Wednesday, 12 December 2012 19:00

Real Numbers That Show Why Facebook's Ad Model Means Google Will Put It Out Of Business Featured

Isn't it amazing that you can get more notoriety for showing your ass and a pretty smile than you can get for outing the scam of the decade through intellectual analysis? More money was lost through the Facebook scam IPO at $38 than Bernie Madoff could ever have pulled off. Notice that Bernie went to jail for his relative pennies, while the bankers selling and snake oil in the form of overpriced Facebook shares got paid record bonuses on the back of taxpayer bailouts!!!Often times people can see a blatant fact, a seemingly undeniable truth, and totally ignore it as if it doesn't exist. In the US, the Wall Street banks are masters of this marketing derived form of prestidigitation. Wall Street banks pay humongous bonuses (from your tax dollars) based on the dispensing of bogus advice, despite the fact that it can be proven beyond a shadow of a doubt that there are many other entities that have advised better, considerably more accurately and have done so consistently (Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best?). Go figure...

Media celebrities are also adept at garnering significant mind share, although it's a bit more understandable why this is so. Some are beautiful, some sound good, others act well on stage - basically, they are capable of doing more than simply muppetizing clients (Goldman Sachs Executive Director Corroborates Reggie Middleton's Stance: Business Model Designed To Walk Over Clients). This article looks to counter that magic that allows those who consistently under perform to continuously be looked upon as masters of the universe, while those who have performed consistently are thought of as "alternative" or "fringe", simply because they don't garner the mindshare of the sexy celebrity or the "Masters of the Intellectual Universe Investment Bank". Well, there's a new sheriff in town! Here comes that new, "Intellectual Celebrity". One should consider me the Kim Khardashian of global finance and investment. Instead of big ass and a pretty face, I offer a massively analytical perspective, a damn near offensive intellectual honesty and an unyielding penchant for spitting the facts that few want to hear. So, it's not Jay-Z! It's Reg-G!. Here we go...

Reggie_Middleton_hunting_the_Squid_Known_As_Goldman_Sachs_GSThere's a new celebrity in town. He sports acute intellectual capacity instead of ass, is much more aggressive and aims to make the masses aware, despite who he may offend. Yes, I know... It may take some getting used to!

This article is segmented, and those who have followed me can skip my history with Facebook valuation vs the Wall Street banks and move forward to the Google+ Communities vs Facebook Groups comparison...

How the Facebook story got started...

Facebook started its institutional investment life as a very popular, very well known company. Goldman took this story (private) stock and went bananas with it, as meticulously illustrated in the following blog posts:

  1. Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week!
  2. Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!
  3. Here’s A Look At What The Goldman FaceBook Fund Will Look Like As It Ignores The SEC & Peddles Private Shares To The Public Without Full Disclosure
  4. The Anatomy Of The Record Bonus Pool As The Foregone Conclusion: We Plug The Numbers From Goldman’s Facebook Fund Marketing Brochure Into Our Models
  5. Did Goldman Just Rip Its HNW and Institutional Clients Once Again? Facebook Growth Slows Pre-IPO, Just As We Warned!

I issued private research to my subscribers while publicly warning that Facebook at, or anywhere near, its IPO price was a blatant bald faced SCAM & RIPOFF!!!

  1. The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1
  2. The Final Facebook Forensic IPO Analysis: the Good, the Bad & the Ugly

As the actual IPO arrived, JP Morgan, Morgan Stanley, Goldman Sachs, etc. piled on the Bullshit, basically espousing how great an investment this was at $38, screaming that this was a once in a lifetime opportunity. Basically, they took the opposite stance of yours truly. And how did that worked out??? BoomBustBlog Challenges Face Ripping Facebook Share Peddlers That Left Muppets Faceless And Nearly 50% Poorer After IPO.

The stock debuted at $38, went up to about $44 that day, then hasn't seen the high or IPO price since, dropping to $17 or so and now trading around $27 on additional analyst upgrades (because the Muppets didn't get bent over hard enough the first time around).

All should still be aware of the primary factor in this "growth company" stock's story....


These facts should not have been a surprise, and blog subscribers were made aware nearly a 2 years ago, as excerpted from our 2nd most recent forensic analysis.


FB IPO Analysis  Valuation Note Page 04

I want to focus on the Google+ effect mentioned in the research page above. JC Kendall of SocialMedia Today posed the question "Google+ Communities: The Last Nail In The Facebook Coffin?". Basically, he ponders whether or not the release of the Google's recent answer to Facebook's Groups product will drive Facebook the way of MySpace. I will excerpt the parts pertinent to this discussion, but I urge you to visit the full article and also keep in mind that Mr. Kendall is a socail media professional, hence may have a different perspective than that of the casual user. Here's some very interesting highlights of what he had to say:

  • Back in March of 2012, Facebook reported that on average only 16% of Facebook Brand Page posts were read on average by the fans of those pages.  For all the money spent on Facebook advertisements, they resulted in a CRT (click-through-rate) of 0.051%.
  • In May of 2012, Facebook began allowing business to “Promote their Posts” after killing off the previous “Reach Generator”, a program that GUARANTEED at launch that it would reach 75% of Facebook users that had liked a Brand Page, but only produced an average of 16% reach. 
  • In June 2012, fed up with what he concluded as Facebook blocking his ability to reach his huge audience of Facebook fans, George Takei of [Lieutenant Sulu] Star Trek fame contacted Facebook about his concerns, and was told “buy more promoted posts.”  Takei watched his reach dwindle while the number of his posts remained the same, and decided it was due to EdgeRank, the Facebook algorithm that determines who gets to see a user’s updates. ....Facebook determines who sees users posts, not the users and you get to pay for this!   In June, George Takei established a profile on Google+, where 100% of his messages would be available to his friends at zero cost.  
  • {In} Google+, all posts, no matter how large the audience, are free of charge to 100% of your followers. 

When I talk to businesses about why, in the face of such dismal advertising returns, they are still concentrating their Social Media efforts on Facebook, the answer is the same, about 90% of the time:  Facebook Groups.  

Google+ Communities is less than a week old, and its growing like a weed!

  • ... all those things you did from your Facebook Groups to develop a relevant and interested audience for your business, could be done easier, smarter, more effectively, and free of charge? Google+ Communities, because of the added services available to Google+ Users and integration with all the other benefits of the Google infrastructure, simply blows Facebook Groups out of the water. 
  • ...Here is the kicker:  All of the content from a Public Google+ Community is indexed, and discoverable through Search on both Google and Google+. This is something that Public Google+ Community Moderators need to consider when creating their destinations.
  • ... to maintain a level of real privacy, there are two options for Private Communities as well. Private Communities can be restricted to its invited members only, but remaining discoverable by search.  Or, a fully private Community can be created, similar to a private YouTube channel, where it can be found only by knowing the specific URL of the Community. 
  • Any organization can create a Google+ Community that is open and available to anyone without an invitation necessary.  To get the word out, all the moderator needs to do on Google, is share their Community to the Public Stream, which will inform not only 100% their circled followers,  but the announcement is now part of the worldwide Google Index, and available through a keyword search, along with the content of every post, every image, every video. 
  • Contrast this with Facebook, where after a Facebook Group is created, the moderator now has to determine whether or not they wish to pay.  The price is determined by the number of Facebook friends who might see it, in order to reach 100% of their audience.  Consider that this is true not only to announce the Group, but the organization must also pay for EVERY update (promoted post) they make during the lifecycle of the Group’s initiative. For any Business or Organization with their eyes on the bottom line, the choice is clear. You can spend your  budget on managing and performing your daily activities from a Google+ Community,  with its various ways to allow users to either see you or find you, or you can devote a chunk of your resources to paying Facebook for the right to let all of your friends know what you are doing, with no guarantee of a decent CTR result. 
  • If I were a decision maker for an organization migrating from Facebook to Google+,  I may pay to send a single promoted post to my Facebook friends and followers, to let them know that my charity drive now and for the future can be found  now be found on Google+.  But, if my Facebook friends have any problem finding my Community Based Charitable initiative, not to worry, because they can (duh) GOOGLE IT. 
  • It is not as though someone cannot be a member of both Google+ and Facebook at the same time, so why would an Organization of any kind, pay more for much less on Facebook?  In addition, the SEO (search engine optimization) advantages of Google+ Communities cannot be overstated, along with the Google Authorship potential for preventing fraudulent association or duplication with your Google+ Community.

Google Hangout is a group video conferencing and video broadcast platform within Google+. It's very handy for multi-media publishing and has no match anywhere near its price - of free!

  • Google+ Hangouts can be scheduled by event and run from within a Google+ Community, with Hangout invitations sent to all members automatically.  Members of communities do not have to be within their community to share comments and information; they can post directly to their Communities from their public streams. 
  • On Google+, users can share files from Google drive both inside and outside their Google+ Communities. Users can both link to and distribute documents of all kinds, and even HOST A WEB SITE from their Google Drive with JavaScript support built in.  Pow! 
  • Suppose two (or up to ten) persons within a Google+ Community share an interest and want to speak RIGHT NOW to each other? They have the option of starting a video Hangout together, or should one of the two not have a web cam, use Google’s Voice services to place a free international call to the other person from within the hangout itself!  Did I mention FREE, and no limit to amount of usage?
  • Google, with the introduction of Google+ communities, has essentially matched or surpassed every level of functionality available on Facebook for a Business to develop its brand, and attract a growing number of followers to its audience. The additional features of SEO, Authority, and Trust associated with a Google+ presence is a difficult thing to pass up, and I predict that the steady stream of Businesses building a Brand Presence on Google+ will soon, with the addition of Google+ Communities will soon become a flood. 

  • Because Facebook has no public search engine, all content is confined within its forums. Facebook will not be able anytime soon to emulate what Google has done with SEO, Authorship or even Hangouts.  You see, the video performance of Hangouts cannot be duplicated without an associated fiber-network between datacenters like those Google has built. 
  • Google+ users connect through this network, away from all of the latency adding routers, switches, repeaters that connect together the rest of the internet. Creating desktop video conferencing for up to 10, or (15 users with a paid Google Apps account) is basically impossible given today’s video compression standards.  Google has promised HD Hangouts in the not too distant future.  I would expect to see those first along Google’s Fiber rollout for users in Kansas City, MO. 

Whew! That's a lot of info to digest. I apologize for excerpting so much of JC's content, but he had so much of relevance to contribute I had to. This is not all of it, by a long shot, so I again urge you to read the original SocialMedia Today article. The obvious question is, "Does he actually make a valid point?" BoomBustBloggers as well as FB and Google investors really need to know. Even though Facebook Does The Reverse Gravity Thing, Defies Logic, I still had to quip  - Hey Muppets, Only Another 100% Climb In Share Price To Go Before You Break Even With MS/GS/FB Investment Advice. Let's turn to my site's stats to reveal some actual facts and stats.


As you can see from the chart above, the social network to beat for actual site referrals is Twitter. I believe that is due in large part to the nature of my site (financial analysis, which has a penchant towards real time information seekers). It is also due in part to a social media push that I have started, in which Twitter has the richest 3rd party publishing tools - something that I feel the other participants in the chart have erred in not directing significant resources. Time will tell if I'm correct.

Google search has always been a large contributor to site traffic, and when combined with Google Plus and referrals, is still number one despite the aggregate social media push. Google has integrated Google Plus into practically all of it properties, which makes the use of almost any Google product an indirect use of Google Plus. A wise move, one that (at least at this time) benefits the end user, and a move that significantly disadvantages its competitors - primarily Facebook! My Facebook account has been active for a couple of years, yet I just started a Facebook Company page last year, and it has been mostly inactive. I recently started adding content to it, along with a Google Plus page and LinkedIn Page (used to be active, then I stopped adding content and recently started again). Twitter has been active for about a year. At this point all of the major social media platforms get the same content posted simultaneously, and you can see the results. The content is formatted for Twitter, which may give Twitter an edge in this comparison.

What makes this comparison even more interesting is the fact that Google Plus is less than a year old while all of the other competitors are several years old. That makes Google Plus's competitiveness and growth appear outstanding. It is a true, clear, and credible threat to Facebook (as well as the others, and that's without considering the tech advancements) and I feel that FB investors are hardly giving this the attentition that it deserves. Google is out-Facebooking Facebook at an incredibly alarming rate!


The site stats mirror my description of the newness of my social media push. The new visits come mostly from my push onto new social media platforms. Of interest is the fact that Google Plus has a very high bounce rate, which denotes a lower quality of traffic, but the small amount of sample data being used is not conclusive. In addition, since the content is being formatted for Twitter's short form input rules, it fails to take full advantage of Facebook's and Google Plus's rich media capabilities. I will experiment with this theory by hosting a Google Plus Hangout Group Video session on my Facebook and Google research and opinion to see if this materially changes the stats. I believe it will, for the interaction in the content that I've posted on Google Plus, when there is interaction, is much greater than the other platforms - Twitter included!


The pages per visit metric is another measure of the quality of traffic. Here you see the Google search properties reign supreme, primarily because that traffic is pushed onto my site (the people are actively looking for me) as opposed to being pulled onto the site (I'm pushing content to them to entice them to come in). By effectively combining search with social media (which Google is doing) Google can convert Plus into a push versus pull scenario. Now for the most important point: Google Plus has just been launched, and it is now just launching new aspects of the platform. All of these platform aspects from Google are absolutely free. If you factor in the cost of paid advertising on LinkedIn, Twitter, or Facebook and cost per page visit, Google Plus shoots way up to the top. WAAAAYYYYYYY UPPPP!!!! Try ti for yourself. Divide the cost of advertising on these platforms plus the cost of content creation and management by the net visitor or engagment session or purchase (or however you measure success) and you will find Google Plus to end up at the top of the list - and that is despite its highly nascent state! Imagine what happens once Google actually gets the ball rolling!!!

This is going to be a problem for all of those social media sites whose business models are predicated on ad revenue. How can you charge for something when your competitor gives the same thing away (arguably on a better platform) for free? This is the question of doom that proved to be the death of the classifieds industry, soon the news industry as we know it, and the smartphone OS industry (ask RIMM if I know what I'm taking about BoomBustBlog Research Performs a RIM Job!, or even Apple Deconstructing The Most Hated Trade Of The Decade, The w 375% BoomBustBlog Apple Call!! and Deconstructing The Most Accurate Apple Analysis Ever Made - Share Price, Market Share, Strategy and All).

Google is able to disintermediate these industries through a process known as cost shifting - basically offering a competitors cash cow product for free to the end user by shifting the cost of making and delivering said product to a natural producer who must incur said costs anyway, thereby totaly disrupting the business models and crushing the margins of the established status quo. With the newness of Facebook et. al., it may be hard for old timers to consider them status quo, but in Internet Time, Facebook is old school and faces disintermediation through cost shifting if they don't figure something out, and figure it out fast! 

Here I break down Google Cost Shifting on the Max Keiser (who, after being broadcast on China TV, may very well be the most seen independent newscaster in the world) Show

So, why aren't you hearing this from those big Wall Street banks that were clamoring to sell you those Facebook shares at $38?

Well, I've Told You Before, And I'll Tell You Again - Goldman Sachs Investment Advice Sucks!!! I thought everyone would be asking the question Is It Now Common Knowledge ThatGoldman's Investment Advice Sucks?, but since they aren't I'm here to fan the flames. The reason why you don't here this from those banks is because their business model is predicated upon your ignorance. Independent investors and analysts (say BoomBustBlog) are to the extant, big Wall Street bank as Google Plus is to Facebook, a source of pending disintermediation and margin compression. As excerpted from BoomBustBlog Challenges Face Ripping Facebook Share Peddlers That Left Muppets Faceless And Nearly 50% Poorer After IPO:

I made it clear that those who lost roughly half of their capital at or near the IPO price simply forfeited those funds from not reading BoomBustBlog, and this situation was virtually guaranteed. I felt so strongly about it that I made much of my opinion available for free this time.

Here's where I broke it down on Capital Account

I also happened to do the same on the Max Kesier show...

I discussed Facebook on the Peter Schiff radio show, the Facebook excerpt is below...

Additional Facebook analysis, valuation and commentary.

On Max Keiser, go to the 13:55 marker for more on Facebook...

Double your money by shorting the Street's advice! Once Again!

Here is a full year of free blog posts and paid research material warning that ANYBODY following the lead of Goldman, Morgan Stanley and JP Morgan on the Facebook offering would get their Face(book)s RIPPED!!! Could you imagine me on a reality TV show based on this stuff??? Well, it's coming...

  1. Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week!
  2. Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!
  3. Here’s A Look At What The Goldman FaceBook Fund Will Look Like As It Ignores The SEC & Peddles Private Shares To The Public Without Full Disclosure
  4. The Anatomy Of The Record Bonus Pool As The Foregone Conclusion: We Plug The Numbers From Goldman’s Facebook Fund Marketing Brochure Into Our Models
  5. Did Goldman Just Rip Its HNW and Institutional Clients Once Again? Facebook Growth Slows Pre-IPO, Just As We Warned!
  6. The World's First Phenomenally Forensic Facebook Analysis - This Is What You Need Before You Invest, Pt 1
  7. The Final Facebook Forensic IPO Analysis: the Good, the Bad & the Ugly
  8. On Top Of The 2x-10x Return Had Off Of BoomBustBlog Facebook Research, Our Models Show How Much More Is Available...
  9. Is Time For Facebook Investors To Literally Face the Book (Value)?
  10. Facebook Bubble Blowing Justification Exercises Commence Today
  11. Facebook Options Are Now Trading, Or At Least The PUTS Are!
  12. Reggie Middleton breaks down "Muppetology," Face Ripping IPO's, and the Chinese Wall!
  13. Facebooking The Chinese Wall: How A Blog Has Outperformed Wall Street For 5 Yrs
  14. Why Shouldn't Practitioners Of Muppetology Get Swallowed In A Facebook IPO Class Action Suit?
  15. Shorting Federal Facebook Notes Are Not Allowed Today ?
  16. As I Promised Last Year, Facebook Is Being Proven To Be Overhyped and Overpriced!

It would seem that Facebook Finally Faces The Fact Of BoomBustBlog AnalysisProfessional and institutional BoomBustBlog subscribers have access to a simplified unlocked version of the valuation model used for this report, available for immediate download - Facebook Valuation Model 08Feb2012. I just nominally input some very generous numbers and the best case scenario chart (see the chart tab after your own individual inputs) is quite revealing, indeed! The full forensic opinion is available to all subscribers here FaceBook IPO & Valuation Note Update, and the latest iteration can be found here FB IPO Analysis & Valuation Note - update with per share valuation 05/21/2012. It is recommended that subscribers (click here to subscribe) also review the original analyses (file iconFB note final 01/11/2011).


Industry Leading, Subscription Based Google Research

All paying subscribers should download the Google Q1-2012 Valuation Summary, wherein we have updated the valuation numbers for Google using a variety of metrics. Click here to subscribe or upgrade

Google still exhibits the likelihood that they will control mobile computing for the balance of the decade.

Subscription research:

file iconGoogle Final Report 10/08/2010

A couple of bits from our archives...

There are currently 7 Google reports available. Select the "Google Final Report" and click the "Download" button. You will receive a 63 page analysis that looks like this on the cover...

The table of contents outlines how we have broken Google down into distinct businesses and identified both the individual business models and the potential revenue streams, as well as  valuation for each business line.

Page 57 of the analysis shows a sensitivity table which outlines the various scenarios that can come into play and how it will change our outlook and valuation opinion.

Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.

Last modified on Thursday, 13 December 2012 09:19 | This email address is being protected from spambots. You need JavaScript enabled to view it.


Login to post comments