The true valuation of Facebook is not about short-term gains or losses, but a medium-term play about how it monetises its user base of nearly 1bn people. The five tranches of share lock-up expirations will affect its price in the short term, as it will inevitably discourage new investors from buying the stock – given the potential for a huge overhang of stock coming onto the market. However, if you believe that Facebook can launch new innovations, which can monetise its user base across multiple devices over the medium term, then either continue holding this stock or see it as a potential buying opportunity. Only last week, Facebook launched two new innovations to its platform which it is currently testing – advertising in its App Centre and advertising across users’ news feeds. Facebook is still a start-up coming of age.
Richard Nunn is a media analyst at Charles Stanley Securities.
Facebook’s share price plunge has been a great disappointment to those wanting to make a quick buck out of its market launch in May. But, in the long term, the company’s future will not be decided by the twists and turns of the stock market, but by whether it can succeed in monetising its platform. Above all, this depends on Facebook’s ability to start making money out of its mobile platform, especially with smartphone and tablet internet use set to overtake traditional computer-based access by 2014. Developments such as advertisements (or sponsored stories) on people’s timelines should help with this. But Facebook will need to take care to avoid annoying its users in the process. While people may not love Facebook, pretty much everyone is on it – and that’s not going to change in a hurry.
John Halton is an advertising, technology and media partner at Cripps Harries Hall.