Wednesday 5 September 2012

Three reasons why I'm buying Facebook shares

Facebook shares launched in May at $38 dollars, today they stand at $17 with many analysts predicting they will fall lower but I will be buying Facebook shares this morning and here are my reasons.

1. Falling TV audiences. TV ads are being watched by less and less people, yet TV ad spending remains the biggest part of many clients marketing budgets. This is about to change because the figures starting to appear about television viewing are simply catastrophic and will only get worse. Let me give you some of the figures from a report out last week from Simulmedia, the US based ad targeting company. They found that three-quarters of TV ads are viewed by just  20 percent of the 18 to 24 year old adults and then went on to give some examples including this one: Unilever's $6.3 million US TV ad campaign for its Axe (Lynx in the UK) body spray was not seen by 60% of the 18-24 year old audience it was intended to reach in March of this year. Now TV advertising has always been a bit scattergun despite all the window dressing of audience analysis and targeting but it's fast reaching a tipping point.

2. Changing habits. The producers behind the hit television show American Idol announced last week that they will release their latest reality TV series, A Chance to Dance on Facebook and cable simultaneously. This is a first and signals that Facebook can be used as a distribution channel which will boost overall viewer figures and engagement in the show. Shows like American Idol and So you think you can Dance already have many millions of fans on Facebook and the new show will be promoted using Facebook advertising to these fans. Viewers pay $1.99 per episode by PayPal or credit card and get all the benefits of being able to post and watch and chat with friends whilst watching and get access to exclusive footage and interviews. 

3. Anecdotal evidence. Ok it's anecdotal but it's often the best kind of evidence. In all my personal experiences of friends and relatives, whether that be in the UK, Brazil or the States, I don't know of a single example where Facebook is becoming less important in their lives or they are spending less time on it. That goes the same for any of the brands I have dealings with - their emphasis on Facebook is increasing and ultimately I have faith in Facebook being able to monetize that. Incidentally it didn't get picked up on much but in WPP's results out last week their spend on Facebook increased a 100% year-on-year.

Financial markets can often act in irrational extremes - wildly optimistic or desperately pessimistic and therein lies the opportunity. Put the three facts above together and I would say the reasons for being so down about Facebook and their share price are well overdone, which is why I need to stop writing this and log on to


  1. And, in retrospect, do you wish you hadn't?

  2. I wish I'd bought more when I wrote this blog and the shares were $17, as today they are up around $30