Will You Buy the Largest IPO of All Time?

On Friday, Fool.com will host a live chat from noon to  3 p.m. EDT to cover Facebook's much-anticipated IPO. Several of our best tech analysts will field and respond to user questions about Facebook, the day’s action, and what it all means for investors.  So make sure  to swing by Fool.com on Friday for what should be one of the most high-profile investing stories of the year.

Are you ready for the largest IPO of all time? Well, you'd better be. It's coming Friday. After a seemingly endless parade of analysts, expectations, and grand proclamations, Facebook is finally making its grand debut. It's been eight years in the making -- 99 months to be exact -- but investors everywhere can finally own a piece of the world's largest social network. No matter what you choose to do with the decade's hottest IPO, you deserve as much information as possible. In that spirit, I've put together a series of graphs that puts Facebook's historic offering in perspective. You might be surprised at where Facebook stands in the sweep of corporate history.

Biggest of all time
One of the recurring threads beneath all this frantic Facebook chatter is a debate over whether it's really the largest IPO of all time. The answer will depend on what measure you use. Most analyses of IPO size use the value of shares offered to the public, and by that metric Facebook falls short. The largest American IPO by initial offer size was post-bankruptcy General Motors (NYSE: GM  ) , which offered just over $23 billion of itself to a skeptical public in 2010 and has since lost over a third of its initial valuation.

But there's more than one way to value an IPO. Most of us are more interested in how much value that initial offering places on the entire company. By that measure, Facebook is head and shoulders above General Motors and every other "biggest" IPO that's come along in recent years:

Sources: Wolfram Alpha and news reports.

Let me note that from here on out I'll be anticipating a $100 billion IPO market cap for Facebook, which skews a little toward the high end of where it's projected to start. Since Facebook's already upped the price range for its IPO shares in anticipation of strong demand, the final score might be quite a bit higher.

Now, Facebook certainly bests these companies in terms of its initial valuation, but let's take this a step further. We know Mark Zuckerberg started the site at Harvard in February 2004. Now, 99 months later, it's worth $100 billion. That's an incredible amount of value to create in a relatively short time, but I didn't truly appreciate how outsized that valuation was until I compared it to these former IPO champions and the length of time each took from founding to reach the IPOs that earned them so much.

Sources: Wolfram Alpha and publicly available corporate histories.

The amount of value Facebook's created per month of its life so vastly outpaced its IPO "peers" that I had to cut the graph off at the halfway point in order for most of the other results to even show up. AT&T Wireless, which has gone through a complex series of mergers, acquisitions, and rebrandings since its birth as McCaw Cellular, was one of the fastest to the public markets and had one of the highest levels of investor interest, and yet its IPO resulted in less than half the value per month of Facebook. No other company comes close to Facebook's more than $1 billion in value created per month of its life.

A competition of high-tech peers
But wait! None of these companies are really in the same class as Facebook, are they? You're not likely to see Facebook regularly compared to GM or UPS, but Apple (Nasdaq: AAPL  ) , Google (Nasdaq: GOOG  ) , and Microsoft (Nasdaq: MSFT  ) all make ideal peers for the Silicon Valley social network. How did Facebook's tech peers begin their public lives? In every case (even Google's), far more humbly:

Sources: Historical news reports and company histories.

Facebook's numbers would skew this graph so wildly that you'd be hard-pressed to see AOL (NYSE: AOL  ) at all -- not that it's easy now. The onetime hottest property during the dot-com boom went public way back in 1992 with a tiny, tiny $62 million market cap, a public debut that would later be dwarfed by virtually every major dot-com company (and plenty of trivial ones) that issued shares during the bubble years. Apple and Microsoft were '80s kids, debuting in 1980 and 1986, respectively, but they represented high-water marks for high-tech interest in their days.

If you'd like to think that Apple was more reasonably valued than Facebook at their respective debuts, you're wrong. Facebook's IPO valuation is actually in line with many of its high-tech peers, including two that didn't wait for profitability before going public:

Sources: Historical news reports and Wolfram Alpha.

With the benefit of hindsight, we can see that most of these companies were bargains at the time, and continued excellence has brought early shareholders some amazing gains:

Sources: Yahoo! Finance, Morningstar, Wolfram Alpha, and historical news reports.

With the exception of AOL, which has fallen on some hard times of late, and Amazon.com, a longtime high-valuation stock, major tech companies that survive the ravages of age have all seen their valuations shrink and their gains explode. Google, with the least growth of the bunch, has still been a six-bagger for IPO investors. Apple has earned its earliest investors 290 times their initial investments, while Microsoft has a cumulative return of more than 33,000% since going public.

Is there anything left to "like"?
For those of you expecting huge returns from Facebook, here are a few sobering numbers to consider -- assuming, of course, a $100 billion debut that isn't pumped to the moon by rabid demand. For your investment to offer Google-like returns, Facebook would need to be worth more than $600 billion, a market cap no company has held for very long. To approach even Yahoo!'s post-IPO growth, you'd need Facebook to be worth more than $2 trillion. And to become the next Microsoft in terms of share-price appreciation, Facebook would have to someday be worth $3 quadrillion dollars. Good luck with that.

Perspective is important when considering the growth prospects of any hot IPO, and Facebook's public debut will demand it. Do you believe that Facebook can be the next Google, AOL, Apple, or Microsoft? I don't -- but I'd love to hear your opinions. Let me know what you think by leaving a comment below.

Not everyone thinks Facebook can be a multibagger -- especially our senior technology analyst. In fact, he thinks Facebook isn't even the best opportunity in social media stocks today. He details the one social media stock investors can't miss in our most recent special free report, which you can access by clicking here .

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool owns shares of Microsoft, Amazon.com, and Google. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple, Amazon.com, Google, Microsoft, and General Motors. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (45) | Recommend This Article (64)

Comments from our Foolish Readers

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  • Report this Comment On May 16, 2012, at 5:46 PM, daveshouston wrote:

    I would not invest in Facebook because I don't understand why Facebook is successful. I have an account and have visited numerous times but fail to see the attraction.

    Facebook looks like a fad to me. However, so did Starbucks. I don't see much value there either. Maybe I'm blind?

  • Report this Comment On May 16, 2012, at 6:47 PM, tychicum wrote:

    I too find the value proposition difficult to understand. I certainly would not bet the farm on it. It is vaporware ....

  • Report this Comment On May 16, 2012, at 7:11 PM, applefan1 wrote:

    Apple has just shy of 1 Billion shares outstanding and Apple has a $10 Billion buyback program. Apple has been doing stock splits up until a few years ago with the last one back in 2002 (correct me if I am wrong). Now Apple has been in business since the late 70's, and went pubilc in the 80's. Apple has been making products for a LONG time and we have a tremendous amount of knowledge of how they make money and their projected growth rate.

    Facebook can only sign so many users and generate so much money per user. I am sure over time we'll get to know more about it.

    Well, If they are out of the gate selling over 400 Million shares, I wouldn't expect a ton of stock splits for quite some time.

    And what is Facebook going to do with all of this money? Update aging server farms? Build more server farms? Overpay for small software companies that don't make much profit?

    Just for the record, I USED TO have a Facebook account, but recently deactivated it. I saw it as nothing more than a horribly immature UI, a superficial way to communicate with so-called friends of whom you probably don't spend much time with, or even meet since many of them aren't really friends, their just FACEBOOK friends. Nuff said. I would rather save some chunk time from their servers and ultimately save some energy by storing information that I prefer not to have released. People should ask themselves? If the service wasn't free, would they gladly pay for the service? If so, how much would they pay?

  • Report this Comment On May 16, 2012, at 7:41 PM, osiris188 wrote:

    Besides getting paid by advertisers I dont think FB has any other real income. The 900 million+ users FB has ARE the product! When this user base starts to dwindle (which it inevitably will) FB will have to scramble to make the numbers. I have been asking random people around the office if they had to pay to use FB would they? the answer is a resounding NO! let's face it there will be another social media form as communication methods and styles are explored, it's only a matter of time.

    GLTA - Don't buy the hype, buy the Fundamentals!

  • Report this Comment On May 16, 2012, at 8:50 PM, applefan1 wrote:

    actually, Apple's last stock split was in 2005, I had a typo. Sorry.

  • Report this Comment On May 16, 2012, at 8:58 PM, applefan1 wrote:

    I think when someone sells some songs that they are getting through CD Baby, FB makes a few pennies. When someone plays a Zynga game through FB, FB makes a few pennies. Stuff like that. Basically, if there is a service and a way to make a couple of pennies per transaction, they play the numbers. The more users, the more chance they have at making money.

    After a couple of years of revenue/expenses, etc. to go through, then will figure out what the potential is. Personally, it's a different way to make a buck, which is why some people don't understand it.

    Some people think that if you don't really know how the company makes money and understand how they generate money, etc. then stay away from it as far as an investor. I am sure the first round of buyers (institutions/large investment people) that get in on the initial purchase can make lots of money, but they might have to dump the stock almost as fast as it goes public. This might be one of those stocks that goes up 10x within 6 months and then drop down below their initial IPO price. Only those that really keep focus on the stock price can make money. Day trader heaven.

  • Report this Comment On May 16, 2012, at 8:59 PM, Resphigi wrote:

    No thanks. I'll pass.

  • Report this Comment On May 17, 2012, at 2:25 AM, lachuub wrote:

    Worth a try. If the opening is too high wait a few days for the dust to settle. Of course will not repeat "microsoft" profit gains!

  • Report this Comment On May 17, 2012, at 8:22 AM, rtekosky wrote:

    I'm not a believer of the FB hype, so I will watch on Friday, if the stock goes up to 75-80, I will buy $60 puts a few months out. Something I never do, short the stock, gambling this time because the run-up is so predictable. No, this is not Apple, time to buy more Apple, RIG, QSII.

  • Report this Comment On May 17, 2012, at 8:58 AM, catoismymotor wrote:

    If FB decided to go the IPO route when it was estimated to be worth between $1 billion and $5 billion I would be interested. But with it worth an estimated $100 billion I can't see the upside. I think FB is approaching the top of a crescendo. I can't help but think that FB will find itself in the same boat as Myspace, AOL and Yahoo! within five years.

    I think the next FB is just around the corner. There is no moat big enough to protect itself from a new crop of young bucks looking to make their mark. Where will the new social network come from? I don't know. It could come from M.I.T, U.C. Berkley, I.I.T. Madras or a garage in Silicon Valley.

    I do know one element of a new social network that could help to take the wind out of FB's sails: Make member privacy the #1 priority and back up the promise with angry, hungry attack dogs.

  • Report this Comment On May 17, 2012, at 9:46 AM, iksnamyzs wrote:

    Its my understanding that there is a large demand for the stock. This therefore conflicts with Buffets advise to be fearful when everyone is greedy, and greedy when everyone is fearful. I would take a pass on it based on this statement.

  • Report this Comment On May 17, 2012, at 10:31 AM, Archaeologist77 wrote:

    "Go with what you know" - Warren Buffett

    Questions:

    1) How many other companies out there have $1 billion in cash at their disposal...and that in 7 years?

    I wouldn't mind seeing some data.

    2) What is Facebook going to do with the influx of capital from its IPO?

    Based on what they've done since 2004, most recently with Instagram, acquire their competition, and expand their business, invest in other solid tech companies just like Microsoft invested in them.

    3) Will Facebook ever reach a $2 trillion dollar valuation?

    I don't know.

    But if you were around, what were you thinking in 1984 when Apple launched the first Mac and Apple shares were trading for $3.48? "Oh, that computer company from CA run by a bunch of hippies is never gonna be anything." Apple is is now the world's largest publicly traded company. I can't help wish my parents were savvy enough to have bought Apple shares back then, and not just an Apple II clone (that my dad paid $2,000 for - have a good father, but he should've bought some shares in Apple as well).

    4) Will those of us foolish enough to buy shares of the IPO (or soon there after) get our money+ out of it?

    I don't know.

    But Mark Zuckerberg has done something remarkable. In 7 years from 2004 to year end 2011 he finished the year with $1 billion in cash for Facebook. If you are a business person that's gotta impress you.

  • Report this Comment On May 17, 2012, at 11:41 AM, tryan102790 wrote:

    OverHyped, oversold....IPO's in general are just bad investments. Lets wait to see where the price stabilizes and then look at the business fundamentals vs the valuation.

  • Report this Comment On May 17, 2012, at 11:55 AM, fullmetal97 wrote:

    Unless Facebook can successfully branch out to other service markets I don't see where growth will occur. I may be the only person on earth who has never been to the Facebook website nor has an account, but I don't plan to join so growth won't come from me. Where will more users come from if the company doesn't entire new markets?

  • Report this Comment On May 17, 2012, at 12:43 PM, TurbulentTime wrote:

    No, I don't invest in IPO at all. This has been my rule since I lost money in the B2B IPO during the last dot.com bust in 2000.

    I am not saying that there is another internet company IPO bubble, yet if we know that Facebook only had 1billion in net income for 2011, and its IPO prices will render its overall company value at over 100billion, this is a trailing P/E of 100+. In that regard, I like Apple, IBM much more. Facebook is another company which relies heavily or solely on advertisement revenue, and I like and prefer companies with multi-channel revenue streams. For that, I do not find myself getting much excited for Facebook's IPO; in fact, I am not excited at all. Yet, I am very excited to see how many people will get burned buying its IPO shares. It could still get a boost for its share prices after IPO as the excitement continues for a while, after that excitement eventually die down, it could be very interesting to see how some people will get burned badly.

    Companies go IPO, and they don't usually leave anything for the small investors to have, meaning they price it so that they maximize the equity values that they can get in order to have more cash for their whatever reasons; and to reward angel investors of the IPO companies; and the investment banks usually make the price so high as to charge highest fee for such IPOs. The investors who buy at the IPO prices are the last fish in the food chain. That is why I will never buy any IPO company shares.

    I get more excited at reasonable valued companies with track records of increasing its shareholder's values; and under-promised CEOs and always over-delivering on performance, with multi-channel revenue streams and high profit margins and high return of equity.

    Even if Facebook will turn out to be a great investment, it could be many years before one can see the return of his/her investment in Facebook since the P/E is so high, it will take much longer to recoup or get back for paying such a steep value for the company's stock. The longer it takes, the lower per year annual return of investment. Facebook is mostly for teens, in my opinion, to spend their time. I rather interact with people face to face. Did GM or Chrysler just pull their advertisement on Facebook too? They state that advertising on Facebook has no effect on their auto sales.

  • Report this Comment On May 17, 2012, at 12:56 PM, TurbulentTime wrote:

    Oh, by the way. Does anyone still remember the "then's next big things" in the 90s? I mean Yahoo, AOL, B2B companies such as Ariba? Where have all these "then's next big things" led its IPO investors?

    Facebook "the next big thing"? hmmmm......

  • Report this Comment On May 17, 2012, at 1:02 PM, TheDumbMoney2 wrote:

    All I can say is the Fool had better have this ratable asap so we can red thumb it when it hits the 50-70 range a day or two after ther IPO.

    Respectfully.

  • Report this Comment On May 17, 2012, at 2:45 PM, Clint35 wrote:

    I'm not buying. I think it's already way over valued. But even if I was interested I would wait at least two quarters to see what kind of numbers they put up. I'll be giving it a thumbs down on caps.

  • Report this Comment On May 17, 2012, at 3:13 PM, zzander9 wrote:

    If only compared to "Linkedin".

    Just found a great article reading 1st day IPO purchases.

    Linkedin

    Average 1st day purchase price was 98.00, IPO was 45.00, now sits at 100.00

    Kinda makes you think..

    Its a Forbes article regarding FB peers IPO's.

    Check it out.

  • Report this Comment On May 17, 2012, at 3:19 PM, billjam wrote:

    Not a chance! No doubt some investors will make a quick killing on this but I don't see a business with anywhere near the valuation this frenzied market is assigning. Where are the barriers to entry in their market? Plus their customer base is fickle. Remember MySpace? And Twitter was the flavor of the week for more than a week.

    I like to invest but I don't like to gamble.

  • Report this Comment On May 17, 2012, at 3:22 PM, actuary99 wrote:

    Haven't done much research on the valuation but based on this article it seems like it may be a wee bit optimistic.

    However, for anyone thinking Facebook is a "fad" or thinking the number of users will dwindle, you're delusional. I would bet a large sum of real-life money against anyone who doesn't think Facebook will continue to be a very big deal. Message me if you're interested.

    I would say Facebook has a significant competitive advantage:

    (1) Having a Facebook account is very practical. Facebook accounts are worth retaining, if for nothing else, because they give you automatically updated contact information of anyone you could possibly lose touch with. Facebook is the most useful medium for contacting a group of my old friends OR immediate family.

    (2) The moat, if nothing else, is that so many people have Facebook accounts. What's the motivation to switch to another social networking site when Facebook is free? It is unlikely that many of your friends/family are on another social networking site. This is making the stretch of an assumption that another site offered what Facebook does.

    (3) There are a significant number of people who have a legitimate problem in their overuse of Facebook. What other social networking site has come even close to causing this kind of dependency?

    Anyone who has had a Facebook account for some time and has spent a significant time using it will testify to it's ability to continuously evolve according to user wants/needs. The site has gone through countless make-overs which shows it has the ability to adapt to a changing environment and shifts in the wants/needs of its users.

  • Report this Comment On May 17, 2012, at 3:53 PM, marshgator wrote:

    Interesting comments on waiting to see more fundamentals downline versus valuations but sometime you simply have to get in when you can in the event this is more than what it seems. I don't expect great fundamentals so much as hyper investments during the launch. I'd hate to be among the many that should have bought Apple or Google, given the opportunity. Morgan Stanley has released a very limited number of shares (500 max) to their key individual investors for what it's worth. In and out doesn't look so bad at this point but I expect the best play is... hold'em until something interesting happens next (good or bad); fully knowing the risk aren't so great at this point. I agree with most, that all the signs point to "wait and see more" but sometimes it pays to simply play and enjoy the ride (up or down).

  • Report this Comment On May 17, 2012, at 4:40 PM, cathynd95 wrote:

    FB IPO --> Joke. And the joke is on those who buy into the hype. The winners are all those folks who got the stock for $1.00 before it "went public"...

  • Report this Comment On May 17, 2012, at 4:53 PM, Deelovelyone wrote:

    No thanks, I will pass I don't understand the hype. Highly overrated..

  • Report this Comment On May 17, 2012, at 4:53 PM, Chontichajim wrote:

    I've never used it but since I review all IPOs it would be beyond foolish to not list my interest for this one. I think my chances of being selected for the IPO are near zero but that would just mean leaving the money put aside until summer/fall bargainsfor other stocks come along.

  • Report this Comment On May 17, 2012, at 4:54 PM, mikecart1 wrote:

    Facebook's current business model is a big failure. That is not to say it is a bad company or stock. I mean AMZN went up for years on crazy multiples before it generated any revenue at all. However, Facebook's product is ads to its huge user base. What people don't see or understand is that 99.99% of us (the users, the customers) do not click on the sides of screens. When we go to a website, we avoid clicking any banner or ad. When we go to a website to shop, we may click on banner or ads of similar companies. That is how Google is doing well. When people go on Google, they generally are researching something or trying to find info about buying something.

    When people go on Facebook, they aren't going there to buy ANYTHING. They are there to look at their friends, updates, and pictures. That is it! They don't go there to spend money! They don't go to Facebook to shop! That is why Facebook's revenue per user is so low. It isn't just low, it is very very low at about $1/user. That is pretty pathetic. It isn't going to get much better.

    We as computer users are trained over the last decade+ to not click on banner, to not click on ads because of some fear of spam or a virus. Why would anyone do different on Facebook?

    That is the QUESTION! :)

  • Report this Comment On May 17, 2012, at 4:55 PM, albedobeagles wrote:

    To hell with finances and market growth and all that stuff... The reason I cannot imagine FaceBook thriving forever in the longrun is that it SUCKS at a media and/or communication tool! Have you ever USED this dump? You cannot contact all of you "friends" at once, you cannot easily navigate in any way, you must spend countless valuable minutes (or hours if you have no life) cruising the sites of your "friends" to see what they may have meant to say to you, a member of the world at large. FB is the single most ponderous means of communicating with multiple recipients available today. Nonsense. It's going to be outdone by somebody with a broader understanding of its potential who is capable of redesigning the system so it's actually useful. Hmmm... Maybe the FB geniuses will sort it out eventually. Meanwhile, I will wait on this one. I want to like the product in SOME way to claim ownership!

  • Report this Comment On May 17, 2012, at 5:18 PM, pwolf100 wrote:

    Will You Buy The... Well, no. However, I may short

    FB next week. Interesting to see where it closes on

    Friday.

  • Report this Comment On May 17, 2012, at 5:26 PM, jm7700229 wrote:

    I would be tempted to put up some of my spec money on the initial offering if I knew how to do it, because, like Apple and tulips, the bandwagon will take it up in short order. Like tulips, and someday for Apple, it will be seen eventually that there is no 'there' there but the early investors who get out quickly will profit.

  • Report this Comment On May 17, 2012, at 5:27 PM, mclaugph wrote:

    No.

    I once read that IPO = "It's Probably Overpriced". Between that and misadventures in the dot.com age, I'll hang on to my money and watch from a distance. The only ones who profit are institutions and those already vested in FB.

    Also, I'm admittedly thickheaded in understanding how FB makes money, and their "moat" doesn't seem nearly as wide as a company like KO. I could be wrong...

    My two cents.

  • Report this Comment On May 17, 2012, at 5:28 PM, Don354 wrote:

    "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it.

    If it doesn't go up, don't buy it."

    Will Rogers

    This isn't a "good" stock!!

  • Report this Comment On May 17, 2012, at 6:27 PM, TMFAleph1 wrote:

    @Mikecart1

    I agree with you on your broad assessment of Facebook, but the company's revenue per user is roughly $4, not $1.

  • Report this Comment On May 17, 2012, at 6:45 PM, HIGHNLOW wrote:

    Facebook IPO = Dis - "Like". Not buying the hype; becoming bored with the site and way too many mundane worthless posts by "friends"; don't bother with the games; and many of the apps gain too much access to my information or are becoming annoying ie "Socialscam". Certainly has been beneficial with regard to making/advancing some contacts with friends/family. Biggest question is whether Facebook will render the future of High School Reunions obsolete??

  • Report this Comment On May 17, 2012, at 6:56 PM, zzander9 wrote:

    I strongly believe when talking about ad space.

    The product BRAND being put in front of you is most important, not the "click".

    When i'm driving down the highway and i see 150 billboards a day (which company's pay thousands of dollars for), visually those products are being BRANDED into my memory. For future purchases. "BRAND" get it?

    It's just getting the visual BRANDS in front of you.

    Pretty basic when you think about it. So yes company's will pay Millions of dollars in advertising just to get the product's BRAND in front of you. actually in front of 900 million of us.

    If you don't believe this then you know nothing about advertising.

    And actually, i am not an advertising expert. I am a Pizza guy....

  • Report this Comment On May 17, 2012, at 7:33 PM, Langalier wrote:

    Whether true or not, I'm more troubled by the "rumors" regarding covert links to a certain government agencys information collection techniques, and by Facebooks refusal to acknowledge their members may have a valid concern. This may be just a isolated case, but most of the people I know are either deleting their Facebook account or planning to do so. With the increased concern over the use/abuse of members personal information by Facebook to generate revenue I can only see this increasing in the months/years ahead.

  • Report this Comment On May 17, 2012, at 7:51 PM, onst4me wrote:

    I pulled the trigger...I just love a "happening!"

  • Report this Comment On May 17, 2012, at 8:19 PM, Hawmps wrote:

    $38... hmmm... price does not necessarily equal value.

    FB is a double edged sword. There are the privacy issues, very real issues and a definite cause for concern. But there is also the social peer group issue. By that I mean, if you're not plugged in to FB and most others in your peer group are, you miss out on simple conversations, happenings, and social evening or weekend plans and are not "included" and actually at risk of being at least slightly outcast from that peer group... especially when most people are doing all this on their iPhone all day long. FB is an amazing concept, it is revolutionizing personal communication as we know it, and I hate it.

  • Report this Comment On May 17, 2012, at 8:43 PM, albo999 wrote:

    One of the greatest wastes of time in the history of man. Spending hours every day, on FaceBook.

    Many will get burned investing in this.

  • Report this Comment On May 17, 2012, at 9:19 PM, Langalier wrote:

    If one has to rely on whether he/she is "plugged into Facebook" or not, to be included in the peer groups weekend plans, one has to ask themselves if that is the the kind of group they really want to "hang out" with. Sounds pretty shallow to me.

  • Report this Comment On May 17, 2012, at 9:43 PM, Langalier wrote:

    On the other hand, I'm quite sure Facebook will find enough "sheeple" who are willing to expose their or all their friends personal information to the world and all the weirdos who populate it.

  • Report this Comment On May 18, 2012, at 8:30 AM, snickerdoodle9 wrote:

    Apple ( aapl ) anyday over FB ! I just added more shares of Apple to my current holdings over the last couple of days . No blind investing with Apple . The balance sheet , analysts reports , earnings reports , etc. are self explanatory !

  • Report this Comment On May 18, 2012, at 9:27 AM, DigitalOZ wrote:

    Facebook is a massive platform that already has 1 billion subscribers. That is an impressive feat. If there is a criticism to be had, it is that FB hasn't figured out how to maximize monetization of the platform.

    There are lots of ways FB could monetize its platform: advertising (of course), selling media/apps (skimming a fee like Apple does on iTunes / App Store), selling data and metrics about the user population, establishing a payment system (like Paypal), monetizing their already existing authentication system, they could introduce storage and posting caps to generate revenue on consumption, they could add value-added processing of photos, videos, they could create a business version of Facebook and charge enterprise customers for it by offering advanced security features and improved team communications, etc. It could start to expand into LinkedIns territory easily. There are dozens of ways that FB could monetize the platform. It is concerning to some extent that it hasn't been more effective at it. However, while Zuckerberg is definitely a technical genius with an incredible vision, he doesn't strike me as a strong business person. But he has a strong COO in Sheryl Sandberg who is a business person and I expect to see her help the company monetize better. The company doesn't seem to have valued monetization as much as accumulating users in its early years, but Wall Street forces a company to focus on monetization and I expect the company will respond effectively.

    I plan to buy a small position (with a limit) in the IPO for a long term investment..the foolish way. I'm not betting the farm on it, but having a small position to see where it goes seems sensible given the incredibly large user population, the many ways in which it can leverage the platform, and its powerful brand. FB definitely has a large moat. It will be difficult for any other company to achieve a platform like it because of the network affect. Google tried to make a run at it twice and essentially failed twice. LinkedIn and Twitter are their only real competition, but Twitter has a much narrower value proposition and LinkedIn is so business oriented that it has more limited appeal.

  • Report this Comment On May 18, 2012, at 12:45 PM, hokupaa wrote:

    The market has dropped so much in the last 10 working days that I'm concern, let alone buying another internet.com stock. I nearly lose my shirt the last time the tech stocks crashed.

  • Report this Comment On May 19, 2012, at 2:47 AM, techoptimizer wrote:

    Stock did better than I thought it would. If our society ever gets educated, all advertising will be exposed for the farce that is. The quantitative literacy displayed above is an immense disappointment especially vis a vis capital market microstructure considerations. I will never pay any personal attention to FB as long as I live.

  • Report this Comment On May 25, 2012, at 1:10 PM, makelvin wrote:

    @DigitalOZ,

    "...There are lots of ways FB could monetize its platform: advertising..."

    Advertising on FB is not as natural a fit as Google Search. This is because when a lot of people doing search usually are already looking for things to purchase to begin with. Putting up sales ads for things that they are looking for would actually be welcome by the users. But in the case of FB, people get on there to socialize with their friends. Seeing a lot of ads would become annoying very quickly for a lot of users. If a lot of users feel annoyed using FB, they will start to jump ship faster than the passenger on a Titanic. Just look at MySpace and see how quickly sites just as this can get out of favor.

    "...selling media/apps..."

    Selling what media and what apps? Apple and Google already has its own eco-systems with real hardware to support them; what does FB has to back up their media/apps sales? Even Microsoft will have their own app store for selling Windows apps in the up coming Windows 8.

    "...selling data and metrics about the user population..."

    Once again this is dangerous territory. As FB starts selling more user specific data and metrics, they face the possibility of further user alienation.

    "...establishing a payment system (like Paypal)..."

    Establishing a payment system makes sense if they are actively selling some sort of products to its users like Amazon or eBay. What product does FB actively sell to its users daily to justify a payment system?

    "... they could introduce storage and posting caps to generate revenue on consumption..."

    Introducing storage and posting caps is another opportunity to anger its users and risk further alienation. Although I am sure Google would be more than happy to see FB implement such a move. This way they can solicit the FB users to become Google+ users.

    "... they could add value-added processing of photos, videos..."

    There are already a lot of free video and photo processing apps and websites. What would they be doing that would justify the extra fee that FB users feel compel to pay FB for?

    "...hey could create a business version of Facebook and charge enterprise customers for it by offering advanced security features and improved team communications..."

    FB's model is to share information as freely as possible to create a social environment. This model and information security are inherently contradictory. If business enterprise wants information security within its corporate environment, they would be better off creating their own intranet communication platform rather than having its workers sending the company's private data over to FB and have FB manage them.

    "...It could start to expand into LinkedIns territory easily..."

    Probably, but then again, there is already a LinkedIn. What will FB offer that LinkedIn does not? After all, one of the reason why most average users like to use FB is because it does not seem very business like. If FB is to copy LinkedIn's business model and start to become more business like, will they start to alienate its core user base?

    The truth is, I am sure FB can generate revenue by doing most of what is mentioned above; but only if they would keep it to a very moderate amount so that it would not alienate its core user base. Does FB has a real business model that can generate revenue? Absolutely, but it just simply does not generate the amount of revenue that its IPO stock price implies. I think based on their current revenue and profit without a clear sign on how they can quickly grow that year after year, FB might possibly be worth around 10 to 15 billion at most assuming that they can consistently grow like Apple and Google; not the over $100 billion that they are asking for.

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