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The most awaited IPO of the last ten years is falling apart. Facebook, $FB, has been down to 20$ for more than three days in a row, during the past days. With an initial public offering at 42$ per share and a valuation at 108B$, it seems that everything is getting in a really bad moon for this company, which is not led by numbers, but by facts.
At this moment the current market capitalization of $FB is about 50B$, half of what was introduced in the market. The second quarter has showed us an incredible improvement in the number of people who use the platform every month, 955 million, and a few numbers about revenues.
The response of the market was straight. Facebook went down in a matter of hours. Is it possible that with almost a billion active users this company is not able to make a great impact on revenues? Yes. This company is eight years old and has probably the best engineers in the world, but still misses the point. It was fun to play in this way when Facebook was private, but now there are millions of shares and billions of dollars in the game.
Facebook’s users don’t love to click on ads and pretty often they don’t even notice them. This is due to the way the platform works. If I login, I do it to talk to my friends and not to see how amazing Facebook’s ads are. If you look at Google, you will see that the same model is successful, because the Google Ad can add value to what you are looking for. For this reason there is more possibility that at some point you are going to click on the ad.
On the other hand we are obliged to say that Facebook hasn’t taken a big market yet, mobile. One third of Facebook’s monthly users connect to the platform through mobile and not through the desktop version. This means that there is still a huge margin in revenues.
If they finally release a decent app for iOS and Android, with an Ad integration or another business model, they will boost their revenues. Although they have been acquiring dozens of mobile companies, they haven’t released anything yet.
At this point it seems it is just a matter of time, maybe months. However the question is still the same, could a huge improvement on mobile help the company? We actually don’t know it yet. What we have really understood is that numbers don’t help your valuation, but facts. It doesn’t matter how many people you have, but how much money you make.
The instagram acquisition and the ones that followed are going to change the game, if not Google Plus could keep growing step by step.
