So after the third day of trading, Facebook is trading for $31/share after an IPO last Friday at $38/share.
If I've got this right, we're talking about social networking company that gets the majority of its revenue from advertisers, that has users who hate ads, and the ad model doesn't really work well on mobile devices anyway...which just happens to be an ever-increasing percentage Facebook total users.
News flash: User growth does not equate to profit growth. I thought we learned this during the dot com bubble of the 1990's.
Just because a social networking site can attract a lot of non-paying users does not mean it creates significant value for anyone. Value exists when people are willing to pay something to get it. How many people would stay on Facebook if they were charged a monthly fee to do so? How many users are willing to click on ads and purchase products so value is created for advertisers?
Until Facebook can figure out a way to create sustainable value for its users and/or advertisers such that people are willing to start engaging in commerce on Facebook in significant ways then it has a faulty business model. Attracting lots of eyeballs never was a business model in and of itself. Money needs to start changing hands.
SEE ALSO: Social media is not a business model.
