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Why I Bought Some Facebook Shares

Yep, that’s right I finally broke down last month (in December) and bought some shares of Facebook.

Previously, I wrote an article called (Why I Passed On The Facebook IPO) where I described why I decided to skip purchasing shares of Facebook during the IPO of the company.  History proved that skipping out on the IPO was pretty spot on, but times have changed!

My goal was to buy some shares once the stock price dipped below $20 a share (which it did), but unfortunately money was tight at that time.  Even in December, I only bought a little over $1,500 worth of the company (at a price of $27.50 per share).  I’m late to the game, but hopefully early enough to catch a larger wave that will still push the valuation of the stock up much further.

Why I bought Facebook shares, even though I don’t use Facebook much.

  1. Mark Zuckerberg – I think he will be like a Steve Jobs, but not quite as a powerful presenter, yet.  The idea here is that he’s proven and has incredible drive and intelligence.  I think he’ll make it exciting for Facebook shareholders.  I wouldn’t be surprised if he doesn’t try to be the next Bill Gates.  Either up or down, it’ll be an exciting ride.
  2. Untapped Monetization Potential – They have over a billion subscribers.  And even if only half are active, they have all that data on them that could be a gold mine for selling to companies (if they went evil).  Could you imagine how much the sales team of other companies that sell products would pay for such information?  Instead of a 1 to 5% success rate for a company using cold calling, their success rate might be in the 20 to 50% range.  Not to mention that all of the email addresses of all the Facebook members could sold (and by product interest probability to boot).  They eyes in the Facebook website is only half the story, the data warehouse of information on each user in Facebook is a data miner’s dream come true.  Both the the previous options are just the tip of the iceberg.  Most likely they won’t even pursue those option, because of the direct Advertising models they could implement.  I’m not even being creative here, the possibilities are far reaching.  Shoot, they could change the sales landscape with just a little bit of effort (watch out Amazon)!
  3. Momentum – All of the cool financial analysts and advisers are now on recommending Facebook…  Perception is reality.  Even if there revenue for the up and coming quarter is flat (which I doubt it will be), the analysts know the potential that the company has and I think they wouldn’t let mediocre numbers affect their rating of the stock (and company).
  4. Facebook is young – This platform can continue to grow.  It’s a single platform but multifaceted!  It’s a social engine, but the code base is something that can continue to grow larger and more useful over time.  I think once the Facebook teams realizes that instead of trying to make the product harder, it could really take off.  Some point in the future, they will have to realize that the audience that they are coding for aren’t themselves and needs to be written so that the average user can use the product without getting a headache.  But what do you expect from a new, young software company?  Eventually they will see the light and make Facebook user friendly, after all they have to be bright people right?

Here is my free advice to Mark and the Facebook team, do I expect them to read this… of course not lol.

Make the site more friendly for the average person or the LCD (lowest common denominator).  If you want more complex interfaces, give the users the option of alternative interfaces so you keep all of your users interested and engaged (no Henry Ford color options in these times).  Your site no longer appeals to the normal male audience (or at least the ones in my backyard), you need to think about that segment of the population and how to re-engage them, while at the same time keeping the female population interested.  Again, this is where the different front-end interfaces options might come into play.

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Anyway, just thought I’d share my thoughts.  What do you think, is the Facebook stock now a good investment?

Best,

Don

14 Responses to Why I Bought Some Facebook Shares

  1. Fair play sir, due to the volatile nature of it’s share price I decided against it. I do like you point on how much information Facebook has on it’s user and at the moment it doesn’t market this potential at all but if it did go evil it would be worth hundreds of billions if not more!

  2. Facebook stock is indeed a good investment! You may not be using facebook that much, but a lot are. Anyway, can you post how you manage to buy a share?

    • The a “share” should have been “shares”, I’ve added the “s” to the end of shares (thanks)!

      It’s actually easy to buy 1 share, for instance take Bershire Hatheway (ticker: BRK-A). I wish I could afford to buy 1 share of that stock! :)

  3. I’ve also been kicking myself for not buying when it was below $20. I’m not sure if I’d buy now though as I can’t get a feel for the company’s actual worth. Hopefully it pays off for you.

    • Me too, and the kicker is that I told my buddies at work that once it hits $20 I was going to buy in. I was lazy and missed that great buy!

  4. I still have very little faith in the company at current valuations. Like you said, I think it’ll be exciting (gut wrenching) ride from 20 to 35 to 25 etc etc

    • Yeah, I think it will bounce up and down too. I’m not entirely sure if I’m going to ride it continually. I might be jumping in and out of it a bit. I guess it depends on what they announce soon. And then also their earnings…

      If it dips below $28.5 I’m out of it again, I think. But for now, I’m enjoying the ride :)

  5. I am not too sure – I don’t invest in individual stocks (yet). I saw an ad on LinkedIn the other day urging us to buy Facebook shares, which made me wonder how dire things must be if that’s what they’re resorting to?

    • I’ve done much better in my regular brokerage account buying individual stocks than my 401k (which is balanced in index mutual funds mostly). Of course, I’m a savvy investor (or so I like to think).

      Ironically, I don’t consider Facebook a savvy investment though. It’s a purely speculative play for me with just a small position in the stock.

      There is definitely nothing wrong with buying index mutual funds (or mutual fund’s cheaper cousin ETFs)