Facebook Share Price – Don’t Panic

I’ve been looking at the Facebook share price this morning and wondering whether the market has it right. So of course the stock is overhyped, but the fundamentals aren’t going away:

– social is a new layer on the whole internet – across the world knowing what your friends think matters more to people than knowing what experts think

– tech companies tend to become monopolies (look at Microsoft and Google) due to network effects

– With over a billion users Facebook owns the majority share of the social layer across the world

So yeah there are things to sort out, like monetising verticals other than games, providing advertising opportunities on mobile devices, but these are no big deal, it’s just a question of getting the balance right.

Apart from games, Facebook has monetised so far around its product (display ads on the side for example) while keeping the core experience free. With products like sponsored stories (where you pay for your best stories to be spread even further) it monetises within its product.  If they can navigate the cultural issues right then they will do very well indeed.

I wouldn’t sell your Facebook shares just yet.


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