After hitting a new low of $25.75 on Tuesday, Facebook (Nasdaq: FB) stock slid further Wednesday morning despite a nice rally for U.S. equities.
With the Dow up nearly 90 points right after the opening bell, Facebook shares edged down to $25.68 in early morning trading, reaching another new low. Shares now sit more than 30% below the IPO price of $38.
Weighing on Facebook Wednesday was news that the Nasdaq Omx Group (NDAQ) will tell brokers exactly how it will recompense investors for the myriad trading problems during the Facebook IPO frenzy. Problems at Nasdaq contributed to order issues that prompted several class action law suits.
But what drew more attention from investors was a comment by Ironfire Capital founder Eric Jackson. The analyst appeared on CNBC's "Squawk on the Street" program Monday and said that Facebook will lose its dominance as a social network in less than 10 years.
Jackson highlighted Facebook's inability to make leeway in the thriving and prominent mobile arena, as well as the stock's steady tumble since the company's epic IPO.
The comments have triggered suspicions that Facebook will suffer the same fate as MySpace, once the dominant force in the social networking circle, and Yahoo (Nasdaq: YHOO), once a leader in Internet search.
"In five to eight years they are going to disappear in the way that Yahoo has disappeared," Jackson said. "Yahoo is still making money, it's still profitable, still has 13,000 employees working for it, but it's 10% of the value that it was at the height of 2000. For all intents and purposes, it's disappeared."
Now Facebook has a new strategy to increase its reach - and its profits - but it's one that will likely raise some eyebrows.
Facebook's Growth Strategy
The pressure is on for Facebook to make more money from advertising since it is now a public company. It's increasingly faced with investor and analyst unease over its online advertising, plus mounting anxieties over privacy.
On the path to amass a billion global members, there is no denying that many users still "like" the site and depend on Facebook as the principal way to reach out and stay in touch with family and friends.
But with that many friends already, it is difficult to keep making more. Technically, you have to be 13 to become a Facebook member, and with more than 26% of the world's population under 15, that demographic is unreachable-so far.
The Wall Street Journal reported that Facebook is creating technology that would allow children under 13 to use the social networking site with parental supervision. The move would help the company reach a new user base and add to revenue, but it would also rouse privacy concerns.
Al Lewis, a columnist for Dow Jones newswire, penned a humorous but honest piece on the topic for MarketWatch.
"Facebook will counter its critics by saying kids under age 13 are sneaking onto Facebook anyway, so it simply must find a way to let them join legally," wrote Lewis. "If the liquor-store lobby could have succeeded with this line, a beer bottle would come with a nipple. A large percentage of adults can't handle alcohol. A certain percentage can't handle Facebook, either. Ruined marriages and destroyed careers are just some of the perils of putting too much information online. Soon the risks may include getting kicked out of kindergarten for starting a popular post that claims the teacher is a poopy-head."
If the Facebook-for-kids approach doesn't work, investors could become even more disenchanted by the stock.
As the Dow surged more than 200 points by 2:30 p.m. Wednesday, Facebook rebounded slightly 0.51% to $26.
Related Articles and News:
- Money Morning:
The Facebook IPO Facts, The Good, The Bad, the Ugly - Money Morning:
Why Facebook Stock is doing a Faceplant - Money Morning:
Facebook Stock Worth $7.50 at Best - CNET:
Facebook will disappear in a few years, says analyst - The Wall Street Journal:
Facebook Explores Access for Younger Kids - MarketWatch:
Silly rabbit, Facebook is not for kids
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