What to Tell Your Kids About Facebook's Earnings

Ever since my sister asked in January whether to invest in the Facebook IPO I have been more engaged in the story than I care to admit. Facebook is not the typical company I would research for Decoding Wall St. clients as it boasts an excessive valuation and has offered no signs it deserves such a valuation. But, after the family conversation, I wrote a client note on Facebook on February 3 (www.decodingwallst.com), coming out negative on the stock before the IPO, after pulling a few all-nighters on the prospectus. Then, when posed with the question on Twitter (@BrianSozzi) this week “do I buy Facebook before its first official earnings report”, I remarked “no, not my cup of tea.” Today you are likely to hear a zillion and one reasons why not to own Facebook, the most prominent being an inability to monetize its platforms in a meaningful way. I agree with the bearish assessment on the company, and continue to have a negative view on the stock. However, seeing as Facebook is a household name as its service (or is a product, hmm) is used by grandparents, parents, and kids, I think there is a bonding opportunity here. Don't just tell your kids that Facebook is not a good investment for their college portfolio “because it's not, leave me alone” or “the company apparently isn't making enough money”, broaden their horizons a bit. Give the kiddies the following nuggets in order to wow their schoolteachers… The CEO says mobile is a “huge opportunity.” Opportunity equates to saying “our product may or may not earn enough money in the future to justify current investment spending but for now, our profits will be constrained. Deal with it.” Have you ever clicked on the media advertisements on Facebook, either using a desktop or the mobile app? Exactly, neither have I. Doing so pulls the person out of the social media experience. Individuals have turned into social media addicts, rewiring their brains to expect instant reply gratification from friends and family. They are almost afraid to click on the ads for fear of missing a two second turnaround reply to the question “yo, where are we going tonight?” Weaving Facebook into the employment market is an interesting aspect. For example, many companies are moving back manufacturing jobs to the U.S. and shipping computerized desk jobs overseas. Is it so far-fetched to think that Facebook's long-term daily usage and time spent on its networks will be under pressure from a greater number of people operating ever efficient machines from morning to night? On the 30 minute lunch break it may be a quick couple of texts to the wife and then back to the grind. I think at some point in the near future mobile phones will be unable to text while driving due to safety concerns. Speak to type functions already strike me as negative to the ads Facebook needs to be clicked on to satisfy the demands of its ad partners.