Raw thoughts from Alex Dong

NYTimes now "supported by readers, not advertisers" and Facebook's real value.

On July. 26th, 2012, NYTimes announced that it’s now “supported by readers, not advertisers”. This is a watershed moment in the history of internet.  As digital content becomes more and more native in our daily life, people are willing to pay for good contents.

At the company’s big three papers — the TimesInternational Herald Tribune, and Boston Globe — print and digital ad dollars dipped 6.6 percent to $220 million, while circulation revenue was up 8.3 percent to $233 million. The historical rebalancing, which occurred at the News Media Group for the first time in Q1, may indicate a sea change in an industry that has long relied on advertising to stay afloat. “They’re probably the first major paper that has crossed that line,” media analyst Ken Doctor of Newsonomics told Daily Intel. “It is an interesting moment.”

Almost at the same time, quite a few major internet brands suffer from non-trivial market value evaporation. As written in Facebook, Groupon, Pandora and Zynga have Drained Almost $50 Billion from Investors, the author wrote the following about Facebook’s performance:

Soaring from a ridiculously inflated IPO price of $38 tagging $45 before reality set in. After a fantastic earnings report (sarcasm here) shares are trading today at $23.49 down only $ .22 on the day (.91%). That, my friend, is a loss of $34.4 billion in market capitalization or 38.2%. Tally so far – $ 34.4 billion.

I am amused by this stark comparison.  I still believe that Facebook is creating good amount of value, but whether that justifies such a high stock price is probably a different story.  I found the following analysis echoing with my past experience.  It basic posts a good question: what if social networks value diminishes as the platform starts to monetize it? 

Every community-based site in the history of the web has essentially been a stab at creating a social network. Most of them fail as businesses, with the rare exception of small, lucky communities that become self-sufficient but not exactly prosperous. What if that’s just the way it is?

If you prefer tables, numbers and a little bit fundamental analysis, this article has laid the most solid, and technical, analysis of the “real value of facebook”.   Based on the size of the advertisement market is “2.1% to 2.3% of nominal GDP” and the numbers disclosed by facebook, the author puts out the following table on projections in 2016.  We’ll see.