stylized_fact Posted September 21, 2013 Share Posted September 21, 2013 Never short on valuation is an important tenet of successful investing, but is Facebook perhaps better thought of as a fad/craze similar to crocs? I'm sure the possibility is not lost on management, hence the acquisition of Instagram. Similar moves are bound to be part of their future. http://www.thestreet.com/story/12043406/1/the-beginning-of-the-end-for-facebook.html Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted September 22, 2013 Share Posted September 22, 2013 but is Facebook perhaps better thought of as a fad/craze similar to crocs Both Facebook and Crocs have very strong cash flow relative to their book value. They have very high returns on capital.... with Crocs, pre-tax ROIC is somewhere around 30%. Crocs has a lot less hype now, but they are pretty profitable now whereas in the past they were losing money or just breaking even. Facebook has a reputation for being an overhyped stock but it actually makes a lot of money. If you back out the odd accounting relating to stock-based compensation, you will see that Facebook has very high returns on capital. Have you read Facebook's 10-K? What's your opinion? Link to comment Share on other sites More sharing options...
stylized_fact Posted September 22, 2013 Share Posted September 22, 2013 Facebook has a reputation for being an overhyped stock but it actually makes a lot of money. If you back out the odd accounting relating to stock-based compensation, you will see that Facebook has very high returns on capital. Have you read Facebook's 10-K? What's your opinion? No, I haven't read their filings in detail, but would like to understand their equity compensation a bit more. Facebook is hard for me to understand for all the reasons people bring up. I became interested recently when my wife cut back her Facebook usage. She has grown tired of wading through brag posts from peripheral connections, yearns for a renewal of activity from people she really cares about, and no longer feels novelty from the process of reconnecting with old acquaintances (that ran its course a while ago). She also tells me that the ads she gets are completely ineffective and sometimes offensive (truly wasteful campaigns). It's just one data point, from their core North American demographic. Like most guys, I stopped regular use a few years back. It surprises me that Facebook hasn't done more to drive engagement by casting themselves in a similar vein to how Buffett describes community newspapers. I feel like Twitter acts more as a community newspaper substitute. Zuck is obviously a real gearhead. Not who I'd want to have running a "social" company. Link to comment Share on other sites More sharing options...
Guest valueInv Posted September 22, 2013 Share Posted September 22, 2013 Facebook has a reputation for being an overhyped stock but it actually makes a lot of money. If you back out the odd accounting relating to stock-based compensation, you will see that Facebook has very high returns on capital. Have you read Facebook's 10-K? What's your opinion? No, I haven't read their filings in detail, but would like to understand their equity compensation a bit more. Facebook is hard for me to understand for all the reasons people bring up. I became interested recently when my wife cut back her Facebook usage. She has grown tired of wading through brag posts from peripheral connections, yearns for a renewal of activity from people she really cares about, and no longer feels novelty from the process of reconnecting with old acquaintances (that ran its course a while ago). She also tells me that the ads she gets are completely ineffective and sometimes offensive (truly wasteful campaigns). It's just one data point, from their core North American demographic. Like most guys, I stopped regular use a few years back. It surprises me that Facebook hasn't done more to drive engagement by casting themselves in a similar vein to how Buffett describes community newspapers. I feel like Twitter acts more as a community newspaper substitute. Zuck is obviously a real gearhead. Not who I'd want to have running a "social" company. Think of Facebook like a telephone network. The novelty wore off a long time ago but people still use it to keep in touch with each other . Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted September 22, 2013 Share Posted September 22, 2013 She also tells me that the ads she gets are completely ineffective and sometimes offensive (truly wasteful campaigns). I don't think that their traffic monetizes very well compared to search. With search: a- People type in the product/service that they are looking to buy. If somebody is looking for an abestos lawyer, Google will pick up on that and be able to show relevant ads. (Abestos lawyers are massively profitable ads for Google... the clicks are worth 10-100X other clicks.) Facebook has no way of doing that; it has no way of knowing that its users have that specific need. b- Google gets the timing right. People search for particular products/services when they need to research their purchasing decision. Facebook can't show ads when a user is in a buying mood for a particular interest. Facebook can track likes, so that advertisers can target ads based on a user's interests. But it doesn't know when somebody is looking to purchase something related to that particular interest and not the other interests listed on their Facebook profile. All this is ok. Facebook is highly profitable anyways. Some of this could be related to the hype around social networking. If you look back in history, Yahoo had a lot of revenue from ad banners because of the hype surrounding the Internet. Later on, we found out that ad banners aren't that effective. Facebook is a little different in that many (though not all) of their advertisers run campaigns which they can track to a sale. Any ad for a dating website will be tracked to a sale, whereas an ad for a car won't be because most people don't buy cars online. 2- There's something called ad retargeting now, where ads follow you around. This should be more effective than the traditional approach of advertising on Facebook. However, you won't see ads for competing companies so it's not quite as good as search. If you are looking for the cheapest place to buy XYZ online, you want to see the ads for a wide range of companies... not just the one or two companies whose website you visited. Anyways, advances like these will help Facebook monetize its ads better. I have no idea what the future will hold in terms of advances in this area, but it's probably only upside for Facebook. Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 1, 2013 Share Posted October 1, 2013 She also tells me that the ads she gets are completely ineffective and sometimes offensive (truly wasteful campaigns). I don't think that their traffic monetizes very well compared to search. With search: a- People type in the product/service that they are looking to buy. If somebody is looking for an abestos lawyer, Google will pick up on that and be able to show relevant ads. (Abestos lawyers are massively profitable ads for Google... the clicks are worth 10-100X other clicks.) Facebook has no way of doing that; it has no way of knowing that its users have that specific need. It does if you posted about asbestos on FB. I would also know that you're a Katy Perry fan before you even searched for her on Google. Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 1, 2013 Share Posted October 1, 2013 And the march continues: http://techcrunch.com/2013/09/26/facebook-starts-up-its-mobile-ad-network-again-focuses-on-improved-targeting/ http://techcrunch.com/2013/09/30/graph-search-posts/ Very interesting: http://techcrunch.com/2013/10/01/facebook-mobile-app-ads-calls-to-action/ Link to comment Share on other sites More sharing options...
Guest valueInv Posted October 30, 2013 Share Posted October 30, 2013 The earnings are out: http://www.bloomberg.com/news/2013-10-30/facebook-sales-top-estimates-amid-mobile-ad-expansion.html On people quitting Facebook: http://techcrunch.com/2013/10/30/nearly-half-48-of-daily-users-of-facebook-are-now-mobile-only-says-ceo-zuckerberg/ http://techcrunch.com/2013/10/30/facebook-teens-drop/ Link to comment Share on other sites More sharing options...
Guest valueInv Posted November 5, 2013 Share Posted November 5, 2013 On the potential of Instagram: http://gigaom.com/2013/10/28/instagram-ads-and-the-future-of-brand-advertising/ Link to comment Share on other sites More sharing options...
fareastwarriors Posted November 13, 2013 Share Posted November 13, 2013 crazy... Snapchat Spurned $3 Billion Acquisition Offer from Facebook http://blogs.wsj.com/digits/2013/11/13/snapchat-spurned-3-billion-acquisition-offer-from-facebook/?mod=WSJ_hps_LEFTTopStories Link to comment Share on other sites More sharing options...
Guest wellmont Posted November 13, 2013 Share Posted November 13, 2013 I guess they had a lot of success with the last zero revenue business they bought for $1b. Link to comment Share on other sites More sharing options...
Guest valueInv Posted November 13, 2013 Share Posted November 13, 2013 I guess they had a lot of success with the last zero revenue business they bought for $1b. They have just started monetizing. So guess what the revenues will be. Link to comment Share on other sites More sharing options...
Myth465 Posted November 13, 2013 Share Posted November 13, 2013 I dont like these billion dollar defensive acquisitions.... Link to comment Share on other sites More sharing options...
jschembs Posted November 13, 2013 Share Posted November 13, 2013 Difficult to tell whether folks are sarcastic or not, but I don't see how returning a #DIV/0! in the value conclusion generates shareholder value for Facebook. Does it not seem inevitable that each new cohort of teenagers will view Facebook as uncool, making it important for Facebook to acquire the latest and greatest teen fad every few years to maintain user growth? On an awkwardly related note, did anyone else catch David Ebersman's comment during an earnings conference call: "We remain close to fully penetrated among teens in the U.S."? Link to comment Share on other sites More sharing options...
Myth465 Posted November 14, 2013 Share Posted November 14, 2013 "We remain close to fully penetrated among teens in the U.S."? Man thats awkward. Link to comment Share on other sites More sharing options...
DCG Posted November 14, 2013 Share Posted November 14, 2013 FB's developers could probably replicate Snapchat in a couple months. I don't understand that offer either. Link to comment Share on other sites More sharing options...
Guest valueInv Posted November 14, 2013 Share Posted November 14, 2013 FB's developers could probably replicate Snapchat in a couple months. I don't understand that offer either. They tried and failed to get traction. While I don't understand the monetization model of Snapchat, Instagram seems to be showing a lot of potential. Link to comment Share on other sites More sharing options...
Guest hellsten Posted November 27, 2013 Share Posted November 27, 2013 FB's developers could probably replicate Snapchat in a couple months. I don't understand that offer either. They built it in 12 days: http://techcrunch.com/2013/03/08/facebook-snapchat/ The Snapchat and Instagram offers tell us something about Facebook's moat and what Zuckerberg thinks of it. It also tells us something about the capital allocation skills of Zuckerberg and what the participants in this game think Facebook's stock is worth. Zuckerberg must be desperate to give away $3 billion in cash instead of equity, but I'm sure the reported cash offer is incorrect. The current startup and venture capitalist religion tells them to buy users at any price. That's a bubble if you ask me. Not as bad as in the 1990s when all you needed was an idea, but still a bubble. Link to comment Share on other sites More sharing options...
fareastwarriors Posted December 12, 2013 Share Posted December 12, 2013 Facebook: Ready for Its Big S&P 500 Debut http://www.businessweek.com/articles/2013-11-07/facebook-ready-for-its-big-s-and-p-500-debut Link to comment Share on other sites More sharing options...
Guest valueInv Posted December 20, 2013 Share Posted December 20, 2013 FB will hit #2: http://venturebeat.com/2013/12/19/facebook-becomes-the-worlds-2-online-seller-of-online-ads/ Link to comment Share on other sites More sharing options...
yadayada Posted December 28, 2013 Share Posted December 28, 2013 http://www.theguardian.com/technology/2013/dec/27/facebook-dead-and-buried-to-teens-research-finds what would be a way to profit from a falling valuation of facebook? Current valuation seems completly insane to me, but I dont like outright shorting it. Link to comment Share on other sites More sharing options...
Orange Posted December 28, 2013 Share Posted December 28, 2013 http://www.theguardian.com/technology/2013/dec/27/facebook-dead-and-buried-to-teens-research-finds what would be a way to profit from a falling valuation of facebook? Current valuation seems completly insane to me, but I dont like outright shorting it. Obviously there's puts, but they aren't particularly cheap, relatively speaking, considering the vix is at 12. I'd rather buy puts right after the bubble pops-when everything is down 20% and starting to fall apart. Dat reflexivity doe. Link to comment Share on other sites More sharing options...
Guest valueInv Posted December 30, 2013 Share Posted December 30, 2013 http://feedproxy.google.com/~r/Techcrunch/~3/i_jPc02CiM0/ Link to comment Share on other sites More sharing options...
Guest valueInv Posted December 30, 2013 Share Posted December 30, 2013 big story today on BGR: facebook is for old people. You mean, the kind that have money to spend? they will simply move on the next cool thing, after their kids find it. :) Or not: http://feedproxy.google.com/~r/Techcrunch/~3/savSjZuUY5E/ Link to comment Share on other sites More sharing options...
Guest valueInv Posted December 30, 2013 Share Posted December 30, 2013 http://www.theguardian.com/technology/2013/dec/27/facebook-dead-and-buried-to-teens-research-finds what would be a way to profit from a falling valuation of facebook? Current valuation seems completly insane to me, but I dont like outright shorting it. As I've said before, don't rely too much on articles you read on the Interwebs: http://gigaom.com/2013/12/30/facebook-is-dead-and-buried-or-what-happens-when-academic-research-goes-viral/ Link to comment Share on other sites More sharing options...
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