Is It Time To Buy Facebook Inc?

This caused Facebook’s share price to drop from close to 20% from its peak of USD185 per share to the current lowest point of USD150 per share, losing around USD90 billion in market capitalization.

Source: Google Finance, One-Month Stock Chart of Facebook Inc

Therein lies the biggest question for the investor; is Facebook a turnaround opportunity or a falling knife?
Let’s explore that question today! But just bear in mind, I am an investor in Facebook so, take my opinion with a pinch of salt! Maybe a soup-spoon of salt.

The Business of Facebook
Facebook is mainly in the business of selling advertising. It owns platforms which allow users to share and connect with one another. As the user base increase, it would allow advertisers to buy advertising slots within its platform.
By creating a platform that allows for easy sharing for users and a platform for app developers to create tools and application to connect with these users, Facebook is able to design an environment that encourages more interaction and sharing between everyone in the community.
With a vibrant community, advertisers would need to bid for a slot to show their advertisement to these users.

Should we really be surprised that Facebook is collecting our data?
Should we? After all, Facebook has never asked a user to ever pay them for the services that they are providing for us.
And if we are not paying Facebook with cash to use its services, we must be paying it using something else. In this case, we are paying it with data, about ourselves. It is no different when we are using our email, searching for an answer on Google, reading free news on Bloomberg and watching Youtube videos. If we are not paying for it, we are the product.
However, this is not something new. We have been practising such business model for decades before the internet comes along. With Free-to-air television, radio, free newspapers and magazines, we are all giving these providers some form of information where they are then sold to advertisers, targeting us.
The internet and Facebook, merely just bring this feature to a massive scale. In fact, we should already be aware that everything we do online, is being tracked one way or the other; from every website you visit (guys, please do take note…), every email you sent, every search you put into Google.

“We should really see the internet as a big large open space, where everything we do is, in fact, similar to shouting at the top of our lungs in this large open space.”

So, every internet company is collecting data about us but it seems Facebook is the main target and poster boy as the “evil of the internet”.
I see the current situation similar to incidents such as the worker abuse incident at Foxconn, the food scandals with KFC China or even Ikea during the horsemeat scandals. These incidents are not isolated cases to these companies but rather an industry-wide issue at the moment.
Yet, these companies are the one that bore most of the blame, mainly because they are the largest companies caught up in the situation. It also shows the dominance of all these companies in the industry as well.
In fact, in all these incidents, these large companies have some of the best control within the industry compared to many other smaller players in the market. Similarly, Facebook has a strict policy in term of guarding its data and controlling leakage. Unfortunately, it is still not perfect enough.

Can Facebook survive this?
What could be the consequence for Facebook? Let’s look at three possible scenarios.