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Social-Media Frenzy Fizzles

Social-media stocks were supposed to be one big party. The fun ended fast.

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Bloomberg NewsFacebook CEO Mark Zuckerberg

Investors who six months ago clamored for shares of social-media firms have turned against them with a vengeance, sending Facebook FB -11.70% shares down 12% Friday following its first quarterly earnings report as a public company. Zynga ZNGA -2.83% fell another 3% after plunging 37% Thursday, after posting a quarterly loss and lowering financial targets.

The concerns are many. Revenue and user growth are slowing, even at Facebook, the supposed paragon for a new era of media and advertising. Aggressive spending on people and technology is denting profits. Impulsive acquisitions and unconventional accounting prompt questions about executive judgment.

“Investors who were excited about social networking have learned just how immature these companies’ business models are,” said Michael Shinnick, who manages $2.5 billion for Wasatch Advisors of Salt Lake City, Utah, and doesn’t own Facebook shares.

At Facebook, investors also are fretting over the future lifting of restrictions on the sale of shares by employees and early investors. By mid-December, that will potentially free more than 1.5 billion additional shares for sale, more than double the 636 million shares now available.  Read More

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About Rant4u

A Revolution in Social Networking

Posted on July 27, 2012, in #social media and tagged , , , , , , . Bookmark the permalink. Leave a comment.

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