Short Facebook
I don’t normally give investing advice, and I don’t even actually trade myself – although some of my retirement money is invested in the market – but in spite of that I plan to explain my dim view of Facebook today.
Here’s the thing. Facebook is boring. Super boring, and super commercial and getting worse. It’s used anyway, by almost everyone, because everyone else they care about is already on it.
But think about how that happened. First a generation of people started using it, then their parents started using it. And Facebook did a pretty good job of making those parents welcome. Things are inoffensive and super easy to use. Inoffensive to the point of being utterly bland.
Here’s what’s not going to happen. The kids today are just not going to be interested in adopting Facebook. Why should they, when their parents and teachers and coaches are on there already, and it’s just another place where they can get into trouble with authority, not to mention be bombarded with ridiculous ads?
My theory is that some other sexier and edgier social media platform is going to come along and sweep up the next generation of users who want to get the hell away from their parents and grandparents and teachers and coaches. And it’s not Twitter, or Instagram. It doesn’t exist yet, but it will. And when it exists, Facebook will never gain another user and will lose a bunch and the entire younger generation will be embarrassed to admit they ever used it.
One more ridiculous opinion on technology for the morning. Email, I claim, is also dying. Nowadays if you really want someone’s attention you need to text them, not email them. Too many people know each others’ email addresses, so knowing someone’s phone number is really the only sign of authentic connection. And even that is falling by the wayside in our age of over-sharing and constrained attention.
My theory is that pretty soon we’re going to have yet a new way of communicating with each other, which isn’t really new but which has a privileged status. Perhaps it will require that, not only do you know my phone number, but you also have a password to indicate that your message is important enough for me to read it.
mathbabe 
While I agree with your premise, I am reminded of Keynes: “The market can remain irrational longer than you can remain solvent.” 🙂
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Hi George. Good to see you quoting Keynes!
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Ha! And hi to you, too! I actually like a lot of Keynes. I think he and Hayek had some great philosophical insights. I think the poor guy would roll over in his grave as the way he is being misused these days.
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I don’t like that quote when used as an argument for not shorting. It’s a reasonable argument for not betting your entire net worth on shorting. That said, stock-loan rates suggest that by shorting you are predicting the stock will go down at a certain rate.
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Go long mental telepathy. You’ve seen it here first! 😉
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Shorting Facebook because the fickle under 25’s aren’t signing up is only looking at one aspect of the situation.
The bland inoffensive service facebook has is one of the reasons its turned the olds into social media users and kept them around. All these ‘sexier and edgier’ social media apps are solving problems 90% of facebook users don’t have. They don’t want to share anonymously, they don’t want to send sexts that self destruct.
I think you are confusing the need of a demographic with the need of individuals. Individuals change demographics which is why facebook and its huge network effect will keep it around assuming they can figure out a business model and not follow the advice of all the wanna be product designers and chase the “hip” demographic which amounts to around 10% of their potential user base when they’ve basically conquered the other demographics.
The “hip” demographic turns into the “olds” demographic every time which is why I think your analysis is wrong.
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“What we’ve learned from working with 16-18 year olds in the UK is that Facebook is not just on the slide, it is basically dead and buried.”
http://www.independent.co.uk/life-style/gadgets-and-tech/news/facebook-dead-and-buried-as-teens-switch-to-snapchat-and-whatsapp-9028208.html
Agree on the long term but if you short you could get mauled:
http://rajivsethi.blogspot.in/2010/01/on-efficient-markets-and-cognitive.html
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But texting someone requires that they’re right by their phone. If you email me, I’m almost certainly going to see it pretty quickly, if I’m awake. If you text me, I might not see it until the next day.
Texts also have the problem that some people treat them like phone calls — they feel you’re required to answer them upon receipt. This makes texts annoying in the same way phone calls are annoying — it’s much better to be able to control the time you address the message.
In fact, SMS use is already declining — apparently a lot of people are using dedicated messaging apps like WhatsApp.
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Great ! SIGNED email, with a signature not verified by a Certification Authority, but given directly on a face to face contact, may do a comeback…
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Personally, I hate Facebook (and I am one of the older generation).
It drives me nuts that it has become a central bulletin board for OWS and similar organizations. They point to Facebook pages rather than their own web sites and often have the most current information there. So, I have no choice but to go there if I want the information I need.
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I remember when email first appeared. It gave you easy access to rather busy or important people who wouldn’t ever talk to you by phone. I was amazed how easily I could contact people I didn’t know that way.
What’s changed completely by now is the ability of the person being called or texted to see easily who the caller is (or whether the caller is unknown). This makes it easier for the callee to avoid people he or she doesn’t want to talk to. I don’t see any way to get around this.
As for Facebook, I don’t think it’s so clear. Facebook is indeed trying to become a boring utility, like phones. And it seems to be succeeding since I see more and more people using Facebook messages instead of phone or text. So although hip people might switch to something else for doing hip things, there is still value in something that does something completely mundane. Remember how boring Bell, IBM, and Microsoft were?
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this is just history repeating itself. facebook used to be the refuge from the myspace masses. and myspace originally was the tech geek haven from the overblown craziness of friendster!
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Exactly! I think you are definitely on to something here!
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Cathy, couldn’t agree more with you. Just to add to the point, apparently Facebook lets you pay to reach the inbox of practically anyone on the site. It’s a way of deterring spammers from contacting large numbers of people out of their network.
Kernel Magazine editors decided to put together a list of celebs who are on Facebook and find out how much it would cost to send a message with a photo of a cute cat. Check out the list http://www.kernelmag.com/features/report/8016/paying-to-message-celebs-on-facebook/#
Interesting part – Larry Summers made the shopping list. It would cost you 0.60 British pounds (US $0.99) to send a personal message to him, though there is no guarantee he will read it. Bummer, I was about to invite him over to Alt.Banking meetings.
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On email vs. texting. I would ask Cathy and those of you who support the notion that email is dead to think about how many texts it would have taken to text what they wrote here (and probably write elsewhere on a regular basis). And what it would be like to receive those texts possibly interspersed with others and maybe even out of order.
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Completely agree with texting over emailing. Texting has an additional advantage over emailing: brevity. Don’t typically use facebook unless bored waiting in a line.
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Brevity is great, but some ideas can not be expressed in 160 (or 144) characters.
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Well, that’s just it- FB is the network for oldsters, and they’re apparently happy with it, not overly concerned with appearing edgy, so will probably stay for life. Crikey, FB is 10 yrs old this year! I can imagine a future for FB as the network for adults; so, when the kiddos grow up out of their extended adolescence, they will join anyway. Not that I’m a fan of the place, it is boring and monotonous, but so was telelvision and look how long that lasted.
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It’s worth noting that it’s reasonably clear that Facebook itself has basically decided that they have nothing else to do with their money, too. There was a Bloomberg post somewhere (Matt Levine?) who pointed out that FB is having another $2B share offering, ostensibly for “operating expenses”, despite having well over $10B in cash and liquid bonds on hand. Such an action would only really happen if Facebook itself feels that there’s really no way to go but down, and they might as well screw over a bunch more retail investors on their way out so Zuckerberg and his pals can get another few multimillion dollar yachts.
The whole thing is sickening.
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Also, correct me if I’m wrong, but weren’t you, like, a VP at Shaw in a prior life? Not to commit some sort of inverse-ad hominem, but surely that implies that your thoughts on investing should be considered more seriously than, say, Talking Head #2341 on CNBC about Netflix or a random dude on the internet who urges you to buy gold.
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For anyone old enough to remember, I think Facebook’s current position can accurately be likened to that of AOL’s 15 years ago. And I could easily see, 15 years from now, commenters having to say “for anyone old enough to remember” about Facebook too.
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Yes!! I was just having that thought exactly. AOL II.
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Know what Facebook runs on? Advertising and selling data to be used for advertising.
Know who has *all* the money? Older people.
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Great observation. Think: MYSPACE. I would’ve texted, but don’t have your phone #!
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I have three letters of warning for Facebook: AOL. That said, like LinkedIn, FB will likely find some focus for its platform which will be essential to grow ad dollars. Also, FB needs to be considered as only one element of a independent professional’s (I like the phrase free agent) “platform,” the others being blogs, Twitter, and any other way one can propagate and connect buyers and sellers.
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FaceBook is a phenomenon of over 1 billion people identifying themselves on the Internet. It flew against everyone’s advice to prevent identity theft.This ‘I am Spartacus’ platform may never be duplicated.
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Do many Princeton researchers read your blog? Maybe you should be getting a credit on this paper (link is to media coverage of research, not the actual research)
http://www.theguardian.com/technology/2014/jan/22/facebook-princeton-researchers-infectious-disease
Best quote wrt FB ever ‘…like bubonic plague, Facebook will eventually die out.’
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Nice!!
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Hey and this too. 🙂
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Something unamerican about shorting… its like playing the “Don’t Pass” line.
But you’re right! Facebook will go the way of MySpace unless it can morph something else altogether. Maybe it thinks WhatsApp will save it like Motorola did for Google.
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