After recently starting to use them again I'm blown away at how useful and engaging the app is. But the revenue just seems to be hobbling along considering their scale.

They've tried so many models and none really stuck like AdWords for Google. Long term I just don't see the same kind of revenue growth that companies like Google and Amazon have had and continue to have. For any investor in public companies that's kind of terrifying when it's not clear how revenue will grow.

Point to another public company that has a P/E ratio as high Facebook that is missing earnings estimates. Nobody is claiming the company is going to fall apart tomorrow, but if growth is slowing already then they certainly aren't worth $100BB, or anywhere close.

I don't know how bad this really is, and we are still in a shaky economic climate. But if we assume that the information being reported is true, this is pretty bad. As the article suggests, they're applying some "quick fixes" to crank up the ad spends. Is that the best they can do?

I've said it here before, but I think many of the tech and app companies are grossly overvalued simply because the market can be so easily upset. If newcomers can get such positive projections, then surely they must be perceived as a viable risk to the big companies.

Facebook specifically is grossly overvalued because as long as they are making all their money from ads, their revenue comes from the amount of time people spend staring at a Facebook page, and this might be at its peak. True, there are more ways to make money, but there are more risks as well. Please, let's spare ourselves another bubble.

That's not to say a competitor won't emerge, and users won't switch to that competitor if Facebook really mucks up its UX in some unforgivable way. But we should bear in mind that Facebook users aren't just going to jump overboard into the ocean. If they're going to jump ship, it'll be because a better ship has pulled up alongside it.

Revenue challenges? Facebook's got plenty of time to figure those out, and meanwhile, Facebook Connect seems like a pretty powerful weapon of mass monetization in the making.

A lot of the anti-Facebook sentiment out there right now reads like wishful thinking.

Looking at worst case numbers it looks like Facebook will be close to 'accumulating cash' mode at the outset. That is a pretty good thing.

Now it would be nice to get some more visibility into their execution against advertising system changes but this reads more like a 'place' piece where the author hopes that if things go good people will forget they ever read it, and if they go really bad he'll be on record early 'predicting' it and will be able to demand huge consulting fees :-)

Of course I have no idea behind the motivations of the author, I just wondered how he can look at $5B in revenue and not be "well ok, their model is working at least."

> "note: ads are not the only way FB can make money"

Facebook still has at least one massive hand to play, and they tipped it in the documents outlining their agreements with Zynga. Those documents stated that if Zynga created a first party site to host their games, Facebook would be the ones to provide ads for the pages. If they were to roll out an AdSense competitor which uses personal data rather than contextual to place ads on publisher sites it could be a huge win.

I don't disagree that Facebook's prospects look extremely strong, but I do think that their decision to IPO now was wrong and potentially sets up a poisonous precedent for how they run and manage their business.

Facebook is still figuring out how to properly grow their revenue model, and now they'll be faced with the very public distractions of being a public company. Not only that, it opens up all kinds of intelligence for competitors.

I think that Mark and his team are in for one heck of a ride this year. And it isn't going to be fun.

"We do not give your content or information to advertisers without your consent."

It's a fallacy to conflate "success" with "hype".

Facebook is going to make money and be successful, barring some unforeseen craziness. They made a billion in net income last year! However, where it seems that the tech world and the investment world diverge is in the expectations. $1BB (or 2,3,4,5) isn't enough to buy in at the anticipated price.

"Slow, sustainable growth? SELL!"

EDIT: Looks like the Google News Alert has reached Carlyle Headquarters. Expect silent downvotes.

There's no guarantee that they will continue to make money if they tone down their spend (for example, reducing ad spend), which is why the revenue / profit quality matters.

Originally, low CPC's were quite commonplace. I could advertise something and get a pretty good rate - $0.10 or so - and make some really good money. Over time, the base CPC has risen across the world. Right now, you're looking at $1.20 or so just to hit the US untargeted (this isn't the suggested bid, this is actually running all-US ads).

What is really telling however is CPC's on very tight interest groups. Let's say I target a set of interests in a city that gets me about ~2k people in the profile. It used to be, even a year ago, that I'd pay about $0.80 per click. Today, you'll be lucky to find $1.30 on the low end. As niches get narrower and people get better at mining interest, the CPC climbs. Long term, sustained CPC trends are clear indicators of increasing demand and the ROI to sustain them.

Why this isn't talked about so much has to do with barriers to entry. I'm telling everyone here a lot about what I do without revealing the finer details. Also, I would say that as with any venue, some products do better than others. You can sell big-ticket stuff on FB, you just have to go about it much differently. You can lose a lot of money on Facebook quite easily, so how you approach the market is a big factor.

That said, the secrecy surrounding the success FB advertisers like myself are having is a much stronger indicator than anything that is said publicly. Will it keep FB from missing earnings targets? Probably not, but I remain very bullish on where they are going and what they have to offer.

1. The advertiser does not put enough money in to fully test the product/niche/demographic

2. The product targeting mix is not well thought through, targets too many people or doesn't take in to account other factors.

3. The advertiser is not testing enough ads to find what gets people to respond.

There are many more reasons as well, and I won't try and cover them all here. Suffice to say, most of the time people don't really put enough on the line to find where they can succeed with FB ads. This has kept the market fairly clear for people like me - I'll happily drop $1k to test something, because if even 1-2 ad/target combos is reliably profitable, I know I've hit something.

A very broad range of products work quite easily, you just have to break out of the old mold of thinking in terms of direct interest -> product correlation. For example, you aren't really going to sell jeans to people that like "clothes".

Think broader - target people that like home improvement and give them ads that say "Toughest Jeans Ever / (pic of dirty as hell jeans) / Work in the garden or change a sink, it doesn't matter. Save $20 with coupon FB20OFF today only!"

These are the ways to succeed on FB, but you really have to be willing to put it on the line.