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Facebook's Lousy Ad Business

Discussion in 'Off-Topic Discussion' started by CatfishRivers, May 3, 2012.

  1. CatfishRivers

    CatfishRivers Well-Known Member

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    Facebook's Lousy Ad Business Is Making Its IPO Is Looking Hairier By The Minute - Here's Why It Doesn't Matter (click for full article)

    "Facebook's ad business isn't very good, and it's making the company's upcoming $100 billion IPO look hairier by the minute.


    But the truth is, the IPO will be fine.


    The problem with Facebook ads is that unlike Google ads - which are perfectly matched with a user's intent - Facebook ads are targeted the same way TV ads are: through guesswork.


    Advertisers buy space that will been seen by certain types of people, in hopes that those are the types of people that will someday want to buy the product being advertised.


    The problem is: advertisers don't feel like they are getting enough feedback from the people who see those ads on Facebook. The advertisers say they can't tell if their ads are working.


    As a result of these issues, Facebook's ad revenues shrank from Q4 to Q1 and are actually decelerating overall.


    But even though Facebook's ad business isn't very good, the company is still going to IPO on May 18, and it's still going to IPO at a very high valuation - probably somewhere around $100 billion, maybe higher.


    The big institutional investors who will propel Facebook to that valuation are going to do it for a lot of reasons.


    Scarcity is one factor, but a bigger one is potential. "
     
    Last edited: May 3, 2012

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