I've been a critic of Facebook's performance since its IPO last year. Its recent earnings report didn't fail to disappoint compared to the hype.
Mobile represents around 30 percent of Facebook's revenues and grew by just under 43 percent year-over-year (from first quarter 2012 to first quarter 2013). That still brings total advertising revenues for the quarter to only $1.25 billion (of which, around 30 percent is due to mobile), which is not much given Facebook claims over 1 billion users -- I question that -- and also has associated costs. Its earnings per share growth is still hamstrung. More on that in a moment.
Given Facebook's claimed users and commitment to mobile strategy, you'd like to see growth of 4,300 percent. Even 430 percent would have been encouraging. The much-touted Facebook phone was a flop. Facebook was trading at 1:40 pm ET on May 29 at 23.60, down from its May 17, 2012 IPO price of $38. It's trading at an astronomically high P/E ratio of over 800. If it traded at the same multiple as Google (a P/E of just over 26), Facebook would be priced at under $1.
Facebook: A Year of Not Creating Shareholder Wealth
Savvy investors focus on what will make them rich: growth in earnings per share. For the first quarter of 2013, Facebook reported $0.12 earnings per share (slightly negative versus the same quarter last year) on $1.46 billion in revenue. Sadly, where it counts most, Facebook's growth in earnings per share was flat compared to the first quarter of 2012.
Facebook.com v. Google+
Growth hackers are divided on Facebook and Google+, but it depends on the application. I recently attended a seminar and was interested in how two growth hackers use these platforms. The B-to-B (business-to-business) user was optimistic about the growth of Google+ users, and the viral marketer was a fan of Facebook's current perceived reach.
Aaron Ginn, Head of Growth at StumbleUpon
Aaron Ginn believes Google+ logins will surpass Facebook logins at the end of this year. His view is that Facebook is facing a "cold winter for growth." That stunned me, because StumbleUpon's home page currently has a prominent blue button inviting you to connect with Facebook.
Ginn's view is that Google+ has a high level of trust and is the premier way to login. (He also feels that email is the most underutilized growth platform.) The key is to have a superior distribution network.
If you're running a B-to-B model and interested in converting followers to loyal customers, trusted branding is key.
Emerson Spartz - CEO Spartz Media, founder of MuggleNet, OMG Facts, GivesMeHope
Emerson Spartz, 26, is a ball of harnessed energy. At the age of 12, he created MuggleNet, a highly successful blog for Harry Potter fans. He's written books and was #1 on the NY Times bestseller list for six months. In part, the viral nature of his web sites helped spark sales.
His view of the web is all about virality, and his goals seem more easily met by Facebook's model. He freely admits virality doesn't work as well for B-to-B. For example, he's creating viral posts packed with emotion and/or nostalgia, animal pictures, humor and so on. A lot of that doesn't fit with a business presentation. It's perfect, however, for what he's trying to accomplish. In his case, popularity can be converted to revenues.
What does this mean for Facebook's future? It remains to be seen.
China Still Closed
Don't look to China for growth; look to her for competition. Travelers report that China sporadically allows citizens to use Google, but she blocks Twitter, Facebook and YouTube. China has cloned all of these U.S. counterparts. Weibo, China's Twitter-like micro-blogging platform, is extremely popular.
Disclosure: I currently have no position (long or short) in any of the businesses mentioned in this article.
See also: "Facebook: Soaring Fraud and Decelerating User Growth" - November 26, 2012