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Of course, Facebook founder Mark Zuckerberg could dream things up, too. And Facebook has a real business, real profit and real revenue today. But social media is still unproven in many aspects as a business model.
A lot of people use Facebook on their mobile devices, for example. Facebook gets 82 percent of its revenue from advertising, but no one has figured out how to make substantial money from mobile advertising. In what turned out to be very poor timing for Facebook, General Motors stopped advertising on it during the week of the IPO.
Comparing Facebook, Apple, Google
Projections for 2012 are among analysts surveyed by FactSet. Price-to-earnings ratios are based on Tuesday’s close.
Price-to-earnings ratio, using earnings from last year: 85.
2011 net income: $1 billion.
2012 projected net income: $993 million.
2011 revenue: $3.7 billion.
2012 projected revenue: $5.1 billion.
Price-to-earnings ratio, using earnings from last year: 13.6.
2011 net income: $25.9 billion.
2012 projected net income: $44.3 billion.
2011 revenue: $108.6 billion.
2012 projected revenue: $162.3 billion.
Price-to-earnings ratio, using earnings from last year: 18.2.
2011 net income: $9.7 billion.
2012 projected net income: $12.5 billion.
2011 revenue: $37.9 billion.
2012 projected revenue: $35.5 billion.
You can also turn that argument on its head. Facebook is just getting started. It will figure a way to make money on mobile, and it will come up with businesses and revenue streams no one has thought of, as Amazon did. But investors in Facebook, at least in the last two days, seem to have their doubts.
One skeptic, Scott Freeze, the president of Street One Financial, says he won’t touch the stock until it falls to a level justified by its earnings. He says that might be $25 — another steep fall from here.
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