Citigroup analyst Mark Mahaney said in an interview on Tuesday. Facebook (FB) has a huge potential for profit, but in order to avoid the repeat of the mistakes on MySpace, the company will not be anxious for generating revenue through advertising.
Facebook has a user base of approximately 1 billion, but the social networking giant will not increase efforts on advertising promotion, especially generate profit from mobile business, just simply for making Wall Street satisfied. Mahaney maintains a “hold” rating on the Facebook stock and set the target price of Facebook at $35.
Mahaney pointed out if Facebook is developing in accordance with the MySpace model, overly focusing on advertising, it will probably lead to customer loss. Facebok stock price will rise in the short term, but the value of the stock will shrink. Wall Street cares more about the performance of Facebook stock and will not be too patient with Facebook.
Facebook’s steady progress in the advertising business not only disappoints Wall Street, but also the customers. Advertisers think that Facebook’s data tracking tools have no difference from other advertising platforms. Advertisers buy Facebook advertising with trial psychology and have not determined the long-term cooperation. It is said that Facebook’s attitude to advertisers is very arrogant.
Facebook stock price lost 2.18%, or $0.70, to close at $31.47 Tuesday, on volume of 14.28 million shares, lower than the daily average of 33.79 million shares. The current Facebook stock price is still 17.18% off its IPO price of $38.
Also read: Facebook IPO was priced at $38.