Facebook is a social utility that connects people with friends and others who work, study and live around them.
Facebook Shares Tumble 9.5% On Wall Street U-Turn
There was a time when Facebook and the way it built an army of users was cool—the definition of business vanguard. But that was before the company went public; before it had to disclose its real revenue figures and how it plans to make even more money for greedy investors on Wall Street.
Since Facebook’s fateful IPO in May, things have been unsteady to say the least and although the company saw some renewed optimism from investors (they liked the plan to enter Search), most it seems are not sold on the ‘how’ of Facebook’s money-making plan.
The company’s latest investor trouble started after financial magazine Barron’s published a cover story on Saturday that questioned the efficacy of Facebook’s business model. The story struck a chord with Wall Street and on Monday investors used their money to show their solidarity for the story. The stock dropped 9.5% and many fear that things may start spiraling downward again.
The author of the story, Barron’s Andrew Bary was quite blunt about Facebook’s business model and how much he thinks the company’s share price is worth: “What are the shares worth? Perhaps only $15. That would be roughly 24 times projected 2013 profit and six times estimated 2013 revenue of $6 billion, still no bargain price.”
Some think Bary’s story was over the top; for those who disagree, Facebook hasn’t been around (or public) long enough to write off its way of doing things. After all, some claim, social media is still an emerging way of engaging people on the web.
Barron’s is suggesting that Facebook start charging people for use of the service; this idea has been touted before but it is unclear how Facebook’s 900 million active users will react. I guess we’ll just have to wait and see, right now Facebook is not in sink or swim territory; if and when that does occur, ‘Zucks’ and co may have to bite the bullet.