Nobody uses Facebook anymore. It’s too crowded.
Five reasons why I’m not buying Facebook
Excuse me for raining on the Facebook parade, but the $450 million investment by Goldman Sachs and $50 million from Russia’s Digital Sky Technology didn’t move me the way it seemed to move others. This despite the suggested $50 billion valuation, as big and beautiful a number as the stock market has seen in some time.
I am certainly not moved in the same way it appears to have moved Goldman’s own clients: the Wall Street firm has pledged to line up another $1.5 billion in sales to its high net worth investors, who are said to be champing at the bit to get a piece of the action, which starts with a $2 million minimum. Not that I have $2 million lying around, but I wouldn’t buy this stock if I did.
Reason #1: Someone who knows a lot more than I do is selling. While the identities of the specific sellers remain unknown, the current consensus seems to be that most will be from venture capital investors like Accel Partners, Peter Thiel, and Greylock Partners. Maybe Mark Zuckerberg will kick in $50 million or so himself, just for some fooling around money. (…) The way the social network is talked about these days, it’s the best investment opportunity in town. So why would anyone want to forsake it? And don’t give me that crap about VCs being “early stage” and wanting to cash out of a “mature” investment. These people are as money hungry as any other institutional investor, and would let it ride unless….they saw something that suggested that the era of stupendous growth was over. Facebook reached 500 million users in July. There’s been no update since, even though the company had meticulously documented every new 50 million users to that point. Might the curve have crested? And let’s not even talk about the fact that they don’t really make much money per user — a few dollars a year at most. (Its estimated $2 billion in 2010 revenues would amount to $4 per user at that base.)
Reason #2: Goldman Sachs. I’ve got nothing against Goldman Sachs. Hell, I worked there. But when Reuters’ Felix Salmon says that the Goldman investment “ratifies” a $50 billion valuation, he’s only half right. That is, someone, somewhere—perhaps the Russians at DST Global—might just believe this imaginary number. (It’s hard to see why, though: DST got in at a $10 billion valuation in May 2009. Facebook’s user base has more than doubled since then. So its valuation should…quintuple?) But concluding that Goldman Sachs believes in a $50 billion valuation is poor reasoning. (…)
Reason #5: Warren Buffett cautions those looking at outsize valuations to consider one’s purchase of company stock in a different way than price of an individual share, whatever it may be. He suggests one look at the total market valuation – in this case, a sketchy $50 billion – and to consider: Would you buy the whole company for that price, if you had the money? The market value of Goldman Sachs is just $88 billion. I’d take more than half that company over the whole of Facebook any day of the week.
related { For News Sites, Google Is the Past and Facebook Is the Future | Google’s stealth multi-billion-dollar business }
and { The Next 10 Years Will Be Great For Both Founders And VCs }
