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FE Editorial : Losing its zyng

Facebook?s first financial report since going public has obviously disappointed investors, with the declaration of a $157 million loss sending shares to surrender 37% of their May 18 value this Thursday.

Facebook?s first financial report since going public has obviously disappointed investors, with the declaration of a $157 million loss sending shares to surrender 37% of their May 18 value this Thursday. CFO David Ebersman also admitted, ?Obviously we?re disappointed.? But he urged everyone to stay focused on the fact that ?we?re the same company now as we were before?. Part of the problem, no doubt, lies in the fact that investors overestimated the company. Facebook may boast around a billion users worldwide, and investors automatically assumed monetising this traffic would be easy. Investors also only have themselves to blame for not anticipating that traffic growth is slowing in established ad-rich online markets like the US and Europe. Recall the somnolent, slow to obsolescence, credo that American house prices would just go up and up. Humpty Dumpty had a great fall, and many went down alongside. Poor Zynga, the social gaming company that uses Facebook to drum up business and provides most of Facebook?s non-ad revenue, is loudly blaming its partner for its own earnings collapse since its December IPO. Despite all this, there are reasons to trust COO Sheryl Sandberg?s promise, ?We are still in the early days of building our monetisation engine.? Better times really could be around the corner. Facebook may yet prove to be the opposite of ?the biggest flop of the decade?.

With the caveat that tomorrow?s alternatives to Apple, Facebook, Google are probably being incubated in anonymous garages today, let?s take note of how Mark Zuckerberg is laying the grounds for an ad avalanche. There has been a 67% jump from last year in the number of people who have looked at Facebook on their mobile devices at the end of June. Facebook hasn?t quite adjusted to this in the sense of getting advertisers to pay more for users who will be accessing their accounts far more often in a day since they no longer need to be in front of a computer to do so. Its 540 million mobile users today are 20% more likely to use the site daily. Zuckerberg expects five billion people to own smartphones over the next 4-5 years, which would create ?more opportunities for sharing and connecting?. From hiring Gokul Rajaram, an engineer who once ran Google?s lucrative AdSense engine, to paying animated attention to the GEM (growth, engagement and mobile) team that has built the user base up from 100 million in 2007, Facebook is more than concentrated on attracting mobile users in emerging markets. Maybe it?ll get back its zyng(a). Meanwhile, it?s a warning to overzealous investors who first built up Facebook and now want to tear it down.

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First published on: 28-07-2012 at 01:24 IST
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