Why Facebook investors find Facebook so baffling

Many shareholders said they bought the stock on the advice of their family.

By MSN Money Partner Jun 12, 2013 5:42PM

Facebook CEO Mark Zuckerberg during a press event in Menlo Park, Calif., on April 4, 2013 (© Robert Galbraith/AP)QuartzBy Leo Mirani


Judging by the questions at Facebook's (FB) first annual shareholder meeting on Tuesday, its investors are unhappy with its stock price, frustrated with its features and just baffled by Facebook generally.


One shareholder complained that "there's more junk coming through in your newsfeed and it's hard to connect with your peers." Another said he just cannot understand its privacy settings anymore. Twisting the knife, he added the Facebook mobile app isn't very friendly.

And a third suggested that "it would be very useful, especially for older, technologically less inclined people, if there were a way we could call Facebook if there were a problem." Later, someone wanted to know what Facebook was going to do about all the hackers inside the company. CEO Mark Zuckerberg calmly explained the definition of "hackers."


Their biggest concern, naturally, was the share price, which has never risen above $38, the price at which it debuted in May last year. That was "kind of a theme of the meeting," Zuckerberg admitted.


Yet, while its stock performance may be abysmal and its profits slim, Facebook is investing in long-term growth. Recent rumors suggest it may even find its way into America's pre-eminent market index. All Zuckerberg needs to do, we have argued, is to be more like Jeff Bezos of Amazon (AMZN), another company famous for aggressive expansion with razor-thin profits -- and talk to his shareholders about how revenue is up in mobile, about investments in emerging markets, about new advertising mechanisms -- essentially about all the cool stuff Facebook is doing to secure its future.


So why hasn't Zuckerberg been able to make that case? Judging by Tuesday's meeting, it seems clear that is a fruitless pursuit. Investors are not going to figure out what Facebook has planned when they can barely figure out what Facebook is now.


Many said they bought the stock on the advice of their family. "I have more than 8,000 shares. I have heard about Facebook. I don't know how to use Facebook but I own stock," said a woman whose son encouraged her to buy shares. The man with the question about hackers told Zuckerberg that he "invested blindly" because "my family is a big fan of yours."


One shareholder summed up the confusion with a simple question: How many people above 40 work at Facebook? Chief operating officer Sheryl Sandberg didn't offer a number, but reassured him that there were many. Yet that helps explain why Facebook has such a tough time connecting with its shareholders and indeed with its users. About two-thirds of Facebook's users are now over 35. The average age of a Facebook user has climbed to 41. The average age of a Facebook employee is 31.


More from Quartz

Jun 13, 2013 11:13AM
I'm no fan of Facebook - have never used it.  But I find the shareholder comments disturbing when they say they bought thousands of shares because someone in their family told them to do so or someone in their family told them Facebook was cool.  No research and no understanding of the fact the stock IPO'd with a P/E ratio of about 95 times earnings.  If you're taking investment advice from your teenager, you deserve a reality check.
Jun 13, 2013 7:48AM
Facebook is pretty cool when you first get on to see your buddies...but then the charm wears off fast and many close their accounts. Facebook appears to be a good place for ego narcissist to hang together outdoing each other. I love how when you close your account....it's not really closed....it's always on "standby", it'll never go away and it absolutely will wait an eternity for you to come back to it. That's' why Facebook has so many non-participating users.
Jun 13, 2013 9:47AM
The truth is we have only Zukerberg's word for how well Facebook is doing and we know that his statements are not based on fact.  The facts are that Facebook has never published an audited financial statement.  The current financial data is published by Zukerberg's lawyer, not an accredited accountant and we all know the integrity of lawyers.  Why the press continues to print articles without checking the facts is beyond me.  This isn't an exercise in fiction, this is supposed to be factual representations of newsworthy events.
Jun 13, 2013 12:32AM
Zuckerberg must surely be baffled by all the shareholder grousing about FB's share price. It's sure been good for him. And that's what really matters, now, isn't it?
Facebook is a waste of time and a tool to give up your privacy to the world.   If you think the NSA scandal is bad, wait until you start seeing your life exposed when the Gov't tells Facebook they want all their files.  If they haven't done it already.  What you eat, how you sleep, where you shop, what kind of car you drive, infinite information you are giving them without you even thinking about it.   Pretty easy to see how our lives will all be changed with Facebook.   Click on the Like button.
Jun 13, 2013 1:07PM
Facebook is turning out to be a big joke, it's losing users every month, it lost it's cool a long time ago. Now Zuckerberg is trying any thing he can to suck every last dime out of investors. Then he will sell Facebook and all it's user data to the highest bidder. 
Jun 13, 2013 10:47AM
Some Investors are always trying to strike Gold and some do so without finding out what they are truly investing in. That's a you problem. The IPO was the best thing to happen for FB itself. They now have Tons of Cash and time, that's right TIME to make needed changes. Rome wasn't built over night and neither will the fortunes or lack thereof for Facebook.
Jun 13, 2013 9:05AM
Difficult to understand?  Most cons are difficult for the average person to understand.  There is no product so to speak.  The product is supplied by the user by their appearance and many users quickly learn they are on the Suckerberg plan of being used to advertise and pitch while slyly veiling the site as a personal benefit.
Jun 13, 2013 2:56PM

It's all about the Symbol to me....Say your real name starts with a "B", and do I really want to buy a stock that is listed as "FB".....It's as if we have already lost when buying in..


The kids & g-kids (ours) use it, but we don't...

Hell, I figured this comment was as good as any..?

Jun 13, 2013 1:20PM
Dubious origins ,botched IPO ,self promoting management absurdly enriched by foolish investors mirrors a doubtful future
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