Investors Have Spoken, Facebook Inc.: "You’re Not Google!"

What should have been a stellar week turned sour on Friday as Facebook (NASDAQ: FB  ) shares shed 5.2%. Facebook CEO Mark Zuckerberg and team must be asking themselves, "What does a rapidly growing tech company that blows away even the highest of expectations have to do to get some respect around here?"

The day before Facebook announced Q1 earnings on April 23, its stock closed at $63.03 a share. After sharing what turned out to be an outstanding quarter by most any measure, Facebook shareholders have watched its stock steadily decline, topped off by Friday's major sell-off. And based on early trading, it appears the negative sentiment has carried over to this week, too. Which begs the question: What gives?

Too much of a good thing?
It's no secret that Facebook has been on a buying spree of late, and that continued last week when it wrote yet another check, this time for motion-tracking app Moves. Moves refers to itself as an "all-day activity diary for smartphones," and with four million Android and iPhone downloads to its credit in just two years of existence, the deal gives Facebook an immediate presence in the fast-growing wearables market.

The market's reaction to the Moves transaction? The aforementioned 5.2% drop in share price. Financial terms of the deal weren't disclosed, but regardless of what Facebook ended up paying for Moves, clearly investors weren't impressed. After dropping $19 billion for mobile messenger WhatsApp, another $2 billion for virtual reality manufacturer Oculus, and then doling out $20 million for drone maker Ascenta -- all in the past month --  Facebook shareholders have apparently seen enough.

Perhaps investors' consternation is over concerns that Facebook is trying to become Google (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) , rather than pass it as the No. 1 online advertising option. When Google bought its own drone manufacturer to bring the Internet to underserved markets, that was just Google being Google. After all, the search giant has dipped its toes into bringing broadband Internet access to users via TV whitespace, launched out-of-this-world looking balloons as part of its Project Loon initiative, and developed self-driving cars, to name but a few recent innovations.

There's a reason Google is considered by many to be the king of innovation: because it is. Facebook, despite its outstanding financials quarter in, and quarter out, simply isn't viewed by the market the same as Google. Considering each of Facebook's recent acquisitions come with considerable monetization questions -- WhatsApp comes to mind -- or fall outside its traditional wheelhouse, it's easy to see why shareholders are feeling a bit uneasy.

Is it Sandberg's fault?
News that Facebook COO and former Google exec Sheryl Sandberg sold 283,334 shares of stock late last week didn't help its share price much, either. When insiders sell, shareholders are naturally concerned, particularly when the insider selling is as widely respected as Sandberg. The fact that Sandberg sold approximately $17.25 million worth of Facebook stock could also be worrisome; though it shouldn't be. After her recent sale, Sandberg still holds over 8.7 million Facebook shares. Needless to say, she's still vested in Facebook's success.

Final Foolish thoughts
If Facebook's recent stock price slide isn't due to Sandberg's insider selling, that brings us back to square one: Is Facebook taking on too much, too soon in an effort to become the next Google? As a longtime Facebook bull, I still believe its outstanding financials and rocketlike growth warrant investor optimism. But it's time for Zuckerberg to rein it in. Facebook isn't Google, and it shouldn't try to be. Unless, of course, Facebook is focused on stealing digital advertising market share from its chief rival.

As for the mammoth WhatsApp acquisition, delving into virtual reality, and launching drones? Enough already. Let Google make self-driving cars; it's time Facebook gets back to being Facebook.

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Read/Post Comments (8) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 28, 2014, at 9:41 PM, Starflite wrote:

    I think I read this in the 90's but it was "Investors have spoken: Apple you're no Microsoft"

  • Report this Comment On April 29, 2014, at 2:32 AM, malikrt wrote:

    Great comment! How about some optimism and enthusiasm author? Why does Google get to do everything and Facebook does not?

  • Report this Comment On April 29, 2014, at 4:38 AM, secularinvestor wrote:

    @ Starflite & malkrit

    LOL....Great Comments....LOL

  • Report this Comment On April 29, 2014, at 5:07 AM, ZAK wrote:

    There are History makers and those that jot down the events and offer opinions. Being that we are in the long term investing arena I choose to be patient with Facebook and their purchases and respect their progress.

  • Report this Comment On April 29, 2014, at 5:32 AM, secularinvestor wrote:

    "Facebook Inc.: "You’re Not Google!” ...Thank goodness. FB is far better than where it matters most - mobile.

    Mobile is the future and is growing at an amazing rate while PC traffic stagnates, or is even declining - Steve Jobs was right - mobile is the future.

    Google dominates PC internet advertising but despite their almost monopolist position Google and wasting BILLIONS of dollars on mobile (like financing Android, Nexus and Motorola - all of which have LOST countless Billions of dollars) Google are LOSING MOBILE ADVERTISING MARKET SHARE to Facebook, at an alarming rate

    According To Statista total Mobile advertising has grown from $8.7B in 2012, to $18B in 2013 and is forecast to reach $31.4B in 2014 i.e. 261% between 2012-2014.

    Googles mobile Ad revenue has grown from $4.6B in 2012 to 8.9B in 2013 to a forecast 14.7B in 2014 , i.e. grown 220% 2012-21014 - i.e. lost market share.

    However, Facebook’s growth has been far faster: from $0.5B in 2012, to $3.1B in 2013 to a forecast of $6.8B in 2014 i.e. grown 1,260% - GROWN NEARLY FIVE TIMES FASTERTHAN Google!

    Furthermore, there is mountains of data which show that Facebook enjoys far higher levels of engagement than Google+, that advertisers obtain a far better ROI on advertising with Facebook than with Google.

    As a result, because of increased demand Facebook has GREATLY INCREASED their advertising rates, whereas Google has had to REDUCE theirs.

  • Report this Comment On April 29, 2014, at 10:54 AM, mediaguy wrote:

    Here is the BIGGEST problem. Look at "Facebook For Business" fan page and read what people are writing. When facebook decided to pull the organic reach away from business and forced paid ads.. all the fan pages FAILED. Paid ads don't do the same as organic for small business. Get ready for a drop in Q2/Q3. Everything currently is smoke and mirrors. Read what people are saying..

  • Report this Comment On April 29, 2014, at 5:29 PM, gmalov wrote:

    This article appears unfairly bias against FB and speculative with assertions.

    Investors need balanced reporting!!!

  • Report this Comment On May 01, 2014, at 11:24 AM, greatInvest wrote:

    This article is bias against FaceBook. I remember reading the same 'Bla bla bla' when Facebook was $18/Share (2012) Meanwhile, it didn't stop smart investors to keep placing eggs in this golden FB basket. $62/Share now.

    'Yes' Google is a great company FYI we also used to read bias article against the company back in early 2000. We 'now' all know the rest of the story...

    Maybe right now investors don't see it but again if we all knew in advance we would be all rich, right?

    Obviously the one writing this article is missing the train....

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Tim Brugger

Tim has been writing professionally for several years after spending 18 years (Whew! Was it that long?)in both the retail and institutional side of the financial services industry. Tim resides in Portland, Oregon with his three children and the family dog.

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