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Should you buy Facebook Stock?

on May 24, 2012 | Facebook | Comments (0)

On 18th May 2012, Facebook users realised just how much their shares and likes were worth in the stock market as Facebook was traded for the first time on Wall Street. Some fans were excited to buy a share of the 104 billion dollar company. To most, it felt great to own something in Facebook other than their profile. Users collectively invest billions of hours on Facebook and now they have the chance to invest some money as well. Despite the fact that friends are invaluable in Facebook or anywhere, the value of chatting, commenting or liking what your friends had posted was placed at $38 USD initial day. Most analysts are however wondering whether it is wise to purchase shares from a company that does not have any advanced money-making plans.

First day of trading 

From a historical point of view, buying any stock on the very first day when there is too much hype is often misguided as most of these stocks lose their footing with time. However, this does not rule out purchasing Facebook stock in the future. On a business level, $104 billion is a big number, and Facebook will have to do a lot to justify this value – days after the IPO we are seeing the company value hover from $80-90 billion. However, Facebook has other big numbers associated with it such as its 900 million users, and this is their real value.

Facebook has changed the Internet 

Facebook has revolutionised the internet by revolutionising social communication. It has brought out a sense of community in everyone as people talk and share their day with individuals. The future of Facebook looks bright, mainly because the concept of social media networking websites is still in its infancy. People have just started warming up to social advertising as well, and this could be a plus for the social networking giant. Also, people are not about to give up on the concept of sharing either and this is another positive factor for Facebook as well.

Revenue and Income 

Facebook generates 85% per cent of its revenue from advertising, and it was recently announced that General Motors, one of its biggest advertisers, was pulling out its investment. Another problem is that most Facebook users are now accessing this social media network through mobile phones, and Facebook is yet to realize how to generate revenue on this platform. These have been seen as tell-tale signs that the over $100 billion valuation will not last long and that individuals will lose by investing in this stock. However, Facebook has been known for innovations since its infancy in the dorms of Harvard, and pessimistic individuals can be confident that the company will come up with a strategy to help them generate money in future – and also continue growing the value of the company.

Advertising 

However, Facebook still has a lot of advertisers, and anyone who would like to appeal to the youth could make a killing from this social networking site. This is because this site is very popular, and Pay Per Click advertisers target users who meet a certain criteria, and who are more likely to use a certain product or service based on their profiles.

Company Control 

Another fear is that since the company has become a public company, shareholders could influence decision making and this could stifle innovation or even lead to poor decisions. The good news is that the Mark Zuckerberg still owns a big slice of this pie and he will probably ensure that the company continues to make money in order to better the services that it offers its users.

The Future? 

A question that many people ask is whether Facebook will appeal to the future generation of internet users and whether they will sign up to this social network or not. The good news is that Facebook has been the buzz for several years, and this buzz is yet to die down. Hopefully, this trend will continue in order to ensure that it has enough people to warrant investment from both shareholders and advertisers.

1 Year on the Internet is like 4 years in the real world 

Whether Facebook will be available in the long term and whether it will survive for the next several decades could be anybody’s guess. Technology and the internet are very dynamic and just like in fashion, what is in today could be out tomorrow. However, there are some internet companies that have stood the test of time and we can only hope that Facebook will join this league.

Facebook does seem like a great investment at the moment and people should consider having a bite of this multi-billion dollar company. However, it is its users who will determine its rate of survival and hopefully it will live long after the excitement has died down. Whilst the past days of trading has seen a decline in share price – everyone will be on the lookout to see how these shares perform in the coming days, and we can only hope that the numbers will be positive.


David Cowling : Editor and Founder of SocialMediaNews.com.au. I also run a Social Media Agency where I do consulting work and another blog dedicated to Instagram news. Connect with me: Twitter | LinkedIn | Google + or contact me here. Alternatively, you can send me an email at david@socialmedianews.com.au











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