http://www.zerohedge.com/contributed/2012-08-01/facebook%E2%80%99s-ad-model-scam
Submitted by thetrader on 08/01/2012 08:59 -0400
http://online.wsj.com/article/SB10000872396390444226904577561462514241968.html?mod=WSJ_hp_LEFTWhatsNewsCollection
Facebook’s ad model a scam?
When Facebook was listed earlier this year, we suggested the stock would be trading around 1o USD before any serious investor would feel the urge to start buying. Having dropped close to 50% from the IPO price, Facebook is surely making investors nervous. The stock has speculative weak hands stuck with stocks they don’t want. Rinsing out those will take longer than many anticipate. After disappointing many last weeks, Facebook continued the free fall today. From Bloomberg.
“There were obviously some people who didn’t want to sell on the first day in anticipation that you would see some stabilization and the stock price sort of return a little bit,” saidMark Harding, an analyst at JMP Securities LLC who has a market outperform rating on the stock and doesn’t own it. “Perhaps they’re disappointed by the lack of a recovery, and maybe now they’re using the opportunity to perhaps pare back.”
But perhaps possibly much more disturbing facts regarding Facebook’s ads is this article “sotfly” suggesting the ads business could be a scam.
Hey everyone, we’re going to be deleting our Facebook page in the next couple of weeks, but we wanted to explain why before we do. A couple months ago, when we were preparing to launch the new Limited Run, we started to experiment with Facebook ads. Unfortunately, while testing their ad system, we noticed some very strange things. Facebook was charging us for clicks, yet we could only verify about 20% of them actually showing up on our site. At first, we thought it was our analytics service. We tried signing up for a handful of other big name companies, and still, we couldn’t verify more than 15-20% of clicks. So we did what any good developers would do. We built our own analytic software. Here’s what we found: on about 80% of the clicks Facebook was charging us for, JavaScript wasn’t on. And if the person clicking the ad doesn’t have JavaScript, it’s very difficult for an analytics service to verify the click. What’s important here is that in all of our years of experience, only about 1-2% of people coming to us have JavaScript disabled, not 80% like these clicks coming from Facebook. So we did what any good developers would do. We built a page logger. Any time a page was loaded, we’d keep track of it. You know what we found? The 80% of clicks we were paying for were from bots. That’s correct. Bots were loading pages and driving up our advertising costs. So we tried contacting Facebook about this. Unfortunately, they wouldn’t reply. Do we know who the bots belong too? No. Are we accusing Facebook of using bots to drive up advertising revenue. No. Is it strange? Yes. But let’s move on, because who the bots belong to isn’t provable.
While we were testing Facebook ads, we were also trying to get Facebook to let us change our name, because we’re not Limited Pressing anymore. We contacted them on many occasions about this. Finally, we got a call from someone at Facebook. They said they would allow us to change our name. NICE! But only if we agreed to spend $2000 or more in advertising a month. That’s correct. Facebook was holding our name hostage. So we did what any good hardcore kids would do. We cursed that piece of shit out! Damn we were so pissed. We still are. This is why we need to delete this page and move away from Facebook. They’re scumbags and we just don’t have the patience for scumbags.
Thanks to everyone who has supported this page and liked our posts. We really appreciate it. If you’d like to follow us on Twitter, where we don’t get shaken down, you can do so here:http://twitter.com/limitedrun
For the (still) best dummies explanation of FB check the video here.
Page here.
Courtesy Yves.
and watch more insiders run for the hills on August 16th ( follow who sells and who holds their shares )
Options traders are betting Facebook Inc.'s FB +5.24% shares will face new headwinds as investor-lockup periods end in the coming weeks.
That would continue a trend established earlier this year when peers Groupon Inc.GRPN +3.29% and Zynga Inc. ZNGA +0.74% faced similar circumstances—the expiration of rules that temporarily barred early investors from selling more shares into the market.
About 1.99 billion shares of Facebook will become available for trading before the end of 2012—nearly five times the number of shares currently available for trading—and options traders are positioning for additional price declines, even as the stock hovers about 43% below its initial offering price.
Facebook shares fell $1.44, or 6.2%, to $21.71 on Tuesday, a new closing low.
As with many initial stock offerings, Facebook's included a lockup agreement for insiders that prevented certain early investors from selling their shares until the end of a designated period. The lockup is typically intended to reassure investors that, at least initially, there will be no new large blocks of shares coming to market that might be a drag on the share price. While many companies free up all early-investor shares simultaneously, Facebook opted for a tiered release system.
The first batch of 271 million locked-up Facebook shares will become available for trading in just two weeks, on Aug. 16, with an additional 249 million shares free to hit the market starting Oct. 15, an additional 1.32 billion Nov. 14 and 149 million more Dec. 14. The final 47 million shares will be available for trading next May.
"This is going to be a big event, and there is going to be a lot of selling pressure. It will be what everyone is focusing on," said Philip Saunders, equity-derivatives strategist at Topeka Capital Markets.
The experiences of Zynga and Groupon highlight the need for caution before the expiration of lockups.
Groupon sank 8.9% June 1—outpacing the Standard & Poor's 500-stock index's 2.5% decline that day—when 600 million shares became available for trading.
Zynga had a number of declines that coincided with the expirations of its tiered lockup, similar to Facebook's lockup restrictions. Zynga fell 7.9% May 29 as the broader market added 1.1%, when 325 million Zynga shares hit the market. Its stock dropped an additional 1.5% July 6, when an additional 50 million shares became available and the market was off 0.9%. Zynga's last lockup expires Aug. 16, with the release of 150 million shares.
For stocks already trending downward, an influx of supply can exacerbate the decline. Zynga and Groupon were in a similar position to Facebook before the expirations of their lockups. As of May 31, Groupon was trading 47% below its initial offering price, while Zynga traded 34% below its initial offering price May 25, before the expiration of its first lockup. Groupon and Zynga are now trading 67% and 71% off their initial offering prices, respectively.
As for Facebook, one investor on Tuesday bet that shares would fall at least 9.5% and as much as 31% by year's end, with the trader setting up a strategy known as a put spread to wager on shares falling to as low at $15.
The strategy involved selling 7,500 December $15 put options and buying the same number of December $20 put options. Put options convey the right to sell stock at a set price by a designated date.
To help offset the cost of the trade, the investor sold 7,500 December $29 call options, according to TradeAlert data, so the three-legged strategy only cost $262,500. Call options convey the right to buy shares.
The put-spread strategy looks for the shares to fall even further, as it would begin to profit if the shares dropped by at least 9.5%, to below $20 a share, by Dec. 22. It would maximize profit at about $3.5 million if the shares dropped 31% and fell to $15 but not below that. The trader's call position counts on the shares staying below $29 by the end of the year.
"It seems like someone has given up on Facebook and doesn't believe it will get anywhere near $29 through the end of the year and sees downside to that $15 level," Topeka's Mr. Saunders said. "Whoever put on this trade believes there is more downside in the name."
Other active Facebook options Tuesday included November $21 put options, bought about 4,200 times for $2.55 a share. The position wagered that the stock would drop at least 15% more by Nov. 17, just after the largest Facebook lockup expiration.
here's who sold before at the IPO and how much - note how the percentage sale of their stakes really jumped for some insiders......
http://www.forbes.com/sites/stevenbertoni/2012/05/17/facebooks-elite-cash-in-but-other-insiders-must-wait/
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Who’s taking more chips off the table? My colleague Eric Savitz broke it down for us:
- Tiger Global upped the number of shares it will sell to 23.4 million, from 3.4 million.
- Mail.ru upped its planned sale to 19.6 million from 11.3 million.
- Accel Partners now plans to sell 49 million shares, up from 38.2 million.
- DST Group will sell 45.7 million shares, up from 26.3 million.
- Goldman Sachs will sell 28.7 million shares, up from 13.2 million.
- Greylock will sell 7.6 million shares, up from 7 million.
- Peter Thiel will sell 16.8 million shares, up from 7.7 million.
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