Will Facebook’s IPO meet expectations?

 

 

 

Facebook expects to list it’s shares between $28 and $35 in its IPO next week, giving it a valuation of $70 to $85 billion. That puts them at a similar level to Visa, Anheuser Busch, Verizon and Royal Bank of Canada. Is that valuation realistic? Time will tell. I am not an investment expert but the cautious side of me wonders about the logic of placing so high a value on a non-essential service.

 

Many would argue that social media is here to stay, if we accept that to be true (and there are arguments for and against that) it does not guarantee that any particular player will continue to stay at the top of the heap. MySpace found that out.

Advertising may well prove to be a huge cash cow for Facebook, but only if numbers of users and users time on the platform continue to grow or at least do not decline. Instagram and more recently, Pinterest have shown that new social media platforms with a different appeal can attract huge numbers of users in a very short time. There is a limit to how much time any individual user can spend on social media, the more “hot” social media sites out there, the more thinly members will be spread.

What happens when the next Facebook arrives on the scene? Will millions of Facebook fans abandon it in for something different?

Just as video recorders then DVD’s put pressure on the original TV programming, so might new developments affect Facebook.

What about social media burnout?  I am hearing more and more that for many the “novelty” of social media has worn off, they are spending less time in total on social media, but some are spreading that time over more platforms, twitter, Google +,You Tube, Pinterest, Linked In, tumblr, Foursquare and more. Has Facebook passed the peak of the adoption curve? Will sign ups of new users start to decline, will attrition of jaded early adopters add to a reduction in members?

I know that I spend less time on Facebook than I used to and more on Google +, Linked In and twitter.

What about the increase in mobile users? Will that be good or bad for Facebook? 

The IPO is going to be interesting.

All food for thought.

Wishing you success in all your endeavours.

 

Peter Wright

 

 

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