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Congrats on One Billion Facebook Users... Who Buy Nothing

Facebook (Nasdaq: FB) is on the cusp of amassing one billion users, unarguably a milestone.

The last official tally of Facebook users was 955 million. Employees have become giddy in expectation of reaching the one billion mark any day now.

But, they might want to hold off tossing confetti, because the momentous occasion will also shine a bright light on the social network's shortcoming.

No matter how many users Facebook acquires, if it can't sell anything, the landmark number is useless.

As Owen Thomas of Business Insider wrote, "Bottom line: One billion users isn't cool. You know what's cool? Two billion."

Facebook Sales Estimates Slashed

The failure to monetize that many subscribers is a shame because Facebook's massive user base is an advertiser's dream if effective - but there have been no signs of future revenue growth.

That's why market research firm EMarketer Inc. recently slashed its projections for the Menlo Park, CA-based company from $6.1 billion in annual sales to $5.04 billion. Facebook continues to struggle for advertising growth, in particular the fast growing mobile market.

[ppopup id="70925"]That’s why Facebook stock should really be trading for this amount. [/ppopup]
An increasing number of Facebook users are now accessing their accounts via smartphones and other mobile devices, an area where Facebook collects a great deal less in ad revenue than it does on desktop access.

Facebook enjoyed an 88% revenue increase in 2011. EMarketer estimates Facebook revenue will rise only 36% this year and 31% in 2013.

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Another 1.7 Billion Reasons to Avoid Facebook Stock

As if there weren't enough factors to make Facebook (Nasdaq: FB) stock unattractive, there's a flood of free shares about to hit the market that could make it even harder to raise the share price.

In two weeks comes the first expiration of "lock-up" agreements, meaning certain investors barred from selling their shares will then be able to do so. Typically employees and big investors are required to hold shares for a certain time period after an IPO. This is done to reduce selling pressure and the chance of a mass exodus as soon as the stock starts trading.

But now some of those investors' shares will be freed up, and they want to cash in.

Editors Note: Why Facebook’s “Big No-No” Could Lead To Its Big Collapse [ppopup id="70925"]Click here[/ppopup].
Nearly 1.7 billion shares of Facebook stock will enter the market over the next few months, starting in mid-August. That is more than four times the number of shares now floating on exchanges.

"It's like a train coming around the corner toward shareholders, so they better get out of the way, Francis Gaskins, president of research firm IPOdesktop.com, told the Los Angeles Times.

The first batch of 268 million shares will be freed up in mid-August, followed by 192 million more shares in mid-October, and a whopping 1.2 billion shares will be let loose in mid-November.

Granted, a slew of those shares will not be sold, but the fresh torrent of shares to be set free far outnumbers the 421.2 million shares Facebook sold in its fabled IPO.

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Buy, Sell or Hold: The Real Winner in the Yahoo (YHOO) vs Facebook Fight Could Be Augme Technologies (AUGT)

I love to find asymmetric risk/reward scenarios in the market.

You can do that with a small company which has the ability to unlock a large payday - and I believe I have found one with Augme Technologies Inc. (OTC: AUGT ).

To understand the value of mobile marketing company Augme, first we have to look at what Yahoo! Inc. (Nasdaq: YHOO) has done to Facebook.

Ripples shot through the technology space last week when Yahoo launched an all-out patent assault against Facebook.

Yahoo is demanding billions in licensing fees for the use of its technologies.

Yahoo has asserted claims on patents that include the technical mechanisms in Facebook's ads, privacy controls, newsfeed and messaging service.

In simple terms, Yahoo is getting ready to try and bring Facebook to its knees through legal means.

"Yahoo has a responsibility to its shareholders, employees and other stakeholders to protect its intellectual property," a Yahoo spokesman said in an e-mailed statement. "We must insist that Facebook either enter into a licensing agreement or we will be compelled to move forward unilaterally to protect our rights."

Should Yahoo sue Facebook, it would mark the first major legal battle among technology giants in the social media sphere.

It would indicate a major escalation of patent litigation that has already swept up the smartphone and tablet sectors and high-tech stalwarts such as Apple, Microsoft and Motorola.

Yahoo's patent claims come hot on the heels of Facebook's IPO announcement to raise money that would roughly give them a $100 billion valuation.

This lawsuit threat can only have Facebook's management, its bankers and lawyers rushing to secure some sort of defensive arsenal to fight off this and other pending attacks.

While this battle has captured everyone's attention, what I find more interesting is Yahoo's seemingly blatant hypocrisy.

Yahoo appears to be throwing rocks from its glass house at the neighbors by wanting to make others pay for the unauthorized use of its patented technology.

What Yahoo is seemingly trying to ignore is that it, too, has been accused of the same type of intellectual property theft - and the accuser is Augme Technologies.



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