Is Facebook coming soon?
The success of the social network LinkedIn on the American stock exchange raises doubts about the value these virtual companies generate for investors.
Marcio Kroehn_247 - One hundred and nine percent increase in value in a single day. That's how the social network LinkedIn, which allows professionals around the world to exchange resumes, debuted on the New York Stock Exchange on Thursday the 19th with such impressive numbers. Investors who flipped the stock (a term used for those who buy a newly listed stock and sell it on the same day) pocketed a good profit. From an initial price of US$45, LinkedIn reached almost US$122 during the trading session. By the end of the day, it had fallen to US$94,25. On Friday, the gains continued: the stock rose another 10%, but closed with a gain of about 1,3%. The impressive surge in investor demand, which raised the virtual company's market value to US$8,9 billion in 24 hours, raises some questions: how will these companies generate money for buyers?
LinkedIn, Facebook, and Twitter are user-friendly services, but they were created for free interaction. None of them have managed to get their millions of users to actually pay, even with a loyal and daily audience. This is the big question these social networks of the new internet age need to answer: how to transform their enormous global popularity into money? Moving from the world of access to the universe of profitability, the levels of demand and responsibility increase dramatically. Adding to the problem is the fact that investors don't usually have much patience to wait for a return on their investments.
The formation of a second virtual bubble is not ruled out, mainly due to the value these companies reach in a short time. It's a lot of access and little value. By market estimates, Facebook is worth US$65 billion and Twitter US$4,5 billion. Those who defend this new digital age say that Google is the greatest example of success of what is to come. However, although it is a free service, Google serves more than 1 billion users annually with its search engine, who generate revenue for the company through the sale of advertisements that appear with each search. And Google's usefulness to modern society is quite different from the fads created to bring people closer together.
The challenge in breaking through this supposed growth of the new internet bubble lies in transforming the virtual economy into a real one. Skype, the free telephone service, was sold a few weeks ago to Microsoft for US$8,5 billion. The numbers seem quite attractive to Bill Gates' company: 170 million users worldwide and 207 billion minutes of voice and video calls in 2010. But only 1% of users pay to use Skype's additional services. Last year, the company had revenue of US$860 million and a loss of US$7 million. The free telephone service escaped being measured by investors on the stock market. But after LinkedIn, Twitter and Facebook are expected to offer their businesses on the capital market. After the success of the film The Social Network, everyone hopes that the Facebook bubble nightmare will remain only in the script.