Should you Jump on the Social Media Bandwagon?: Facebook Inc (FB) and More

The Foolish takeaway

Facebook’s 10-K lists nine bullet-pointed facts under a section titled ‘2012 Highlights.’ I couldn’t help being disturbed that none of them pertained to anything financial in nature: they all pertained to the company’s growing user base. Such growth is certainly good for these companies, but at some point investors need to see it translate into profitability. The next few sections of Facebook’s 10-K describe how the company creates value for users, developers, and marketers. Perhaps it’s time for a new section to explain how the company creates value for shareholders. All three companies have billions in revenue, but year’s end leaves only a few pennies of profit per share. And their web sites’ huge popularity doesn’t reduce the premium investors are paying for shares. Investors shouldn’t stick with these stocks for long if the underlying companies can’t demonstrate clear paths to effective user base monetization.

The article Should you Jump on the Social Media Bandwagon? originally appeared on Fool.com and is written by Robert Ciura.

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