Arash Christopher Eslami's Blog


Is Facebook Sinking!

The numbers are in for Facebook’s first earnings report as a public company.  They were good overall, though, they closed at an all time low today at a meager $23.70.

When you take into account that the company’s IPO was on May 18th of this year at $38 a share, then you might think this is a very serious matter.  The fact is that the company did $1.18 billion in revenue for its 2nd quarter fiscal year with ad sales contributing more than 80%.  Wall Street compares past performance to the current performance as a way to project where the company is headed.  Well in this case Facebook made a 32% improvement in revenues in the same quarter last year.  You would think, well, that seems good, what’s the problem?

What took its toll on the company’s stock today was its net profit, that is, its GAAP versus its non-GAAP.  The non-GAAP (generally accepted accounting principles) showed Facebook netted $295 million—not bad, but its GAAP numbers revealed a loss of $157 million.  So, as usual, panic dominated Wall Street today as investors sold the stock while traders shorted it.

Facebook’s arrogance was demonstrated on its IPO when it upped the ante of selling 25% more shares on its debut.  That raised $16 billion for the company’s coffers while it also set a record as the largest IPO in tech history.  They have almost more shares on the float than Google and Apple combined.

What does the future hold for Facebook?  Promise.  The company is gradually getting more aggressive with its Pages, in particular their Sponsored Stories.

Let’s say you’re on Facebook and you check out Rubber Ducky Company who just put out a new, stellar rubber ducky.  As a sign of your approval, you click “Like,” and then this story is shared with your thousands of friends.  Network marketing 101.


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One thought on “Is Facebook Sinking!

  1. the problem FB faces is that majority of its subscribers are using more of it on their smartphones and mobiles are the worst platforms for advertising. Companies know that the impact of ads on mobile screens is poor and hence the biggest stream of revenue for FB is in jeopardy. There is no way back. A lesson that one cannot win goodwill of people for free and then exploit it for sustainable profits.

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