Friday, May 4, 2012

Mark Zuckerberg: The Next Steve Jobs or the Next Steve Case?

Remember before the meltdown of 2007, the private equity bubble was in full-force. Right at pinnacle, just after the eagerly awaited and hyped Blackstone Group IPO came out and enriched those chop shop execs, then to call what followed a "POP" would be an understatement. We could see that here with Facebook. I certainly wouldn't buy until a while after the IPO and would even buy some Puts on it.

When this many people are talking about the IPO, I would not be long IN THE SECONDARY MARKET. If you can get some in the Primary and are not restricted from selling, you will make some money off of the frenzy of course. That's what this road show is all about. The fact they are doing this roadshow demonstrates they really want to hype the stock.

Enough people KNOW about it and have long known about the IPO to SUPPORT the deal. THIS show is to HYPE the deal beyond what is necessary; so unless this company performs some miracles, there are going to be some pissed off dupes and law suits to boot.

I'm not convinced that 500 million+ subscribers translates into the earnings and growth necessitated by this market cap. The old phone book had virtually everybody signed up too but that didn't mean they were making aggressive profits by virtue of that fact. They make their money by advertising and that just further dilutes the pie shared with Google and many others. I don't see them growing that pie by much.

Given Zuckerberg's history and law-suits settled for essentially "stealing" the model from some fellow college students, I don't know that we are dealing with the next Steve Jobs or Bill Gates. I say that Zuckerberg has a much better shot at being the next Steve Case than the next Steve Jobs. But even AOL always had paying subscribers from the beginning.

The best thing Facebook could do is to use that stock as a currency and buy as many companies with patents, subscribers, content and cash-flow while they can. The strategy didn't work so well for AOL as most of those acquired companies have long since been spun off. But it has worked for Google so far. It's all about synergies and whether your leader has the competency to execute the integration.

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