Nick Rosen | |
We are all bored of it at the same time

Just at its moment of triumph, with a $100 billion valuation looming for its share flotation, Facebook appears to be in deep trouble.

Facebook is the world’s second most popular word that starts with “F” and ends with “K”,  but there was always something highly suspect about its business model – tens of millions around the world fill it up with content each day, but share not a penny of its massive revenues, mainly culled from advertising sales.

This month a much hyped revamp of its page structure has left its 300 million regular users (845 million registered users) in chaos, unable to understand, still less navigate the new design.  It may prove to be the most expensive design mistake in corporate history, leading either to the biggest Internet bust so far, or at the very least a massive downsizing of the share price.It seems like another example of Facebook’s rampantly dictatorial boss Mark Zuckerberg attempting to impose his will on his global army of serfs. This time his reach may exceed his grasp.

Ad revenue has topped $3 billion per year, but unlike, say, YouTube there is no way of sharing the revenue with popular pages.

Scott Schermerhorn, chief investment officer at US money management firm Granite Investment Advisors, has his doubts about the proposed share price. “We had some clients call and once we step them through the numbers, they sober up,” he says. “The valuation is 100 times earnings in a stockmarket that is trading at 12.”  that is why the lead banker to the float is Morgan Stanley and not Goldman Sachs – MS are well know to have thousands of ultra-rich clients prepared to dig into their pockets without asking too many difficult questions.

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The number of ads on the site has risen by 42% over the past 12 months, with the average price paid for each spot up by 18%. When it started its main source of revenue was selling data about its users to ad agencies and other number crunchers. Our data.

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