Facebook will begin trading today at 11 am. You can access live quotes on the stock, which trades under the FB symbol, here.
I am not a fan of Facebook’s services, and it remains unclear (at least to me) how they will monetize their huge trove of user data sufficiently to support its offering price of $38/share. The biggest growth in social media is in the mobile space and generating huge revenue from advertisements on mobile devices remains very difficult. In addition, Facebook users should understand that if you don’t pay for a service (and Facebook users don’t) that you are not the customer, you are the product. And you should know what that means.
I hope that the investors read and understood this section of the Facebook prospectus:
If we are unable to maintain and increase our user base and user engagement, our revenue, financial results, and future growth potential may be adversely affected.
We generate a substantial majority of our revenue from advertising. The loss of advertisers, or reduction in spending by advertisers with Facebook, could seriously harm our business. The substantial majority of our revenue is currently generated from third parties advertising on Facebook. In 2009, 2010, and 2011 and the first quarter of 2011 and 2012, advertising accounted for 98%, 95%, 85%, 87%, and 82%, respectively, of our revenue. As is common in the industry, our advertisers typically do not have long-term advertising commitments with us. Many of our advertisers spend only a relatively small portion of their overall advertising budget with us. In addition, advertisers may view some of our products, such as sponsored stories and ads with social context, as experimental and unproven. Advertisers will not continue to do business with us, or they will reduce the prices they are willing to pay to advertise with us, if we do not deliver ads and other commercial content in an effective manner, or if they do not believe that their investment in advertising with us will generate a competitive return relative to other alternatives. Our advertising revenue could be adversely affected by a number of other factors, including:
- decreases in user engagement, including time spent on Facebook;
- increased user access to and engagement with Facebook through our mobile products, where we do not currently directly generate meaningful revenue, particularly to the extent that mobile engagement is substituted for engagement with Facebook on personal computers where we monetize usage by displaying ads and other commercial content;
- product changes or inventory management decisions we may make that reduce the size, frequency, or relative prominence of ads and other commercial content displayed on Facebook;
- our inability to improve our analytics and measurement solutions that demonstrate the value of our ads and other commercial content;
- decisions by advertisers to use our free products, such as Facebook Pages, instead of advertising on Facebook;
- loss of advertising market share to our competitors; adverse legal developments relating to advertising, including legislative and regulatory developments and developments in litigation;
- adverse media reports or other negative publicity involving us, our Platform developers, or other companies in our industry; our inability to create new products that sustain or increase the value of our ads and other commercial content;
- the degree to which users opt out of social ads or otherwise limit the potential audience of commercial content; changes in the way online advertising is priced;
- the impact of new technologies that could block or obscure the display of our ads and other commercial content; and the impact of macroeconomic conditions and conditions in the advertising industry in general.
The occurrence of any of these or other factors could result in a reduction in demand for our ads and other commercial content, which may reduce the prices we receive for our ads and other commercial content, or cause advertisers to stop advertising with us altogether, either of which would negatively affect our revenue and financial results.
CNBC reiterating again the underwriters have a lot of ammunition to keep this stock above the $38 level. Wonder what happens when the underwriters lose incentive to keep $38?