's really not my problem - I can only rank a service on my user experience, and FBs is sliding downhill. It's been said by others that Google Adwords has been so successful because it captured intent and context. I also think it was successful because (for the most part) it was non-disruptive to the overall user experience on the page it was displayed. The ads were reasonably discrete and clearly defined.
FB's approach of 'disrupt' or 'trick' the user into clicking on ads seems like a throwback to interstitials, pop-ups and other dubious methods. I can't see this as being a good approach and believe this will only hurt their user base (and stock price) in the future.