Shares of Facebook (FB) were slumping Friday morning, this time on word that Farmville-maker Zynga (ZNGA) pre-announced weak earnings and revenues and cut its full-year forecast. Zynga derives the bulk of its revenues from its platform on FB, raising yet more concerns about the social media king's ability to make money off its one-billion users. In the attached clip the OptionMonster himself, Jon Najarian discusses whether Facebook's latest headwind is cause for concern.
In reality Zynga was a meaningful part of Facebook's revenue, but selling virtual farmland was never going to be a way for the company to justify a $45 billion market valuation. Facebook itself has been making the media rounds talking up the efficacy of its advertising platform. Words with Friends has yet to be discussed.
"They're trying now to find better ways to monetize their audience," Najarian reminds us. On the upside it's about time we heard from Mark Zuckerberg and COO Sheryl Sandberg, both of whom were strangely silent after of FB's famously bungled IPO. On the other hand exactly what FB is doing to drive those revenues has become a controversy of it's own. Persistent rumors of double-counting Likes, inflating user data, and precisely how far Facebook is willing to go to gather personal information continue to dog the company.
Damning the company with faint praise, Najarian doesn't think any of these problems are fatal. "I think the company can survive," he says, quickly adding "whether or not they can thrive remains to be seen."
The issue for investors is what happens to Facebook's stock in the nearer term. "I'm long it," Najarian divulges. "I bought the dip in the after-hours (yesterday) so I am long the stock."
It's not a table-pounding recommendation but long suffering Facebook shareholders should be willing to take what they can get.