This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

GM Has Facebook Envy -- and a Lot of Nerve

Also on TheStreet, contributor Jonathan Heller wondered aloud about the Facebook IPO in clear-headed and ultimately indifferent fashion: The bottom line is that I don't understand the math. I don't see how Facebook is worth $100 billion ... The common thread with all the IPOs I've mentioned is that each of the companies offers useful products or services, but there's a disconnect between their utility and the valuation of these companies. That's not uncommon. IPOs often generate investor interest that drives prices far higher than the company's true value. Sometimes it takes a while for the dust to settle.

I would ask Heller to throw conventional ideas about valuation out of the window. You're bound to drive yourself certifiably insane if you don't.

First of all, as he acknowledged, this is a multi-billion dollar company. And, as Fuchs nicely described in his video, social media is in its infancy. Mobile advertising has barely begun to bloom. If GM wants to hop off of the bandwagon already, so be it.

The folks who are hysterical about this development do not get two key things. First, advertising comes and goes from businesses that rely on it every day of the week. You probably have clients come and go consistently in your business. It's not uncommon. Heck, when I worked in radio I was personally responsible for blowing six-figure accounts off of the stations I yacked on with the most innocent slight of tongue.

Second, Facebook does not have to be "effective" as an outlet for advertising in the traditional sense of the word. Chances are GM dealers are not going to have many customers walk into a showroom, sign on the line that is dotted for a new truck and note that Facebook referred me. It does not work that way. Facebook will not directly sell a big ticket item like a car for you. If you need them to, it's doubly obvious that you just do not get it.

Ford (F) spokesmen Scott Monty honked the horn square on the steering wheel when he said: You just can't buy your way into Facebook. You need to have a credible presence and be doing innovative things.

Individuals build their brands on Facebook every minute of every day. Your life could suck as bad as a Chevy, but nobody would know it. You use Facebook to craft the identity you wish reflected the real you. You're not selling anything. Your putting together the portrait you want to put in your "friends'" minds' eye when they think of you.

If GM really thought Facebook is not effective, it would have saved a few million dollars more and pulled its page from the Web site. It did not do that, though. GM needs Facebook more than Facebook needs GM. The stodgy old company simply made a feeble attempt to prove a completely insignificant point. Facebook is overvalued. It's too big for its britches. Zuckerberg should start wearing a tie again. Whatever.

At the time of publication, the author did not hold a position in any of the stocks mentioned in this article, though positions can change at any time.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
FB $80.54 0.00%
GM $35.70 0.00%
AAPL $132.54 0.00%
GOOG $540.11 0.00%
TSLA $247.73 0.00%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs