facebook IPO = euphoria?

It will be remembered as one of the defining days of our generation, okay maybe that's a bit dramatic. Nevertheless, I have my doubts about this IPO. I have been thinking about this for the past month. The excellent film, The Social Network, definitely tumbled me down this rabbit hole. 900 million users and growing sounds like a lot of users, I know, but were you aware that Google+, which launched late in June 2011, has over 100 million users already? Anyone want to guess how many people are using Gmail or do daily searches on google.com? I don't know, but I'd venture to say that its about the same as the number of facebook users or higher, especially the latter. I'm sure everyone remembers myspace, right?

It occurs to me that facebook (NASDAQ:FB), with a proposed initial market capitalization of  US $104 Billion, is severely over valued. I think the entire day can be summed up as euphoria over something everybody loves, but love rarely makes for a sound emotion for a true market evaluation.

A disclaimer first, I am not a banker, an accountant, a finance guy, an economist or a qualified analyst of stocks and other financial assets at all. I also, unfortunately, don't have any skin in this game. If I did though, I wouldn't be putting it on facebook. What I do possess is a real world, common sense understanding of the nature of things based upon the fact that I've been a very curious person who's read entirely more than he should have over a great many years and kept my eyes open far too wide many a time. After university, most of my reading has been of an economic, finance or business nature, but I applied the same standards of logic and evidence that philosophy taught me to this new world of economics, finance and business. My point being that whatever knowledge I have of these things is largely self taught, so please apply the requisite grain of salt when assessing the value of this humble opinion. I am not responsible for your financial decisions. Let's make sure that's clear. Does fine print make that clearer? A further point, I am a user of facebook and I happen to like the product.

Let us aim for some perspective. I offer the following current market caps of some well known corporations for comparison:

• Apple Computer Inc (NYSE:AAPL)             US $495.7 Billion
• Exxon Mobil Corporation (NYSE:XON)       US $383.0 Billion
• Google Inc (NASDAQ:GOOG)                    US $203.1 Billion
• The Coca-Cola Company (NYSE:KO)         US $169.6 Billion
• Anheuser-Busch InBev (NYSE:BUD)            US $110.9 Billion
• Facebook Inc (NASDAQ:FB)                       US $104.2 Billion
• McDonald's Corporation (NYSE:MCD)        US $91.1 Billion
• The Walt Disney Company (NYSE:DIS)        US $79.3 Billion
• Diageo (NYSE:DEO)                                     US $60.1 Billion
• Hewlett-Packard (NYSE:HPQ)                      US $43.6 Billion

Starting to see the problem? Consider the portfolios of products and services that these corporations offer. Apple produces hardware, software and is one of the largest content distributors, via iTunes, the world has ever seen. Exxon underpins the world economy. Coca-Cola supplies huge portions of the world's beverages of choice. McDonald's Corporation has millions of customers worldwide everyday. Diageo controls most of the world's top alcohol brands. Even lowly HP, is one of the largest technology companies in the world creating government, business and consumer solutions. 

The question is, what does facebook offer that is actually marketable? If the only answer is future advertising based on people's demographic information and its existing social network, then I see a lot of people being very disappointed by this IPO in the long term and a few making out like bandits. 

Let's compare its offerings to Google, which I would venture to say is its nearest competition. Google offers both of the services already mentioned, advertising and a social network, and offers more still, a lot more. Think of, as I already mentioned, Gmail and Google+. Or, think of Google Maps, Google Earth, Google Street View, Google Wallet, Google Calendar, Picasa, YouTube, Google Play Music, Google Chrome, Google Drive, Google Translate, Google Blogger, Google Books and the really big difference makers, Android, which is the most popular mobile phone OS in the world already, and the Google Play Store, which already sells books, movies, music and Apps for a variety of digital platforms. The latter is Google's answer to the iTunes environment, but could eventually challenge it and Amazon. Google Play Store is the most serious competition to the iPhone/iTunes environment.

Perhaps this list of acquisitions makes it clear how serious, how focused, how determined and how methodical the leadership of Google has been in developing this 'Google Suite' of products that practically constitutes an OS, a mobile OS and multi-platform Apps for both of them that sync, update, share, post, link, search, play, read, store and jam in unison. Only Apple's platform can rival this inter functionality, and not by much these days, if at all. In addition, Google runs data centres around the world. Finally, Google has a clear competitive advantage in one other regard, it's human resources culture. Consider this, Google was ranked first on Fortune magazine's list of the best companies to work for in 2007, 2008 and 2012 and fourth in 2009 and 2010. Loyal employees are priceless in an organization.

You might say, well, facebook will do all these things as well. Will it? The missing thread through all of Google's current programs, which they have been rolling out steadily one by one over the last several years, was Google+. Google+ will integrate those apps with its social network. Google is ahead of facebook in the Apps department and has been quietly fine tuning its social network, while growing users. 

If I had to put money on it, I'd say that Google is grossly undervalued if facebook is valued at US $104.2 Billion, because I think, given time, more and more people will simply migrate to Google+ because they're using Google's other very useful Apps already or they're on an Android phone. Google Chrome is also about to become a far more dominant web browser, because as Android gets more popular, more and more people will switch to Google Chrome because of its increased compatibility with Android OS. 

If all this is just way over your head, then, first, I sincerely thank you for still reading, and second, run this thought experiment in your head. It's my concluding point. Think of something you want to buy. Now log on to your computer or your phone and go look for it on the web. Did that yet?

What website did you search from? Google right? People go to facebook to be social and hang out, but they go to Google to shop and actually do stuff already. Google is going to introduce that hanging out aspect to their product suite. In fact, they already have, try Google+ Hangouts. It's like Skype, but with as many people as you want and you have access to all those other Google Apps I mentioned above when you are in the Hangout environment. Still don't believe me, what's your homepage? 

To be clear, this isn't an attempt to disparage facebook or to argue that it is a bad product. I say again, I use and love facebook a lot. This is simply an attempt to understand the dizzying heights of its valuation vis a vis other well known corporations and their products that we have a great deal more information about already and who are proven commercial market performers. On that analysis, I'd say stay clear. Of course, that's just my humble opinion. I'm genuinely curious to hear from others. Thoughts? Agree, disagree?