FB Stock Has Lost Half of Its Value, Because Facebook Is Not Really Making Any Money

Since I am a rabid privacy advocate, I don’t use Facebook very much -- but others do. 

While Facebook has over 900 million users, some of them are duplicate accounts and pages for pets, spamming and blatant advertising activities. Who isn’t worried by their bikini vacation photos being seen by an oppressive employer? Facebook makes a ton of money and has made Mark Zuckerberg a billionaire and many of its other employees rich as well. So how does the NASDAQ listed firm make all that money and can you benefit from their success as well?

Facebook makes money not by their prodigious and worldwide popularity, but by the advertisements they display and convince (PPC, PPV, PPI or PPM, PPA, and PPL) their members to use. The better they do this, the more money they make. One prominent blogger from the Huffington Post, however, believes that it’s not enough business to generate a full-time income.

Ads track your online habits, but do they correspond with real world ones? This is frightening but true. Online advertisements extensively cookies and one-byte “web-bugs” to determine your habits, then sells this information to a plethora of organizations which goal is to manipulate you to their private ends. Other than antivirus and internet security applications, one program I use extensively is called “Crap Cleaner” and is completely free. I encourage everyone to download it today!

However, performance charts prove Facebook isn’t doing very well.  The data for Facebook indicate that while the long-term outlook is good, it hasn’t performed very well when compared to the same period performance of similar companies such as Google and the (wider) NASDAQ Tech Composite stocks. While the QTEC chart shows a drop, it is a fraction of the faceplant that Facebook has done. When looking at charts it’s important to realize the people cherry-pick their data to show nearly anything. I used to do this all the time as an investment support analyst (the PC guru). One thing that can be done to counteract cherry picking from genuine low-hanging fruit is to carefully watch the chart scales.

Furthermore, performance of other IPOs reveals that technology stocks can be sound investments. Other technology giants have done better in their Initial Public Offerings. IBM is the source of the term “Blue Chip” stock because their color was blue. Apple also has been a social media darling and the staple of dreamers all over the world. Many Apple employees got rich from their IPO. Didn’t they invent the mouse… Nah, that was actually Xerox, but in the 1980s every mouse was feasting on apples.

That is why the Securities and Exchange Commission is important, as it polices all stock market activities and is responsible for sending to jail a number of investment company criminals. Martha Stewart, Michael Milken, Bernie Madoff are examples. Another example, not in the U.S. but in Europe, is the London Interbank Offered Rate (or LIBOR scandal). However, the SEC is not void of controversy. The Dodd–Frank Wall Street Reform and Consumer Protection Act, or simply Dodd-Frank, was signed into law by President Obama on July 21, 2010 and provides protection from many of these abuses of stock market activities. Further laws will undoubtedly follow.

Nonetheless, Facebook remains relevant as it enriches the lives of nearly one sixth of the planet. The economic, political, environmental (no paper to pass around), and social impacts are more far-reaching as any futurist can imagine. Facebook absolutely enriches, cultivates, and enhances the livelihoods of all of us from all age groups. Go Facebook!

How much do you trust the information in this article?

J. Kellogg

Economics junkie. I believe that while true freedom cannot be suborned by government, it can be, and is currently, over-legislated. As a privacy advocate, I don't share much in the way of personal life details. I allow my commentary here to stand on its own merits--unsupported by pontification of my expertise. I am a conservative centrist and am a strong supporter of capitalism and free trade.

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