Originally Posted by imageWIS
Depends on the social network. FB is pretty fucking solid because of the massive potential customer base... consider that every major company in the world with B2C sales has a FB presence. LinkedIn is a whole different story... but still has value.
At the same time, I'm not stating that these two companies should necessarily have the market cap that analyst would give them (when the LinkedIn IPO occurred, most of the people making the valuation had never actually used LinkedIn...
The problem is the premium people give it on the potential it has because of it's massive reach upon consumers. I mean look at Yahoo, they are still one of the most visited sites, yet they only command a market cap of 19 bil.
For Facebook their main revenue streams is advertising, and processing $$ for those zygna games and other crap. However the advertising space has become incredibly competitive, and the margins razor thin. Advertisers can take their pick on who they want to advertise with. Google, Yahoo, Facebook and the millions of new companies that sprout up get some VC money and try to be the next big thing. For mobile advertising the same thing, a new company sprouts up every week in every country back by investors.
With google people are searching for something, and ads are all relevant, and people are more likely to click on an ad or record more impressions as they search site to site for w/e they are looking for. With facebook, you go on to connect with friends, you are looking at comments, posting comments looking at pics etc. You aren't drawn to those shitty banner ads on the side. And Suprisingly Facebook's ads are generic. They can pull so much info on people based on their age, their likes, their status updates posts etc. But I look at the ads and they have for me: become a volunteer fireman. =_=
I really think we are in the midst of a bubble forming, with social networking and online/mobile advertising, although everyone compares it to year 2000 and their argument is that these companies have revenue and earnings and nothing like pets.com and the other no business model random websites. Yes they make money, but stock prices for these companies are trading at a huge premium their p/e levels are insane.
At the same time it's dangerous to short off the bat, the momentum of these stocks will cause you to lose all your $$