In an interview on CNBC, David Sze of Greylock Partners briefed listeners about the prospects for Facebook (FB). On Wednesday, the company will report earnings, and so the investment community is gearing up hoping to hear good news. On Tuesday, the stock closed at $30.77, down $1.70. The stock is trading close to 20% off of its IPO price of $38 per share.
Sze is a long-term holder of FB, having purchased shares at very low prices in the company's early days, so he has a huge book profit and is not a seller. He believes FB's domination of the social media space with its one billion users makes its future success highly probable. Specifically, Sze indicated that the current controversy relating to ad revenue and FB's ability to sell ads on mobile devices with work itself out.
FB is moving along the expected progression of this type of tech company. Usage comes first, then the company will find many ways to monetize its business. He reminisced about how people were initially skeptical about ad sales on computers, and it flourished at Google. The same will happen with mobile.
Sze was very complimentary of Zuckerberg and the rest of the FB management. He said they will execute and not be overly influenced by the demand for short-term results. Unfortunately, the investment community may make the stock price suffer if FB does not show some significant upside in the near future.
FB is providing tremendous value to its users as they are staying onsite for extended periods of time. This will be the key to the company's monetization strategy. The potential is huge according to Sze.
Other issues, such as privacy concerns in Europe, will not create significant difficulties as consumers will demand that euro zone restrictions not be so significant that services provided are affected.
To this point, FB has not telegraphed anything about its earnings that I have seen, so anything could happen tomorrow. Traders appear to be a little ill at ease, which resulted in the loss posted by the company on Tuesday.