Selling Facebook Short

First of all, anyone who takes investment advice from me is an idiot. I know less than nothing about investing. If I knew anything, do you think I'd be writing this stinking blog?

Nonetheless, fools rush in...

I am going to boldly make a really dumb prediction which I'm sure I will be eating soon. Later this morning, Facebook will start selling shares to the public. Counter to everyone who knows anything about investing, I think Facebook shares have a good chance of flopping. Not immediately, but soon.

After the IPO hysteria phase is over (and I don't think it will last very long, couple of months maybe) Facebook will be a sell. Here's my logic:

1. I believe Mark Zuckerberg. In a way, I admire the Z-man. He doesn't give a shit about advertisers and he doesn't bother to hide it.

Now that he is going to be a zillionaire, he is likely to care even less about advertisers. He cares about his subscriber's experience, and frankly, I think that's a good thing.

What the hell does he need more money for? I think his psyche is an open book. He'd rather be a rock star than a suit. He'd rather be popular with his groupies than with his investors. I think he made that perfectly obvious in Boston.

Investors want him to sell more advertising. But he doesn't want dopey display ads plastered all over his baby. This will become a problem.

Strangely, by tacitly telling advertisers to screw themselves, he may be instituting a better long-term strategy for Facebook. But in the short term, shareholders are greedy bastards and they want returns on their investment now. Investors could lose patience and start selling pretty quickly.

2.  They still haven't figured it out. As we have said often, Facebook has two options for marketers: the free option (a Facebook page/suite of pages) and the money-making option (paid advertising.)

The free option is interesting. It offers marketers opportunities for creativity and interesting ways to involve consumers.

The paid option is pathetic.

Invisible small space ads tumble down the right side of the page, where most people don't even know they exist. The limits on what you can say in such ads are daunting. The potential for creativity is meager.

These ads have about the same impact as classified ads used to have in newspapers. The difference is, people rummaging through classified ads were actually looking for something. People on Facebook are not.

Facebook still hasn't figured out how to sell its 900 million subscribers to advertisers. If they do, it will become a huge advertising hit. But until they do, I remain skeptical.

The smart money will get in during the frenzy and then get out quickly.

I'm taking my Monopoly money and selling.