Would you expect him to do anything else? Invert the question: if you had $500 million cash, would you spend it all on Facebook stock? Or Google stock? Or any one stock?
Even for company insiders who really believe in the future of their company, it isn't prudent to hold more than a small fraction of a billion-dollar fortune in one stock, from a purely rational perspective. Of course, the public expects irrationally enthusiastic behavior from founders, which is the only thing that leads to the gigantic fortunes amassed by the Gates/Ellisons of the world.
Is this some sort of extreme cognitive dissonance?
Why can't people just accept that Facebook is a fad?
It does not mean the world is going to end. It's a fad, not a solid company. We went through this before 12 years ago. Eventually the market figures it out. Move on. That's what Thiel is doing.
More fads are around the corner. Investors will keep falling for the same old tricks.
Gates and Ellison are very poor comparisons. Their software was not web-based (=ad-based), their main market was the enterprise and they went to great lengths to create long-term customer lock-in. They began in a different era, and are nothing like Facebook, which is a photo-sharing website that relies on display ads and game-playing "whales" to make money.
Everyone keeps focusing on Facebook as an ad platform, and pointing to the difficulty in monetizing mobile via ads. But I'm betting Facebook is on the brink of rolling out a digital wallet. They already act as an authentication/identity service with hundreds of millions of users. If those users linked their FB accounts to their bank accounts, they'd be able to buy anything on any integrated website that they log into with FB Connect -- or eventually in any store that wants to handle FB payments. With FB taking a small cut of every transaction, I imagine PayPal and Stripe would be in trouble, no? Mobile doesn't have to be about ads....
>"I'm betting Facebook is on the brink of rolling out a digital wallet."
I'm betting they're on the brink of slicing dicing and selling everyone's personal information. It's more profitable. It makes use of their principle asset. There are few comparable companies to act as competitors. It's a really big and lucrative market.
And it solves their problem with monetizing mobile.
I think this is just thiel putting his money where his mouth is. Anybody who has followed him knows it's no secret that he's spoken out against companies solving small problems and has even implied facebook to be squarely in that camp.
I'm going to buy when it gets closer to $10 per share. Half the world uses Facebook every day so let's not pretend it isn't an awesome business with utterly massive potential.
"awesome business" and "massive potential" aren't mutually exclusive events. It can have massive potential, but never deliver and still be a terrible business.
Sure, it's got a lot of upside if you can buy it at the right price, but up till now, it hasn't shown advertisers (who make up the majority of their revenue) that it can deliver customers as acceptable CPAs. Until that happens, we'll still be waiting for facebook to be an "awesome business."
Facebook may stick around for years to come, but I disagree that it's an awesome business. Unless oriented towards professional profiles (like LinkedIn), social networks are a terrible idea. Just because everyone likes something, doesn't mean it it's in their best interest. Facebook is just a voluntary invasion of privacy. Right now most people are either using Facebook to post memes and soft core pornography that they find elsewhere, bitch about how their lives are more difficult than everyone else's because they have a job(try not having one for a while), or to stalk their current / former significant others.
I myself prefer more direct and personal forms of communication like Skype, Instant Messaging(Facebook Chat is merely adequate), phone calls or email. Unfortunately, I am saddled with Facebook because everyone I know has abandoned all other forms of communication.
How many new accounts did you create annually 10 years ago?
How many new accounts did you create annually 5 years ago?
How many new accounts did you create this year?
People don't mind switching, and in fact they don't mind having simultaneous accounts. People on this forum think that they are 'special' inasmuch they don't mind negotiating multiple accounts with relative ease, but it's an inevitable tactic.
Facebook can be used to login to other sites, but with Google+ and Twitter and the $20 share price, nobody small wants to bet on Facebook. It's like making an Xbox 360 exclusive game if there was a $0 porting cost.
If Facebook is bought out by Microsoft or Apple, it will truly be a threat as a universal login system. But until then, they will die a death from a 1000 paper cuts.
> 2. They haven't found a way to make advertising work on mobile, an increasing part of their visits.
And herein is the problem: Apple - Apple is so against advertising that they created their own iAd network to keep other companies out of the game (it doesn't have to really be a success - just enough to keep devs off competing ad networks).
As long as Apple is influential in the mobile world, Google and Facebook are going to have a tough time with mobile ads... do consumers actually want ads? Apple is betting no, and as far as they're concerned - screw the devs and advertisers.
It's not just the graph. Intent is very fleeting. You can't know "instantaneous intent" from someone's history and graph (e.g. what will be my next Google query?)
The 10b5-1 is actually bit fuzzy on whether you can cancel trading plan. SEC basically says that if you cancel the trade than you are not legally liable because no transaction actually occurred and so one cannot claim that you profited from insider trading. So in theory you can cancel the trading plan if you like. However if SEC feels that you cancelled only because of price drop then they can come after you for ALL your future trading plans or may even re-examine previous trades to see if you were trying to game the system. Therefore executives are advised by to cancel only under extraordinary circumstances.
So I think Thiel had lot of legal pressure, although technically not an obligation, to sell as per his trading plan filing. He could have taken risk but it's probably not worth it for another half-a-billion of profit if you are already multi-billionaire and if you are already cultivating 1000X returns as it is.
On the other hand it is surprising that he decided to sell most of his stock instead say only quarter or so. I would think Thiel as a long term investor in FB from what I've read in the book "Facebook Effect". Thiel is one of the few person that probably knows most upcoming plans and products in works and problems at FB. A typical strategy for investors like Thiel is to cash out in stages instead of dumping most stock at once like regular VCs do (10-25% each quarter, for example). Considering his level of insider knowledge this only means he did not expect FB stock going up at the time of trade filing in at least 1 to 2 year horizon.
This is even more surprising because I keep thinking FB is going to come out with something like AdSense any day now and almost instantly double its revenues bringing stock back to $25-30. Obviously Thiel has calculated things differently.
The Facebook story is over. They got ahead in the social network game of making communication over the Internet easier. They did this by making Email obsolete. One centralized system where all users can send instant messages to one another without remembering user logins, email addresses, or phone numbers. This is the ONLY advantage Facebook has over its competitors. And I guarantee their current advantages are going to be eroded away by more open protocols. In the same way that Twitter's current advantage in microblogging is also going to be eroded away.
If you get too far ahead of everyone else you become the target, and there are simply so many startups and smart brains working against Facebook and Twitter at this point that they simply will not be able to maintain their leads indefinitely (which is what their market values are incorrectly predicting).
You're focusing only on features, and ignoring the fact that Facebook has more active users on their site for more time per day and with a higher retention rate than any other site in existence, and that network effects have created an almost insurmountable barrier to entry.
Peter, if you are reading this, there's one question I'd love to ask. Why did tou even buy Facebook shares in the first place? Just to say you owned a part of Facebook? It was a clear failure from the beginning when they hit the market, way overpriced - surely you must of known this too. And then comes why other question. Why sell now, after loosing so much money? If you were willing to take a gamble in the first place, you should of been prepared to stick with it for a few years - it might go back up, but that's only if FB manage to get their shit together.
Did you even skim read the article? He invested $500k as one of their earliest investors, and turned that into $400 million. He sold when he did because of a lock up period.
The market is concluding FB is not likely $1 trillion company. The Q is order of magnitude for FB $TEV.
A. $1000B ? No...
B. $100B? Maybe
C. $10B? Possible
I think Theil is obvi not betting on $1T.
Thus, after 8 yrs, time to go.
At ranges between B and C, holding a large position in a public stock that is exhibiting true volatility (ie, something other than upward drift), is not likely to please his LP investors.
Nor, similarly would it be advised for his own holdings.
Reading more into the tea-leaves (ie, operationally) might be fun, but I'm not sure its adding explanatory power to what we are seeing here.
[+] [-] qq66|13 years ago|reply
Even for company insiders who really believe in the future of their company, it isn't prudent to hold more than a small fraction of a billion-dollar fortune in one stock, from a purely rational perspective. Of course, the public expects irrationally enthusiastic behavior from founders, which is the only thing that leads to the gigantic fortunes amassed by the Gates/Ellisons of the world.
[+] [-] cfront|13 years ago|reply
Why can't people just accept that Facebook is a fad?
It does not mean the world is going to end. It's a fad, not a solid company. We went through this before 12 years ago. Eventually the market figures it out. Move on. That's what Thiel is doing.
More fads are around the corner. Investors will keep falling for the same old tricks.
Gates and Ellison are very poor comparisons. Their software was not web-based (=ad-based), their main market was the enterprise and they went to great lengths to create long-term customer lock-in. They began in a different era, and are nothing like Facebook, which is a photo-sharing website that relies on display ads and game-playing "whales" to make money.
[+] [-] aasarava|13 years ago|reply
[+] [-] brk|13 years ago|reply
[+] [-] brudgers|13 years ago|reply
I'm betting they're on the brink of slicing dicing and selling everyone's personal information. It's more profitable. It makes use of their principle asset. There are few comparable companies to act as competitors. It's a really big and lucrative market.
And it solves their problem with monetizing mobile.
[+] [-] J-H|13 years ago|reply
[+] [-] batgaijin|13 years ago|reply
[+] [-] marquis|13 years ago|reply
[+] [-] unknown|13 years ago|reply
[deleted]
[+] [-] cmircea|13 years ago|reply
[+] [-] Ryan_Shmotkin|13 years ago|reply
[+] [-] cfront|13 years ago|reply
[deleted]
[+] [-] jamesmcn|13 years ago|reply
[+] [-] rootedbox|13 years ago|reply
[+] [-] dkrich|13 years ago|reply
[+] [-] grandalf|13 years ago|reply
[+] [-] joelrunyon|13 years ago|reply
Sure, it's got a lot of upside if you can buy it at the right price, but up till now, it hasn't shown advertisers (who make up the majority of their revenue) that it can deliver customers as acceptable CPAs. Until that happens, we'll still be waiting for facebook to be an "awesome business."
[+] [-] phaus|13 years ago|reply
I myself prefer more direct and personal forms of communication like Skype, Instant Messaging(Facebook Chat is merely adequate), phone calls or email. Unfortunately, I am saddled with Facebook because everyone I know has abandoned all other forms of communication.
[+] [-] batgaijin|13 years ago|reply
How many new accounts did you create annually 10 years ago? How many new accounts did you create annually 5 years ago? How many new accounts did you create this year?
People don't mind switching, and in fact they don't mind having simultaneous accounts. People on this forum think that they are 'special' inasmuch they don't mind negotiating multiple accounts with relative ease, but it's an inevitable tactic.
Facebook can be used to login to other sites, but with Google+ and Twitter and the $20 share price, nobody small wants to bet on Facebook. It's like making an Xbox 360 exclusive game if there was a $0 porting cost.
If Facebook is bought out by Microsoft or Apple, it will truly be a threat as a universal login system. But until then, they will die a death from a 1000 paper cuts.
[+] [-] beagle3|13 years ago|reply
[+] [-] ThomPete|13 years ago|reply
1. Their social graph is great but it has one major flaw. It's very bad at profiling intent.
They also have a problem they share with Google.
2. They haven't found a way to make advertising work on mobile, an increasing part of their visits.
Unless they find a way to solve those two areas they will not be able grow their revenue without hurting their visitors.
[+] [-] r00fus|13 years ago|reply
And herein is the problem: Apple - Apple is so against advertising that they created their own iAd network to keep other companies out of the game (it doesn't have to really be a success - just enough to keep devs off competing ad networks).
As long as Apple is influential in the mobile world, Google and Facebook are going to have a tough time with mobile ads... do consumers actually want ads? Apple is betting no, and as far as they're concerned - screw the devs and advertisers.
[+] [-] diego|13 years ago|reply
More about this point on my blog if you're interested: http://diegobasch.com/facebook-and-twitter-dont-know-what-yo...
[+] [-] sytelus|13 years ago|reply
So I think Thiel had lot of legal pressure, although technically not an obligation, to sell as per his trading plan filing. He could have taken risk but it's probably not worth it for another half-a-billion of profit if you are already multi-billionaire and if you are already cultivating 1000X returns as it is.
On the other hand it is surprising that he decided to sell most of his stock instead say only quarter or so. I would think Thiel as a long term investor in FB from what I've read in the book "Facebook Effect". Thiel is one of the few person that probably knows most upcoming plans and products in works and problems at FB. A typical strategy for investors like Thiel is to cash out in stages instead of dumping most stock at once like regular VCs do (10-25% each quarter, for example). Considering his level of insider knowledge this only means he did not expect FB stock going up at the time of trade filing in at least 1 to 2 year horizon.
This is even more surprising because I keep thinking FB is going to come out with something like AdSense any day now and almost instantly double its revenues bringing stock back to $25-30. Obviously Thiel has calculated things differently.
[+] [-] dj2stein9|13 years ago|reply
If you get too far ahead of everyone else you become the target, and there are simply so many startups and smart brains working against Facebook and Twitter at this point that they simply will not be able to maintain their leads indefinitely (which is what their market values are incorrectly predicting).
[+] [-] csallen|13 years ago|reply
[+] [-] rdl|13 years ago|reply
[+] [-] dutchbrit|13 years ago|reply
[+] [-] benjaminwootton|13 years ago|reply
[+] [-] jamesaguilar|13 years ago|reply
[+] [-] 001sky|13 years ago|reply
A. $1000B ? No... B. $100B? Maybe C. $10B? Possible
I think Theil is obvi not betting on $1T.
Thus, after 8 yrs, time to go.
At ranges between B and C, holding a large position in a public stock that is exhibiting true volatility (ie, something other than upward drift), is not likely to please his LP investors.
Nor, similarly would it be advised for his own holdings.
Reading more into the tea-leaves (ie, operationally) might be fun, but I'm not sure its adding explanatory power to what we are seeing here.