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Originally Posted by AVGWarhawk
Goods and services. That is what manufactures offer. That is what companies like GE, Verizon and Comcast offer.
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Manufacturers manufacture things, not services. Verizon is not a manufacturer. They're a service provider. Same with Comcast.
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Not a virtual world of friends showing pictures of their latest sexual conquest.
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Verizon only offers people a virtual world means of telling their friends about their latest sexual conquest. Comcast pipes entertainment into your home. They don't manufacture anything at all. But yet these companies have value to shareholders - why? What's the difference between one service provider (Verizon, Comcast) and another (Facebook)? You can't say that Facebook's worthless because it doesn't produce anything, as you just named two other companies that don't produce anything either.
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The only value FB has is the constant advertising. It offers nothing else. All it takes is advertisers to see diminishing returns and pull the plug.
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Now you're getting warmer. But I think you're mixing up Facebook's business model with their product. Their product is the website, the user interface, the platform for sharing pictures, updates, etc. That's what they've created. Their business model is to use that to sell advertising and to get fees from games. It's a key distinction to make. You can have a problem with their business model - and many people do. I think it's a valid concern, and a valid reason to value the company less. But the fact that they don't manufacture widgets that get shipped out from a warehouse somewhere is not.
I think the underwriters really screwed up on valuing this deal. Apparently the market does as well.