Is the Facebook bubble ready to burst?

Updated happygeek 0 Tallied Votes 1K Views Share

According to the Sunday Telegraph newspaper yesterday "Morgan Stanley, Facebook’s lead financial adviser, ended the day with 162m shares, worth $6.16bn. Other banks including JP Morgan and Goldman Sachs also bought shares, ending the day with $3.2bn and $2.4bn holdings respectively" which is kind of worrying when you step back and realise that Wall Street were propping up the share prices on the much hyped first day of trading. Indeed, as a result of that $100 billion Facebook valuation, there is now much talk of another tech bubble and whether or not it's about to burst.

dweb-facebook Writing in The Guardian, Michael Wolff is of no doubt that the Facebook IPO is indicative of a bubble but is doubtful that it's anywhere near bursting point as of yet. "The Facebook IPO – by, in effect, printing a $100bn in new, spendable, money – further inflates this bubble" Wolff insists, explaining that "investors have spent some $16bn in cash on Facebook shares, valuing them at $104bn, a part of which Facebook will now spend on other companies, which will increase their value, as well as the value of all other like-minded companies."

Alex Mifsud, CEO of payments company Ixaris, even goes as far as to buck the media commentator trend and suggest that Facebook is under, not over, valued. "Facebook has developed a number of innovations for monetising the platform which have the potential to increase its profits exponentially" Mifsud says "Facebook Credits are a prime example of this. Facebook keeps 30% of all proceeds generated through this virtual currency. In fact, the majority of Facebook’s revenue comes from people using Credits to buy virtual goods within games". With fast approaching a billion users, Facebook has the potential to drive incredible profits from retailers establishing e-shops within the Facebook platform.

But things are not all rosy in the Facebook garden, and there are some worrying signs that Zuckerberg and his minions have much work to do in order to plant the seeds of healthy profit in the years to come. Take the results of a global survey undertaken by the Greenlight digital marketing agency which reveals that a staggering 44% of respondents would never, repeat never, click on Facebook sponsored adverts and 30% strongly distrust the social network with their personal data. The Greenlight Search & Social Survey (2011-2012) wasn't all bad news for Facebook with 50% saying they use the service and ranking as the third most popular website behind Google and YouTube, and the second most popular website accessed through a mobile phone, but the warning signs are there that it cannot take success for granted.

"Facebook's advertising programme has an upward struggle” according to Hannah Kimuyu, Director of Paid Media at Greenlight. Especially when only 3% of respondents said that they regularly clicked on Facebook advertisements or sponsored listings. The most popular ad format for Facebook is the sponsored story model though, which Greenlight reports as delivering an average 32% decrease in cost per acquisitions along with a 30% increase in conversion rates.

Did you buy shares in Facebook? Do you click through the adverts on the social network? Is the new tech bubble in danger of bursting thanks to the inflationary pressure of the Facebook flotation? Join the DaniWeb conversation and share your thoughts on the matter...

MeiliIsHere 0 Newbie Poster

For sure people don't trust Facebook with their information. FB has done a lot of things that make people worried, for example, when they added facial recognition automatically to everyone's pictures, this is something straight out of scifi lol.

Ads on Facebook - I click on them when it is an ad about a game on FB

Shares- nope I didn't buy any

GarryHillton -5 Newbie Poster

I agree with you facebook done lot of things too much ads and sticky interface on left side.


penny88 0 Newbie Poster

I agree with the advertisement and promotion stuff, but still it has lot of potential becasue it is like fashion, as soon anything emerges it is incorporated in FB in the same way if ads affect its popularity they will find alternative to it.

aymanbinmoshi08 0 Newbie Poster

I also agree with this

PrimeOutsourcin -2 Junior Poster in Training

Facebook is trying to innovate every year to keep itself on top. It became famous because of the social and app games, then next because of the back links, then the timeline and the like. It keeps on being on top while users keep on following it.

maria.methews 0 Newbie Poster

Yeah i will definately agree with the thoughts of PRIME Eoutsourcin .. that facebook is trying to keep users in touch with the site through innovations....

siyajoshi 0 Junior Poster in Training

Google likes changes so for being top position Fcaebook is trying to do changes.Waiting what will be new things for us...:)

Coloradojaguar 0 Light Poster

What goes up must come down. I think that it will be a matter of stabalizing in the market. If the negative media drive dies down against Facebook then it could appreciate on the market somewhat. Most of the stocks that go out hard have met a similar fate.
Now let us see and Apple will split and go up for trade. That will be the next big one to watch.

TopCat23 0 Newbie Poster

$100 billion Facebook valuation for a website? I believe websites should be valued at the income they generate, just as normal businesses are, not just from the say so from some top stock market insider. I bet stock traders got a lot of commission on the day that FaceBook floated!

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