Report: Facebook investors looking to dump shares

In a post to his blog in January, Joseph Perla presented a compelling argument for Facebook being one of biggest Ponzi schemes in the history of commerce, one that I frankly agreed wholeheartedly with then, and continue to do now.

He wrote:

Have you ever bought a Facebook ad? I have. I have talked to many, many people who have. We have spent hundreds, many have spent thousands or even more, experimenting with Facebook ads. They are worthless. Nobody ever looks at them, and nobody ever clicks on them. I just talked to someone who was trying to promote a book. He found it cost him over $100 in ads to sell one book. Moreover, as you increase your ad spending, people get used to the ads and just ignore them. So, your already low click-through rate plummets even further.

People go to Facebook to interact with their friends. It is fundamentally different from the ad platform that is Google. People go to Google to find something they need, possibly ready to buy, which a good percentage of the time can in fact be solved by someone’s ad. Facebook ads, on the other hand, annoy users. They yield no real value, and thus no profits.

Eventually, though, and this might take a long time, but it is finite, everyone will have tried Facebook ads and know that they are useless. Eventually, after 10 million businesses have invested $1000 each, and Facebook has earned $10 billion in revenue in total, then they will have run out of new customers and their revenue will dry up. A useless product is never sustainable. I wish I could short Facebook.

So could that have something to do with this?

A group of Facebook shareholders is seeking to offload $1 billion worth of shares on the secondary market, a sale that would value the company at more than $70 billion, according to five sources with direct knowledge of the situation.

It would represent one of the largest transactions of Facebook shares to date and points to a growing wariness among early-stage investors and employees who fear Facebook’s growth cannot keep pace with its market valuation.

The sellers have lowered their price after previously trying to offload shares at a price that valued the company at $90 billion, which would make Facebook more valuable than Time Warner Inc and News Corp combined. But buyers balked.

“At the current valuation where it is, it is really hard to justify the investment,” said Sumeet Jain, partner at venture capital firm CMEA Capital, who has examined Facebook deals recently and has taken a pass. “It’s hard to imagine it will turn into a $270 billion company in the next few years.”

Just a thought.

Perhaps some folks think that getting into the coupon business won’t insure that Facebook won’t eventually go the way of Friendster or Myspace, though it’s hard to imagine Mark Zuckerberg ever having to resort to selling houses in Vegas.

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