It's The Economy Stupid!

Obama and Facebook

I'm concerned about a few things with this upcoming election. First I want to start with Facebook and it's IPO. I'm no stock wizard but I had a few questions about the pricing of Facebook. 100 billion just seemed a little steep/insane to me. In my opinion the only people who invested in Facebook are those who misunderstand what Facebook is and why it has gained so many users.

Take a peek at this article form 2005. In 2005 it was all about Myspace and how it would be able to rule the Internet for the foreseeable future. But this article misses what is probably the most important aspect of any social networking site --it's FREE.

A few things have changed since Myspace was on top. The "newness" of Myspace has worn off. Myspace was good for computer users; remember smart phones were considerably less advanced in 2005, so the mobile aspect was not as much a driving force. Myspace was not yet sold, so it was more user oriented.

The popularity of Facebook began to increase greatly after Myspace was purchased by Newscorp. The reason for this, I believe, is that once Myspace became nothing but a never-ending bulletin board of Flash animations and advertisements; people quickly lost interest in it. It was too cluttered. Not to mention a bandwidth hog. The trend as I see it is to move to the next social network once the current one becomes too bloated and self interested. Myspace was catering too advertisers and not its users. Myspace users naturally moved over to Facebook. It offered similar features and wasn't so cluttered. Keep in mind that Facebook and Myspace are both free services. The ability of either site to earn money can only be based on advertising.

Facebook has more things working against it than it does working for it. Let me list the issues facing Facebook. History has shown, at least to me, that advertising can hurt social networking membership numbers. Facebook's users are increasingly mobile. How can you advertise to mobile users with real estate so precious on tiny little screens? Google's social networking site Google+ is waiting to snap up Facebook users as they flee either advertisements or usage fees. Not to mention Google's Android operating system will undoubtedly ship with Google+ pre-installed.

Now let's tie Obama into all this. Obama has been wrong on everything he's said about the economy. When Facebook was valued at around 100 billion, shortly after the IPO a sell-off began. Then an investigation was launched into the pricing methodology by Morgan Stanley. People were angry because they feel they were lied to about their investment.

The only people who will vote for Obama now are those who don't understand basic economics, or actually believe that it's so complicated that they can't understand it. Obama is hedging his bets on the hope that Americans as a whole are so misinformed about the economy that they will believe the media hype about the economy and elect him again. The problem for Obama is that the "sell-off" of the US economy has already begun and is happening now in the form of job losses. Unemployment keeps going up. Businesses are not investing in workers because they don't have enough demand for their products.

On the upside there was a poll that showed that many people were skeptical about the Facebook stock prices.

Half of Americans think Facebook is a passing fad, according to the results of a new Associated Press-CNBC poll. And, in the run-up to the social network's initial public offering of stock, half of Americans also say the social network's expected asking price is too high.

Just a third of those surveyed think the company's expected value is appropriate, 50 per cent say it is too high. Those who invest in the stock market are more likely to see Facebook as overvalued, 58 per cent said so. About 3 in 10 investors say the expected value of shares is fair.

Hopefully people will be equally skeptical about Obama's economic claims. After all there is nothing to historically back them up. I hope that tax payers are as angry with the economic situation as investors were with the Facebook deal.

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