In order to make sense of where the truth may lay, let's examine a few things germane to the whole concept of Facebook.
- Facebook is only viable if people voluntarily sign up for its service.
- Facebook's success is tied not only to the number of users but their quality as well. If people don't participate in the "click through" advertising, Facebook doesn't make money.
- Younger users seemed to be less and less inclined to use Facebook, preferring other social media sites instead. Here's a cute take on this trend.
- Facebook doesn't make any hard physical product. This isn't necessarily a bad thing but it is hardly a robust diversification strategy.
- As the recent events with Tumblr suggest, the barrier to entry into competition with Facebook is not that onerous.
My observations are hardly scientific so don't (ever) use my blogs as stock trading advice. But I'm going to point out two recent happenings that I believe bear some close scrutiny.
Number One: Since Facebook's IPO in 2012, Mark Zuckerberg has liquidated almost US$6 billion worth of his own stock. He may just be trying to get some money to allow both him and his wife a higher standard of living. Zuckerberg barely takes a salary and I think he just asked it to be reduced to $1. That's hardly a sign of a greedy man who still owns about $30 billion worth of stock. Yet, six billion dollars worth of stock liquidation is hardly a trivial matter.
Number Two: The COO of Facebook is Sheryl Sandberg. During the same two year period that Zuckerberg was liquidating stock, Sandberg has sold just over half her stake in Facebook. She is a political operative who was active in the Clinton administration. Some are speculating that Sandberg is building up a "war chest" that will help her run for some form of political office. There's nothing surprising or unusual about that. During the 2010 gubernatorial election in California, Meg Whitman used $140 million of her own money to try and win the race (she lost). Elections cost real money these days if a person hopes to win.
Nobody knows for certain what the future of Facebook may hold. There are certainly some clues out there that can lead to dark conclusions if read in a certain way. Typically, the smart people get out when the gettin's good. Is that what's happening at Facebook?