Written by Nina Thomas
As we near the end of 2013, many things are coming to an end. For some people it’s the Fall semester of college, for others the fad diet that they are now tired of. But one thing that will not come to an end is Facebook. This company has stood the test of time and for many people across the globe, it has become a part of everyday life. Starting originally as a social network primarily for students at Harvard, this website has expanded on a global level. There are 1.19 billion monthly active users of Facebook to date.
The question we’re left with is whether a company we love to use is a company we can love to invest in?
The answer to the question above is yes. However, it is very important to invest with your head instead of choosing to invest in Facebook because you like it. But whoever wishes to invest would need to be willing to wait. This is because I believe investing in Facebook is a smart decision but the Facebook stock will need time to rise enough for you to actually generate profit from it.
When Facebook first announced its IPO, the cost was $38 per share. This was considered to be a very high initial public offering. Unfortunately this number dropped dramatically to $24. Many people believed this was because Facebook was too optimistic about how much their stock was actually worth. This number is around 30% less from where it started. It was in September 2013 that the stock hit an all-time low of $18, devastating many investors.
Luckily, Facebook quickly responded to this huge plummet by changing the way it approached advertisements, their primary sources of revenue. Now advertisements come up on your newsfeed instead of only being shown on the side of your newsfeed. Previously, Facebook was not generating enough revenue from advertisement sales. This was combated by the introduction of mobile advertisements as well. Previously, revenue that came from mobile sales ads accounted for 0% of Facebook’s revenue. Now mobile sales account for 41% of all Facebook revenue. This is because it tends to be more convenient for people to pull out their smart phone on the go instead of a computer.
There is hope that Facebook’s stock can perform as well as Google did when it was first announced in 2004. The only problem with this is the fact that Facebook’s initial public offering was much higher than Google’s. In fact it was nearly three times more expensive for buyers. This means that if Facebook wants its stock to perform nearly as well as Google’s stock was able to, it would need to perform exponentially better. Another thing to keep in mind is the fact that although Facebook and Google are both Internet based, they are not the same type of company.
Because of Facenook’s new advertisement approach, Facebook’s stock is now priced at $51.91. This is great for the people who were willing to stick things out when Facebook’s stock was first announced. Although for those who we were not willing to wait, this is bad news.
Luckily for people who still want to invest, Facebook’s stock is very sticky. This means that many people get “stuck” on Facebook. Because of Facebook’s influence, now is the perfect time to invest. You may not be able to reap the rewards immediately, but five years down the line Facebook should expand and grow. This is because of its resilience to stay afloat that has been demonstrated to us in the past that I believe Facebook will continue to show in the future.
Click here for the podcast.