Published on: Nov 26, 2012

Facebook’s Stock Performance History

Prior to going public, Facebook’s 2011 profit reports reflected $1 billion on sales of $3.7 billion. As Facebook became publicly traded in May of 2012, the stock opened at $38.00 and fell down to $31.00 in the first 4 days. In the first three months on the market the stock value continued to sink, hitting its low at $17.73. It became apparent that the stock was significantly over valued by underwriters and investors. Even with the disappointing stock performance, Mark Zuckerberg Facebook’s CEO’s net worth was estimated at 19.1 billion dollars after going public. Zuckerberg first appeared on Forbes billionaires list in 2008 with an estimated net worth of 1.5 billion dollars. Therefore, it is clear that the brass at Facebook enjoyed a huge jump in personal wealth, while its pioneer shareholders are the ones that suffered the worst losses.

After their initial free fall in the stock market, the stock continued to hover around $19.61 per share until the expiration of the 91 day stock lock-up period (November 14, 2012). Within this Lock-up period, insiders and other large investors were not allowed to sell shares. Critics and speculators yammered that disappointed stock holders would sell their shares and cut their losses. Perhaps Facebook’s short, but volatile performance in the market lingered in their minds, along with memory of how LinkedIn (LNKD) fell about 30% in the time surrounding its lock-up period. However, Facebook embraced better than expected results, seeing a $3.60 price per share gain to bring the price per share to $20.01.

Aside from Facebook’s recent gains in the stock market, their 2012 third quarter revenue reports reflected better-than-expected profits and a 32% increase in third-quarter revenue to nearly $1.3 billion. The 3rd quarter report provided welcome news to share holders just weeks before the lock-up expiration. In addition a good 3rd quarter report, a footnote provides for a positive outlook for the 4th quarter report. As a 4th quarter report will begin to reflect financials relevant to the Instagram acquisition which was a major strategic move, to provide additional function ability “exclusive” to Facebook, in other words “a move to steer users away from Twitter” who has become a major competitor in the world of social networking.

What exactly does the monetization of Facebook mean to its members?

My professional opinion is that you will never see Facebook charge it’s users directly for their membership! That would be like throwing a ticket booth up at the entrance where 4 billion users access this popular social network! This would directly impact their biggest selling point to advertisers and partners by possibly reducing that attractive number of 4 billion users. Even if they attempt to create various membership levels (allowing profiles free of advertising) I believe once you begin charging membership fees, many members would consider leaving Facebook for other free social networks such as Google Plus or Twitter. This would be in direct conflict with their overall objective to grow users and activity. In any case, there are a variety of other methods Facebook can use to generate cash flow aside from charging membership fees, some of which will end up coming from their user base in an indirect way.

It is evident that shareholders bought into this company because its current 4 billion users hold value. Monetization will likely be achieved by increasing activity of Facebook’s current users. Mobile technology plays a big part in this formula. As the popularity among mobile devices gains momentum with many manufacturers releasing their own tablets to compete with the iPad, it is already apparent that Facebook aims to produce and/or acquire various other applications that will offer greater function ability to mobile users. Acquisitions such as Instagram, is just a small example of how Facebook is moving to add additional and exclusive functions to offer users. An even bigger move to monetize Facebook was revealed on November 16, 2012. As Facebook announced “Facebook Gifts”. The “Facebook Gift” application will offer hundreds, if not thousands of products and possibly services provided by new retail partners, offered to Facebook members. This new application promises to assist Partners and Advertisers in seeing actual results by introducing an eCommerce mechanism to its 4 Billion plus users.

In addition to Facebook’s functions expanding, as of recent times I think we can all agree that we are noticing more advertising when accessing our Facebook accounts?  My opinion is that the additional advertising has been so subtle, that it has hardly been noticed by many users.

The Future of Facebook

If the slumping stock prices are pushing the envelope on monetization, then it is a logical next step for Facebook to capitalize on their current user base by expanding their social network into an internet conglomerate. What do I mean by “Internet Conglomerate”? Just as you see Google expanding to Social Media with Google Plus, you will see Facebook explore various internet services that allow profit ability without fees. The Facebook Gift expansion will provide an eCommerce vehicle for Facebook to compete with Amazon. You will see them expand to offer search engine services and perhaps a local coupon service or reviews of local business to compete with Groupon, Yelp and Google Places.

As Facebook joins other internet conglomerates such as Google, Microsoft and Yahoo, they will begin to step on each other’s toes, offering similar services.  I believe Facebook users can rest assured, Facebook will remain free! Ultimately consumers will benefit by enjoying more cutting edge internet tools and more competitive prices relative to eCommerce shopping.  I am sure an occasional advertisement here and there is in the works. However, I am sure we will survive.