(click for larger image -- Facebook stock chart this morning)
I'm taking off my geek hat and putting on my technical trader software guy hat and my entrepreneur hat, and will look at my favorite bête noire, Facebook. As I have so fearlessly predicted in these pages (HERE and HERE and others), Facebook stock is going to tank, and tank badly. Where will it end up? I am not afraid to make fearless predictions, and they usually end up near the mark. So I predict that Facebook stock will sink initially to the $14-16 dollar range. It will momentarily find some support there and then find its true valuation in $7-9 range. Remember you read it here first on August 2, 2012 when the stock price is pennies over $20.
So why will it tank may you ask, when Wall Street jokers like Arvind Bhatia say that it is worth the $38 dollar opening price? Either these buffoons were paid by the underwriters to say this, or they are hugely mistaken about what constitutes real value in business, and were enamored with the business play.
Facebook stated that because they have 900 million followers, that this is a huge unmonetized potential. I maintain that they cannot monetize this user base, because people do not go to Facebook to buy things. They go there to be social. It is like a hooker trying to sell her services in church. The French have a wonderful word: inaccrochable. It means "You can't hang it!". It's like trying to put up a Playboy centerfold in a kindergarten class. You can't hang it. Here's another example. If every time you met your neighbor on the street, he tries to sell you Amway, would you still be glad to see him on the street? Nope, in these instances, we just want to be social and not commercial. Facebook and Wall Street do not understand this.
But let's look at the pure business side of this. Zynga, the social networks games folks have tanked and lost 75 percent of its value. Groupon is limping like a ship pierced by torpedo in the hull losing 70 percent of its skin. Pandora Media's ship has plummeted to the depths of Davy Jones' Locker. What gives? It's the business side, stupid. What is the value proposition of these companies. Zynga sells you a $4 virtual cow. How big is that market and how long until you saturate the IQ-challenged market? The Pandora value proposition has disappeared because people don't want streaming -- they want to own the music for their iPods -- thanks to Steve Jobs. Groupon can't provide deep discounts in an economic downturn, because merchants need to milk every dollar from every person that comes through the door.
And Facebook? Let's face it. They are a Php driven website for desktop computers. They have missed the mobile market. They are brogrammers. They are not smart like the Google programmers who can spooge code down to the bare metal. They have missed their core value proposition -- that people want to connect in a lazy fashion with each other, and really don't want to shop while doing so.
So, I predict that unless Zuckerberg has the testicular fortitude to say that he was wrong and turn the Facebook ship 180 degrees, then they will continue their slide into oblivion.
What will the Facebook replacement look like, and how will it make money? Stay tuned.