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Facebook Shares Drop Even Further

It appears that Facebook’s fortunes have definitely turned around. In the three months since its stock market debut its per-user valuation has more than halved to $47.

The share values of Facebook and other social networks have been steadily dropping in what may be a sign of hard times to come.

Facebook now has about 955 million active users, up from 900 million in May of this year. However, the total market value of the social network is now at $45 billion, far below the $104 billion of its IPO. According to Facebook almost 8.7% of users are fake or duplicate, this means there are 83 million fake users. If these are discounted then its per-user valuation would go up to $51.

However, Facebook is not alone, share prices in all the major social networks have been dropping over the last few months and all social networks are suffering. Furthermore, the drop in value of Facebook and other social media companies’ stock prices is more of a cause for concern than many recognise.
This is because the social media bubble has been very important in the economic recovery of the US. It has helped to create nearly 500,000 jobs over the last few years as well as help to launch a housing and commercial real estate recovery in San Francisco and parts of New York City. The social media bubble has also helped an explosion in entrepreneurial activity, the number of start-up incubators tripled between 2009 and 2011.

It can now be expected that social media start-up activity will drop. One of the reasons for the huge amount of activity over the last few years is the extremely high valuations of publicly traded social media companies such as Facebook. This drove people to set up social media companies in the hope of being bought out at very high prices. There may now be a wave or technology companies and start-ups failing as the hype around social media dies down.

OCA News Editor