Business is often very exciting in the dullest ways imaginable. Finding a new, cheaper supplier for that microchip just as the competition is raising prices? Don't tell your CEO, he might have a heart attack. However, on rare occasions, business can actually be fun in the more traditional ways. Facebook (NASDAQ:FB) offered proof of that this week when it attempted to debunk a Princeton University report forecasting the social network's demise. Facebook's response was funny. Genuinely funny. Thank God for small miracles.
Princeton's shocking discovery
Earlier in the week, Princeton's mechanical and aerospace engineering department released a study on Facebook based on viral infection. Feel free to reread that sentence to make sure you get all the relevant facts. In the study, researchers validated a virus model -- because social media is virus-like -- using historic search and membership numbers from MySpace.
After much formulation and discovery, the researchers discovered that Facebook would lose "80% of its peak user base between 2015 and 2017." Shock waves ripped through the media, with just a few outlets pointing out that the journal that published the report, Arvix, isn't "peer-reviewed" and that maybe the aeronautical engineering department doesn't have a ton of experience with social network studies. It's easy to overlook that when you focus on shock value, I suppose.
Facebook's shocking discovery
Facebook was understandably concerned. Here it sits, down to a mere 1.3 billion users, losing out on the super lucrative buying power of teenagers -- the coveted 12-18-year-old advertising market -- and along comes Princeton to tell it that everything is going pear-shaped. Facebook couldn't debunk the study due to its water-tight development, but it did make a shocking discovery of its own.
As it turns out, Princeton will have no enrolled students by 2021 . It's a tough pill to swallow, but it looks inevitable based on the number of Facebook likes and published papers that Princeton currently commands. It's only going to be a few years, according to the report, for Princeton to drop to 50% of its current enrollment. It's such a lovely campus, too. Maybe they can turn it into museum of some sort.
A grain of salt and a sense of humor
Princeton's study is a perfect example of why investors need to take news, even from reputable sources, with a grain of salt. Princeton may be right, but it's shockingly unlikely that it's right for the reasons listed in the paper. Facebook has a strong user base, a growing revenue stream, and a brand that's hard to put a price on.
It's important for investors, and the general public, to keep context in mind when viewing these sorts of reports. On the plus side, it's a pleasing breath of fresh air to see Facebook handle it so deftly, and in such a way that the response fits right in with the company's brand. I'd love to see similar responses from other companies in the future. Wouldn't that be fun?