Saturday, February 15, 2014

The Facebook Fraud: Smoke & Mirrors Surrounding "Likes"

A few days ago Marc Faber commented that "social media stocks today are more overpriced than bubble internet stocks were back in January 2000." (See Marc Faber On Emerging Markets & Technology Stocks) This is a staggering comment as most of those stocks fell between 80% to 100% after their peak in March of 2000.

A portion of Wall Street's value in social media stocks, such as Facebook, comes from marketing dollars earned by gaining "likes" associated with pages. But how much is the true value of likes? The following fantastic video, titled "The Facebook Fraud," walks through what is actually behind a Facebook like.

If investors determine a large portion of the value behind a social media company (which determines how much you pay for the stock) is based on smoke and mirrors, then the price of that stock will plunge in breathtaking fashion. While Marc Faber warns the shorts on the timing, those that are both brave and lucky will make a tremendous amount of money on the opposite side of the social media trade.

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