Irrelevant Arguments

Silencing out the noise remains one of the hardest aspect of investing. This morning I witnessed a battle royale over what would happen with Facebook during this lock up expiration. The video is posted below:

Now lets look at the contrary take, voiced by Mark Cuban. Here is the link to said article.

Let us take a big breath, step back into reality separate the fact from fiction, the relevant from irrelevant.

Assuming that some stroke of intelligence carried you to this site, I shall enlighten you on both pieces of rhetorical nonsense that were spewed above.

First off let’s get one thing straight, just because Mark Cuban has a vendetta against Facebook does not correlate to you changing your investment thesis. Perhaps he does not allocate a substantial amount of funds to his online marketing (meaning that the routine 3 g’s was costly), or even better maybe the cost benefit of utilizing Facebook did not play out how he wished. As I remember when GM pulled ads from Facebook many months ago, people took the news at face value, failing to delve deeper into the issue. Guess what fools? Facebook had a record quarter due to advertisement, without giving a thought to the criticism posed by General Motors. So perhaps Facebook is set to do just fine excluding Mark Cubans good funds. Perhaps their rich fees work for some and not for others. One persons anecdotal opinion should not make your investing decision. Now at the end of the quarter if we see marketing dollars flee the world of Facebook due to the cost of advertising, perhaps then we should take what Cuban has to say into account, until then jut tell him to go back to being a vulture capitalist

What everyone fails to realize is that Facebook has monetized mobile. The hilarity of that is many of you are Facebook mobile users and barely really you are being made a pretty penny off of. Zuck has done what the tech haters said was not possible. Not only that, but did anyone catch they fact they have developed a great working relationship with Apple, ya know the biggest tech company in the world.  Facebook has gone from this company that was looking at Zynga for money to keep the lights on, to a company that owns the advertising space (they own it because who do you know that’s not on Facebook?). Have they finished the advertising revolution? No. We will see a lot out of this giant in the coming years. What’s important to note is that they are making inroads on a business model that works. Not only that, but the mass exodus that everyone anticipated never happened. The pundits said that Facebook users would leave the platform for a better alternative…. oh wait those users instead just started integrating Instagram into their Facebook lives. So what we have is a company that has successfully started to monetize a free product and has been able to avoid running off users while continually growing their base. Yeah your right, a horrible company….

Many are concerned with this GIANT lockup expiration. Many initial Facebook investors want out after this roller coaster ride. Actually, many investors want in at these deflated prices (those that couldn’t get in initially or were worried by the lockup). So no tomorrow will not tell us what the expiration means, the next few months will. I tend to agree with one of the talking heads on CNBC (which never happens), that mass buying will occur. Many investors have been interested in Facebook but seen the headwinds, particularly the ridiculous amounts of shares being sold in lock up expiration.  We are about to pass that next milestone of concern and the dynamics may just change. The tailwinds are beginning to outweigh the headwinds. In more simple English for ya’ll: more good and less bad means the stock goes up.

If Facebook keeps making money, continues growing its daily active users and ensures that they are fully active on their platform, we may see the reversal of a lifetime.

Photo by _Max-B

Posted on by Young Gun in Uncategorized 2 Comments

2 Responses to Irrelevant Arguments

  1. Mike

    Hmmm … Calling their second ever reported quarter ‘a record quarter’ is laughable – and constitutes ‘noise’. It is simply the higher of two numbers – the first being pretty bad! People go to google to search for products so seeing ads is acceptable in that context. People go to fb to find out what their friends are up to. Any ads detract from that experience and probably annoy. Mark Z may be cutting ad deals now, but nobody can say yet if advertisers are really seeing the ROI that they hope for. If they aren’t then fb profits will decline. Also factor in that big growth in this company is slowing in terms of users and the growth is now in places where folks spend less money. Add to this that the P/E ratio is so high that it sets a ridiculously high expectation for growth.

    I cannot criticize your choice of music, on the other hand. 50 cent – awesome.

    • Young Gun

      It remains the farthest thing from noise. What their recent quarter suggests is a company that has a profitable strategy, one in which leaves both customers and advertisers happy. Facebook has set out to revolutionize the ad industry. Ads were never acceptable, they just became so, and they are in the process of being acceptable in the social networking setting. What are you talking about? The company is where people are spending less money? Online retail is they current wave and similarily the wave of the future. Compared to many of its high growth peers the P/E of Facebook looks appetizing. Quit spewing something you heard on CNBC and get your facts in order.


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