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Saturday, August 4, 2012

Facebook Appeared Overpriced

When the largest social network in the world issued its IPO, the experts came to a conclusion that it was overpriced,with its value depending on the social networking website which expected to make huge profits in the future.

The industry observers doubted that Facebook had yet to come up with a decent business model and its Internet advertising wasn’t doing as well as it should have been. Indeed, Facebook share prices fell significantly soon after the IPO, but the experts expected that worse was yet to come.

Facebook CEO, Mark Zuckerburg, has his first quarterly result to make pubic and unfortunately he couldn’t actually lie. However, the analysts believed it was unlikely that Zuckerberg managed to convince more businesses that the advertisements on its service and mobile app prove effective.

One of the reasons for this might be that Zynga, which contributed to 12% of Facebook’s revenue last year, saw disappointing earnings recently. The experts are not expecting any surprises with Facebook warning investors before its IPO that their expectations were too high.

Before the IPO, Facebook said that its mobile users were growing at a faster pace than the number of advertisements on its mobile platform, which wasn’t a very good thing. The experts are expecting Facebook to say it earned $1.16 billion, which isn’t that bad, but actually not worthy of a company having a share value of as much as $38.

Meanwhile, among other aspects to the call will be whether or not Mark Zuckerberg is able to handle being in the spotlight in a conference call with experts. While many believe that Facebook is unlikely to miss their estimates, if the company still fails to beat them, it will find itself in hot water.

Indeed, Facebook has a difficult job this quarter. The matter is that the Internet advertising market is mostly down. Although mobile advertising is growing, it at the same time becomes cheaper than conventional methods. Nevertheless, both investors and experts who follow the earnings report will want to hear how Facebook is able to earn money from its growing mobile user base.

Thus far, the analysts are sure that Mark Zuckerburg won’t impress anyone and Facebook shares will take another plunge in the nearest future.

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