Flashback to 2001: How Far Can Facebook Shares Fall Before They Can’t Fall Any Lower?

Facebook’s stock performance since May IPO

From my Forbes.com blog The New Persuaders:

I’m having a flashback, and it’s Mark Zuckerberg’s fault. OK, not exactly the fault of Facebook’s cofounder and CEO, but his company’s stock.

The swoon in Facebook’s shares, culminating in a close today at less than half their IPO price, brought back memories of what feels like (but may or may not be) a similar situation I observed a decade or so ago in the wake of the dot-com bust. I was covering Amazon.com during its period of rapid expansion, when it was far from apparent to everyone that it would survive, let alone turn into a blockbuster business.

Amazon.com’s shares–which went public at $18, as it happens the price to which Facebook’s shares fell today–had dipped below $6 a share in late 2001. Amazon had huge costs from building out massive warehouses around the country well ahead of its level of revenues, prompting one analyst to predict that Amazon would go under unless it changed its expansionist ways.

It was the one time I remember wishing that I weren’t prohibited by BusinessWeek rules from buying stocks of companies I wrote about. Having reported on the company for several years and knowing how the economics of its business worked, I was pretty darn sure Amazon wasn’t going under and that founder and CEO Jeff Bezos knew exactly what he was doing.

And he did. Thanks to his vision coupled with a determination to stay the course while adjusting for market changes along the way, Amazon is now trading at $248 a share. A mere 100 shares bought then would have realized 40-fold return for a pre-commission, pretax profit of $24,200.

I don’t yet have the same feeling about Facebook’s stock that I had about Amazon’s back then. …

Read the complete post at The New Persuaders.

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Amazon’s Ad-Supported Tablet: What Took So Long?

The current Kindle Fire

From my Forbes.com blog The New Persuaders:

Ever since the first, rather expensive smartphones came out five years ago, I wondered: Why not offer cheaper ones supported by advertising? After all, even if you’d prefer not to see ads, you’re already taking a subsidy from a wireless carrier that often entails (I’m talking to you, Verizon) carrier widgets and interface limitations than are far more onerous than any advertising.

But since then, the only ad-supported portable devices that I can think of, at least that are still around, are Amazon.com’s Kindles with Special Offers. Now, however, the Wall Street Journal says Amazon may debut an ad-supported new 7-inch tablet as a followup to now sold-out Kindle Fires, as a way to offer a lower price in an increasingly competitive tablet market. The tablet could come as part of an expected Amazon launch of new tablets on Sept. 6.

The tablet apparently would display an ad as the device “wakes up.” The story mentioned no specific price break. The Special Offers Kindles offer a $30 to $50 price break, which if applied to the current Kindle Fire price of $199 would come in as low as $149. That would provide a considerable discount from Google’s Nexus 7 tablet, whose key appeal since it debuted in mid-July has been its low price.

Apple also is expected to come out with a similarly sized iPad Mini this fall, that could be priced as low as $249. However, Apple’s brand would still make a higher-priced device appealing to many people.

Assuming the ad-supported Amazon tablet actually launches, what took so long? Well, for one, tablets are still a pretty new category, so perhaps it just took awhile to work out the economics. Also, it’s possible that the ad formats on each tablet have to be so unique that it’s hard to get marketers interested at a more than experimental scale. Not least, a lot of people may figure that if they’re already paying a couple hundred dollars or more for a device, having to watch ads as well is a step too far.

But given that the three key tablet combatants today–Apple, Google, and Amazon–each are already in the ad business to varying degrees, and as it becomes clearer what kinds of ads work best on mobile devices, I wouldn’t be surprised to see more ad-supported models before long.

Why Google’s New Tablet Could Be The iPad’s First Real Competition

From my Forbes.com blog The New Persuaders:

Google is just a couple of days away from debuting a new tablet that could finally shake up a market utterly dominated so far by Apple’s iPad.

Reports from Gizmodo and others say Google is likely to introduce the diminutive 7-inch tablet at its Google I/O developers conference (whose Wednesday keynote I will be covering live here). The kicker, according to the reports: The tablet, built by Asus, will start at $199 for an 8 GB of memory, up to $249 for a 16 GB version.

Amazon.com’s Kindle Fire already plowed this pricing ground, of course, so such a tablet wouldn’t be entirely new. But while the Fire has been reasonably successful for Amazon, it hasn’t made much of an apparent dent in the iPad because of its limitations, including a somewhat app platform controlled by Amazon itself. And the Fire doesn’t run a standard version of Android, making it tougher yet for developers to do apps for it.

Let’s not forget Microsoft’s coming Surface tablet, either. But the reported pricing on that device, introduced last week, sounds quite close to the iPad’s. So unless it’s significantly better, which seems doubtful, it seems unlikely to mount a serious challenge.

But Google’s tablet, assuming as Chairman Eric Schmidt has promised (and this is a very big assumption) that it performs well, could for the first time challenge the iPad. And it would come at a time when tablets are the focus of everyone in tech from chipmakers and hardware manufacturers to app developers to marketers and publishers hoping to capitalize on a new mobile Internet device that could give them the creative canvas to rival (or exceed) the appeal of television and magazines. Here’s why Google might have a hit this time:

* It’s cheap. Now, merely being cheap won’t guarantee people will buy it in sufficient numbers to matter. But at $199, it doesn’t have to be every bit as good as the iPad. As Clayton Christensen has noted in cases dating all the way back to the transistor radio in the 1950s, a rival can most successfully challenge an established incumbent not by matching it feature-by-feature, but by offering something good enough for most people for a lot less money.

* The rock-bottom price will attract more app developers. If it’s decent enough to sell a lot thanks to the low price, that suddenly makes Android a more attractive platform for app developers. One of several reasons the iPad is the most popular app platform is that Apple controls the operating system version so developers don’t need to rewrite an app for each device running different versions. …

Read the complete post at The New Persuaders.

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