Furor over Facebook Financials

It was rather inevitable that we would hear a whole lot of hullabaloo and blah-blah-blah regarding the over-evaluation of a cute little company out in Palo Alto (CA) that goes by the name of Facebook. Listening to both the clear-headed financial analyses and more heated debates on how ridiculous a valuation of the order of $100B actually is, there is really only one factor in common to all sides of the argument: a healthy dose of envy. You just cannnot get around the fact that the owner is a hoody-wearing 20-something kid with next-to-no corporate or media experience, and one who has not exactly excelled with respect to customer relations. But he is the creator and owner, and has built a brand that has almost a billion users globally, so the critiques are effectively null. Even with that billion off out in the void. 

I don't really get the consternation of the naysayers because from the start, and ever since, Facebook has been an exception and not the rule, so why would anyone expect it to perform or be handled in any other fashion than as a totally unique entity?. Mark Z. built up to this public offering with great patience, and unlike most people twice his age, was not tempted by the "get rich quick" prompting at various stages of his brand's evolution. He got this head down, got on with the work of building a following, and assumed that the rest would also gradually fall into place. As it did. Furthermore, whilst investor types seem to greatly appreciate bulging waistlines, graying or balding hair, and the prerequisite wrinkles, on their senior company executives, what they are dealing with here is a healthy kid. He is not prone to the sloth and selfishness of the classic tired senior executives who, in companies that are way more associated with building "products", sit back, building nothing except their already overstuffed bank accounts. In fact, I would argue that the selfish money-grabbing by CEOs and various senior executives across a variety of industries is precisely where investors have lost money in the very recent past. Generally speaking, the baby boomers have sat on jobs for decades, preventing younger people from rising up the ladder and even today after a lifetime of earning, all they often seem to care about is lining their retirement savings. They are still more interested in me, myself and I than they ever were in "producing" anything or driving a company forward aggressively, and they balk at the mere idea of early retirement to make room for someone younger. But that type of selfishness has played out in very negative ways and was in large part responsible for the economic crisis that began in 2008, and which was underwritten by selfishness and greed. So, I would argue that there is nothing terribly comforting about having the stereotyped aging and selfish CEO at the helm, or his similarly aged and past-it VP cronies by his side, all playing the same game, all milking the beast and bleeding it dry in the process. These are the people who got us into this mess! 

So, I think that a degree of youth should now be fashionable once more and the fact that this guy has done what he has done by his 28th birthday is simply staggering, and if that causes the usual underhanded comments about his dress sense, as a cover for a massive dose of jealousy, I hope he rubs their noses in it. But unlike most of that gang commenting on him, he actually has too much class to do so. I saw one commentator that was all fired up over the more or less 90X valuation over revenues, while another was shocked that it could be that much when "he hasn't really developed a 'product' or leveraged that membership". Guess what guys? As I said above, nothing about Facebook is typical, they stand alone, and yes, in many ways you might argue that an iPhone is something that has changed our lives more, but I could argue that hundreds of millions of people around the world open their iPhone each day to do one major thing: connect to Facebook! There are a variety of other smart phones, but there is only one Facebook. Additionally, when was speculation not part of the risk in investing? There's not much point in wanting in once everything has been achieved; one goes in based on good business analysis of what is likely to happen if the funding is in place. They might not have "fully leveraged their membership" but are you going to tell me their audience does not have enormous potential? Like all of those who just became millionaires (and billionaires!) in the recent offering, if you aren't willing to gamble and take a leap of faith, well then, you can't be part of the success. 

They have built a billion person global following. It is arguable that they don't need a "product" to generate $100B in a public offering, because, with a billion members, you are sitting on a goldmine and we all know it. Advertising revenue is already around a billion, and who knows what it will be that might take them into stratospheric annual earnings, but I tend to believe that they will get there. Yes, by classical standards, the company is over-valued, but that's just a hoody-wearing 20-something beating everyone at their own game. You have to smile at the image of all those 40- to 60-somethings who put Facebook down, but every single one of them would love to be CEO of Facebook today. If they actually understood the "product", that is. They might need a few years back behind a desk to catch up. 


The very fact that a relatively minor stake in Facebook just made fellow countryman Bono the "richest musician on the planet" simply says it all. Never mind Mark Z., we would also say that Bono must be one hell of a smart man and somewhat of a visionary himself. But of course he is, he's the front man of U2, and unless we are mistaken, he just happens to be Irish as well! ;))  - Kevin Mc