Facebook Stock Takes Another Tumble

Recently Newstalk shared information from Fox Business that Facebook might be a 'fad' stock.  Could they have been right?

Early Tuesday results from Wall St. show Facebook's stock taking what the Wall St. Journal called "fresh IPO lows."  Dropping another 5%, the stock is now 21% below it's original opening price, which was just over $38 a share.  Now hovering at $30.17, trading experts credit the higher price to the "buzz" generated by perhaps the most widely known stock IPO, or initial public offering, in recent history.  While most of us know everything from wheat, to gold, to oil and tech products are traded on in the market,  few of us know specifically what companies.  But everyone heard about Facebook going public.

  Clear back in February, Bloomberg Financial cautioned that Facebook could be big out of the gate, but then taper off.  Critics pointed out that the site depends upon ads that generate it's revenue.  While Facebook's revenue climbed 104 percent in 2011, it's ad growth is expected to climb half of that this year, and less in 2013.  From the Bloomberg, via the Washington Post, February 3:

Figures, courtesy of eMarketer, indicate Facebook’s ad sales grew 104 percent in 2011.  That figure, however, is only expected to climb 58 percent in 2012, and 21 percent in 2013.  The trend is diminishing which indicates its dependence on ad revenue could be a fading trend.  Furthermore, when we look more closely at the CPM (cost per thousand impressions), Facebook is earning a mere 22 cents while the industry average is around 50 cents and rival Google is earning $2 to $4.  Facebook can correct this and put itself in a stronger position by launching its own ad network. However, that will be a significant challenge to compete in that market largely dominated by Google and other search engines.