Sunday Morning Coffee

Just a brief comment or two about the upcoming Facebook (FB) IPO. According to Barron's, FB has a "user base of 901 million, or 58% of the globe's Internet users (not including China, where the site is restricted)." Barron's quoted company filings as follows "we do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven." 

My first thought is it does not seem like there can be much user growth unless the restrictions in China come off. There was no mention of any expectation about growth in Africa, which has one billion people but would seem to be a ways from embracing social media. If this is correct then they need get growth from further monetization of the user base which might be difficult in the short term if more of the growth in usage is coming from mobile which is a weak spot for them.

It is not unreasonable to expect FB to overcome this weak spot but this appears to be what the thesis will rely on.

I haven't written much, if at all. about the FB IPO. Sometimes I get a sense of how these things will go (not to imply I am always correct) but I have no sense of how this one will go. It probably doesn't matter in that I've never tried to game an IPO with client money.

Zooming out a little, social media stocks are a fad. The fad may last for quite a while (or not) and some folks will do quite well but it could easily be that the thing (the utility gained from what these companies do) is far more important than the stocks as was the case in more instances than not 12 years ago. If you get involved, do so in a reasonable proportion so that a blow up does send you back to the financial planning drawing board.